[Marxism] An increasingly precarious role for the global hegemon

["Jurriaan Bendien" <andromeda246@xxxxxxxxx>]

The article by Roach contains some fallacies I think. One reason why the US
savings ratio appears to be low, is because ordinary folks invest in housing
and insurance (a third of their after-tax income is spent on this, according
to the Consumer Expenditure Survey), and because of the extreme income
disparities - the modal real disposable income is well below the average.
You obviously cannot save money that you don't have to save.

In the idyllic world of vulgar textbook economics, there are only consumers
and investors, and what is not consumed is saved and invested. In the real
world, things are more complex - you have to take into account hoarding and
liquid funds, waste, speculation, spending on armaments, luxuries and
unproductive assets, and international transfers of funds. I think the media
obsession with the "current account deficit" is also a bit of a red herring.
Changes in world market prices and currency values can alter current account
deficits within a relatively short period of time.

As regards the dependence of the US on foreign surplus capital, it is
important to study who specifically invests and receives this capital in
what area of activity and what form, and what this really has to do with the
real economy. Obviously the bulk of investments and debts are not by people
lacking capital assets, but by the large capitalists and governments.
Essentially what happens over time is, that foreign creditors buy up more
and more US property, but that is obviously not something that necessarily
causes a crisis. The "fake Left" is of course always on the lookout for the
final capitalist collapse, crisis or doom scenario to justify their
revolutionary zeal.

The big international investors (governments and institutions) are banking
on a rise in interest rates in the US, and in the event that many people in
the US go bankrupt, it's an opportunity for foreign investors once again, in
the same way as they bought up Russian assets on the cheap before. Caughey
comments though that:

(...) there has been a persistent decline in foreign investment in U.S.
securities other than Treasuries, particularly in the private sector.
Foreign investment in U.S. stocks and private and agency bonds comes mostly
from Western Europe, particularly Britain, so we must conclude that
investors there are finding investment opportunities less attractive in the
U.S. This trend, however, has been dwarfed in the last two and one half
years by an enormous increase in purchases of U.S. Treasury securities by
both official and private sectors. (...) http://www.comw.org/poc/0501.html

Caughey turns the question around the other way here:

"Why does the whole world send its savings surplus to the U.S.? The size and
liquidity of U.S. markets is one reason. There are no other markets with the
same combination of public information, safety, and ease of transaction. The
reserve status of the dollar is also a factor, especially in view of the
fact that many basic commodities (such as oil) are priced in dollars. But as
we have seen, many countries are now using dollar purchases to, in effect,
devalue their currencies. The U.S. on the other hand, is declining to
correct its fiscal and monetary policies that lead to depreciation of the
dollar in currency markets. The net result is a de facto competitive attempt
at currency devaluation carried out by different means."
http://www.comw.org/poc/0501.html

The way Greenspan argues is:

"Our current account deficit and household debt burdens do not strike me as
overly worrisome, but that is certainly not the case for our fiscal deficit.
Our fiscal prospects are, in my judgment, a significant obstacle to
long-term stability, because the budget deficit is not readily subject to
correction by market forces that stabilize other imbalances."
http://www.atimes.com/atimes/Global_Economy/GC12Dj01.html For example, if
big investors would suddenly divest large amounts of surplus capital from
safe Treasury bills, in search of higher safe interest rates, or more
buoyant currencies elsewhere, what do you do then?

In the mathematics of debt-fueled accumulation, the timing of transactions
becomes all-important (including the ability to keep restructuring debts,
shift repayment obligations, and spread repayments), and the ideological
issue concerns agencies which can borrow funds without being subject to
"market discipline" as regard repayment, or which can somehow evade the
consequences of escalating debts (i.e. a propensity to borrow that is not
checked by market forces of supply and demand).

It's funny though how escalating debts (a signal that "the market" is mot
balancing supply and demand) in Greenspan's view becomes a "normal" part of
market behaviour, or even a virtue, as long as the debtors are private
investors who can go broke, and not governments who cannot afford to go
broke.

According to Jean Baptiste Say's law of markets, supply always finds its own
demand, so overproduction or structural overcapacity cannot exist. This is
of course a rather meaningless generality, because markets nearly always
will clear, if prices fall low enough, and if you wait long enough. But what
really sustains Greenspan's faith in Say's law here, is that magnificent
invention of the credit mechanism, which permits not only the appropriation
and consumption of wealth in advance of paying its cost, but also the
opportunity to generate new income that could repay the debt.

If therefore some leftist argues that America is gobbling up the world's
savings, the reply would be that if investors did not themselves want to
place their funds in the US, then they surely wouldn't invest there! The
basic law of capital is of course that the larger the sum of capital, the
larger will be the sum of capital that it attracts.

Jurriaan

Time is on my side, yes it is
Now you always say
That you want to be free
But you'll come running back
You'll come running back
You'll come running back to me
- Rolling Stones, "Time Is On My Side"




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