[OPE-L:7451] Re: Global Crisis

From: Rakesh Bhandari (rakeshb@stanford.edu)
Date: Wed Jul 24 2002 - 04:56:34 EDT

part of an email exchange with a friend who wants to know what 
Marxists are thinking nowadays. What are we thinking?

  He writes in reply to me:

Good points, dear Sir, but apart from the purely economic I am looking
forward to some politico-economic thoughts from you, to wit, the share of
corporate profits in GDP and hence the impact on equities, wages and class
issues, also the ramifications of globalized outsourcing, which has
delinked, as it were, the economic interdependence of classes at a
national level and linked them anew across boundaries. What do Marxists
have to say about all these issues? Where are we headed..what is the
outlook now for global capitalism and what will be the band-aid this time
>  ***with so much of the credit creation process outside of the banks,
>  how limited have the powers of central banks become in downturns? Has
>  mortgage refinancing run up against its limits...I think so. But you
>  would know, not me.

..i think you are absolutely right on both counts...increase in financial
depth moreover has the tendency of increasing volatility both in financial
as well as real markets..

>  ***what is the relation between financial crises (currency runs,
>  equity implosion) and crises in the real economy?

..ah, if there could be a simple answer to that one...piercing the veil as
it were..

>  ***has there been a real improvement in US productivity such that a
>  point or so has  been added to the real underlying growth rate,
>  justifying better than historical average growth in the financial
>  markets once the bottom is found--which I have been told by [a software
>  CEO] for a year is 7900 for the Dow, 1300 for the
>  Nasdaq

..there is a difference between a change in levels and change in growth
rate. I do think that restructuring, outsourcing, belated effect of
technology, as well as fortuitous supply side effects (arising out of
demise of ussr) had boosted productivity, as well as the bottom line for
some years in the nineties...but why should it add a point forever..

>  ***does the US need a controlled devaluation to mitigate its current
>  account deficit, but will cooperation from Japan and China, wracked
>  by problems of their own and in need of a weak currency, not be
>  forthcoming?
>  ***is the real hope for a recovery in the stock market that Greenspan
>  will keep interest rates low, thus giving stocks some lustre vis a
>  vis bonds? but if Greenspan has to raise rates to prevent a dumping
>  of dollar denominated assets, will the stock market enter into
>  another free fall, taking the real economy with it through the wealth
>  effect and company cost cutting to restore pensions? I think this is
>  a real possibility.

...there are interesting contradictions as you point out, but give me more
Rakesh, give me more! ...and less of the neo-classical, if you dont mind.
At this rate, you will soon be neo-Summersite

>  well these are American centric comments for now...
>  Your thoughts?
>  yours, Rakesh

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