> What's interesting is that the currency of the world's largest
> debtor nation (USA) depends upon the world's largest debtor
> government (Japan).
>
> ***** US dollar's "virtuous circle" may be turning vicious By Nick
> Beams 18 June 2002
>
> ...Warning that the US dollar was "very vulnerable" to a change in sentiment
> about American assets, the Economist of June 14 noted that there
> had been a shift in the flow of funds to the US over the past year.
> "Foreign direct investment financed 91 percent of America's current-account
> deficit in 1999. By last year, that had fallen to 43 percent,
> having been supplanted by more fickle capital flows...
Yes, it's the ongoing financing of the US current-account deficit that's fascinating. Among other things, if Euro denominated short term paper is a real and attractive alternative, and the US - as it enters the second stage of the recession - can't raise interest rates, they have a problem, no?
Quality of dollar denominated debt is also now a problem. Argentine, Enron, WorldCom dollar debt was dispersed widely enough before the defaults not to endanger any crucial part of the system. Same thing is happening now with Brazil sovereign and US airline debt. While US small investors (in the mutual funds this stuff was unloaded into) are helpless to avoid this expropriation ("peoples capitalism" was what they used to call it, no?), it's not clear why non-US expropriatees should have to relax and enjoy it. E.g., so far there's been no megagiant default (Enron, Argentine, WorldCom type) of Euro denominated debt.
But Gowan's main point in <http://www.unl.ac.uk/ukrainecentre/WSS/ws-9.html> is that sustaining the US capitalist empire system has been, so far, in the self-interest of all the ruling capitalist elites on the globe. If that is still the case, the US will have all the central bank interventions it needs in order to avoid the problem of financing its current account deficit turning into a fullblown crisis.
The ins (Bushees) management of the US hegemony under conditions of bubblebursting is way more difficult than was the outs (Clintees) under conditions of bubbling. With counterfactuals there's no point in arguing, but my guess is that the outs would have also gone for creating a military emergency as one of the tools available to manage the US capitalist empire system at this potentially nasty stage of things.
john mage