Re: Re: Re: beginning of the end?

[Jim Devine <jdevine@xxxxxxxxxxxxxxx>]

Barney Wagman writes:
> Higher energy prices hurt (or are perceived to hurt) Europe and Japan more
> than the US, so oil prices aren't likely to have much effect on capital
> flows.  I suspect it will take a major expansion somewhere in the world
> before things turn around.

though looking at the foreign-exchange value of the dollar is important, I
think that looking at aggregate demand is more important. There are two
polar alternatives:

1) the US trade deficit pulls up the rest of the world, allowing a
mutually-reinforcing demand-side boom amongst the capitalist nations
(especially the already-developed ones), upward harmonization of demand
growth.

2) the rest of the world's slow growth (higher interest rates in Europe,
etc.) pull the US down, so that demand growth harmonizes in the downward
direction.

If the "race to the bottom" (the downward harmonization of wages relative
to labor productivity driven by intensified mobility of capital and, more
generally, the neoliberal revolution)[*] is to be taken seriously, the
first option is unlikely, since as wages fall relative to labor
productivity that hurts consumer demand relative to world potential output.
(The exception, of course, is when consumption is financed via debt
accumulation or inadequate saving, as in the US. But only a small sector of
the world can pull this kind of consumption boom off at any one time.)

So I think that option #2 is more likely.

[*] per Louis P, this might be called a "counter-revolution."

Jim Devine jdevine@xxxxxxx &  http://bellarmine.lmu.edu/~jdevine