[OPE-L:6111] falling profits

From: Rakesh Bhandari (rakeshb@stanford.edu)
Date: Mon Oct 29 2001 - 13:51:16 EST

Patrick wrote: 

The US economy is quite strong because the 20 year crisis from 1973 to
1992. The weakest sectors of the American economy were obliterated. 
Yes, I think Brenner for example underestimates not only how much elimination 
there was excess capacity within branches in the US but how much elimination 
there was of weak branches altogether--early on this list Paul C noted how 
important the restructuring caused by high interest rates was to the 
profitability of US industry in the early 80s.  

 It would seem that this is the reason why the Japanese central bank is 
unwilling to take more radical monetary policy. While fiscal policy allows the 
unemployed to be absorbed in public works, tight monetary policy is needed to 
bankrupt firms so they can picked up as cheap assets and restore the 
profitability of more powerful capitals or so they can be eliminated outright 
and thus create the market space to make profitabile  new investments in  lower 
cost capacity either offshore or in superior technological substitutes. The BoJ 
seems unwilling to allow a restructuring to be forestalled any longer through 
cheap money which would only allow output and employment levels to be 
maintained at the expense of profitability. The Keynesians think capitalism can 
be healed of its crises, that the dentist can make sure that teeth will never 
get so bad that they have to be pulled. 
Patrick added:

standard of living of most households were driven downward. And, during the
1990s government debt was severely reduced. Unlike Japan, the US public has
the capacity to run enormous deficits to fight off unemployment.
Yes but the total debt situation is bad; the corporate bond market has been 
tight, I think.  Why won't big deficits put pressure on the dollar and long 
term rates especially? Krugman reported that at the first signs of US deficits 
as a result of Bush's tax cuts, the long bond reacted unfavorably. Again, I 
think there are *political* reasons why the US can get away with issuing cheap 
debt--Sa'udis can be coerced to hold US treasuries, the BoJ can be convinced as 
well since it needs to keep access to the US market and may not want a 
retrenchment of the US military. But then all we have is the rest of the world 
subsidizing the American economy. 
I tend to be opposed to the study of profit rates within national boundaries. 


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