Re: S=I, a new twist

["John M. Legge" <jlegge@xxxxxxxxxxxxx>]

Rob,

I started today felling only moderately depressed.  Now I am wondering
whether to dig up my rose beds and plant potatoes to see my family through
the forthcoming crisis.

1.  You are RIGHT ON in your indictment of the use of share options and
other share price based schemes to bribe CEOs into participating in Ponzi
schemes rather than managing their companies for growth and rising
value-added
2.  A serious correction, or series of defaults, in the US bond market will
make the present Asian and Japanese liquidity crisis seem like a storm in a
teacup.  Even if there are no defaults, a substantial drop in the value of
the US$ will wipe out vast amounts of Japanese domestic liquidity.

JML

-----Original Message-----
From: Rob Parenteau <rwp@xxxxxxxxxxx>
To: POST-KEYNESIAN THOUGHT <pkt@xxxxxxxxxxxxxxxx>
Date: Thursday, 20 August 1998 5:51
Subject: Re: S=I, a new twist


>I am surprised nobody on this list has picked up on the Wynne Godley FT
piece.
>
>If the current account deficit is getting larger, and the government
surplus
>is rising, the S=I macroidentities suggest a rising private sector
financial
>imbalance. Based on flow of funds accounts, this imbalance is nearly 4% of
>GDP, the largest it has been since 1970.
>
>In the attached Word document, I argue most of this deficit is coming from
>the corporate side, is being financed from abroad, and it is not too hard
to
>see that their is a giant Ponzi scheme going on in the U.S. equity market.
>The similarity to the pre-crisis conditions in Asia is noticeable. I wonder
>if anyone can poke holes in this view.
>