Re: Polemic/never land

[Doug Henwood <dhenwood@xxxxxxxxx>]

On Fri, 8 Jul 1994, Randy Wray wrote:

> Doug:
> 1. I expect all bond holders (and all at the Fed) act in what they
> perceive to be their own self interest; given their limited
> intellectual capacity, they behave "rationally". So does Greenspan; in
> his case, intellectual constraints are substantial. You assume that it
> is in his interest to maximize benefits for the "ruling class"
> (whichever that might be); this I seriously doubt. Was he so doing
> when he was on Keating's payroll? Or was he merely trying to make a
> buck? (actually, 40,000 of them)

In my analysis, the ruling class cares most about making a buck. This
might be called a monetary theory of politics, to go with JMK's monetary
theory of production. M-C-M' is an all-pervasive model. Did Greenspan
suffer one whit for his endorsement of Keating?

>
> 3. I simply don't understand the point of view which attributes
> "beggar thy neighbor" policies solely to the US when it is the US that
> continues to run big govt and trade deficits so that Japan and Germany
> can run the economies that Doug so admires. Given the institutional
> constraints operative in the world economy, it is the responsibility
> of the rich nations to run trade deficits.
>
"Admires" is a bit strong; I said the axis powers were still formidable
manufacturers. They also have lower poverty rates and more equitable
distributions of income. In the German case, they have a much richer
political and intellectual life than the US. OK maybe I do admire them some.

Who will finance these chronic trade deficits? Won't we end up with a
Ponzi financial structure over time if we do? Or will surpluses on
invisibles offset the deficits on visibles? Does that mean that we should
heap up great wads of foreign assets?

> 4. It isn't surprising that the marginalized understand the economic
> situation AND EVEN THE INTERESTS OF DOUG'S RULING CLASS even better
> than the Nobel prize winners and the rich and the famous. This is
> almost always the case. It is rare, indeed, for correct analysis to be
> embraced at the top--and probably only during times of severe crisis.
> We aren't there yet.
>
My friends in the ruling class have never been richer nor more
politically secure in the last 60 years. This may not last forever, but
where are they vulnerable right now?

By the way, Randy said in an earlier post, responding to my FT letter,
that we are not Argentina. No, for sure, but the parallels between the US
and Britain are formidable: a hypertrophied financial sector, a
deteriorating industrial base, a declining imperial power, an ossified
political system - and a depreciating currency.

> 5. Of course, I agree that the problem is insufficient worldwide
> aggregate demand; however, I point my finger at a number of countries
> rather than solely at the US as the source of the problem. It is
> strange to heap accolades on the worst abusers....
>
There's plenty wrong with the Japanese economy, for sure. But there's
also plenty to be learned from it. The financial sector was, until
recently, fairly repressed, and investment was somewhat comprehensively
planned, if not socialized. Non-bastard Keynesians should study the model
rather than heap abuse on it.

Doug

Doug Henwood [dhenwood@xxxxxxxxx]
Left Business Observer
212-874-4020 (voice)
212-874-3137 (fax)