[PEN-L:28267] re: summary of credit bubble (continued)

["Devine, James" <jdevine@xxxxxxx>]

Title: re: summary of credit bubble (continued)

 
>James when you mention sharp recession in private investment I'm
reminded of the constant stream of headlines about US  multis investing in China, Thailand, etc.  I realize it's probably marginal compared to 90's capex but isn't there more to that?   I mean isn't the foriegn investment really more when looked at in a comparitive market-basket kinda way.  And I also wonder how much of the 90's "investment" came in the form of buying other companies with inflated shares, ala Cisco?  I don't know how all this works together accounting rules-wise, but  wouldn't the quality of investments count somehow?<

I think that for short-term macroeconomic dynamics (e.g., the recession of 2001) the role of US foreign investment is small, though growing over time. Most of this investment is portfolio investment (purchases of existing assets) rather than direct investment (roughly, expansion of the overall amount of capital).

In the long run, the growing role of direct foreign investment and the greater share going to the poor countries (except sub-Saharan Africa) is part of the "race (or creep) to the bottom" which produces the underconsumption undertow which frames the current era's dynamics. Further, the greater role for foreign portfolio investment is part of the rise of hot money and other financial flows that add one more force behind the tendency for more & more countries to embrace neo-Liberalism (perhaps with "capital controls" to weaken the negative effects), which contributes to the competitive austerity and export-promotion efforts that adds further world-recessionary impact to the "creep to the bottom."

Jim