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<DIV>Doug Henwood wrote: "People have been forecasting some sort of
bone-crunching crisis for <BR>the U.S. economy, and the broader world economy,
for several decades. <BR>They point to rising debt, financial market
instability, or whatever the problem of the moment is. And that crisis has
failed to materialize. It could yet someday, I'm not denying that. But its
repeated failure to materialize should prompt some reflection on why it hasn't,
and why the propensity to predict it persists. On the first, I think the
prophets of doom underestimate the skill and power of state bailout managers
(and also fall for the temptation to see <BR>every problem as a crisis). "</DIV>
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<DIV>I think we have some mutual misunderstanding here. I agree with your
assessment of wishful thinking forecastings by the left and the
Austrians on the demise of the system. But I think this reasoning is
symmetric and it equally applies to the cheerleaders who only see a rosy outcome
in the horizon. That's why I pointed out specific economic items to consider in
assessing government statistics before swallowing them whole .I wasn't
forecasting any immediate crisis but it is obvious that the system is facing
severe problems that might lead to one sooner than later. The twin deficits are
approaching 6 % of GDP, the saving rate is near zero and SEA central banks
hold immense amounts of US debt ; then would some one please tell me how
the policy makers in any economy can deal with this problems without
causing a severe contraction and a reduction of the standard of living ? Please
tell me because I don't want to appear to be an ill wisher but I can't figure
out any economic mechanisms leading to a better outcome..</DIV>
<DIV>Again I agree the system has so far shown extraordinary resilience. But you
don't specify the mechanisms (I don't imply you don't know them, most likely you
do) by which this is possible. In my opinion a lot has to do with the US
hegemonic imposition of the dollar as the sole reserve currency in the world.
This has facilitated the vast expansion of the financial sector ,locally and
internationally, which has been able to fuel he economy almost unlimitedly via
genuine creative investment, asset bubbles and explosive, unprecedented
corporate and consumer debt. This has certainly oil the system well..Finance has
been able to turn its activity into exchangeable commodities becoming a
partially autonomous sector. This is something that Austrians and old fashion
Marxists miss. Although gloomy views are not limited to them .Analysts and
operators within the system such a Stephen Roach from Morgan-Stanley, Paul
Krugman, Warren Buffet ,The PIMPCO guys and George Soros do not exactly hold
rosy views on the immediate economic future.</DIV>
<DIV>Because , as powerful as it maybe be, the system also has its
limits. I think it is beginning to test its lower boundaries right now.
We'll see how long it will take. All I can say is that eventually every chain
letter runs out of addresses.</DIV>
<DIV>Cristobal Senior</DIV></FONT></BODY></HTML>