[OPE-L:7540] [OPE-L:1080] Re: Re: Re: Is anyone there

Rakesh Bhandari (bhandari@phoenix.Princeton.EDU)
Thu, 26 Aug 1999 13:53:42 -0400 (EDT)

>1. Most broadly, there has been ONLY A PARTIAL RECOVERY OF THE RATE OF
>THE RATE OF PROFIT in the US economy since the 1970s.
>This partial recovery of the rate of profit is mainly the result of the
>fact that real wages have not increased since the 1970s (real wages have
>actually declined 10-15 % since the mid-1970s; see my CC paper).

Fred, how do you determine this to be have the main cause as opposed to

*centralisation or reorganization of existing assets which not only plays
surplus value into fewer hands but may have the added effect of attenuating
competition-driven investments by which upward pressure on the OCC is put
(we seem to be going through a record merger wave--how does that fit in?)

*restructuring of American industry, in particular elimination or export of
those lines which were saddled with high excess capacity

*declining interest costs from those capital inflows.

*high artificial demand from the wealth effect you also mention

>This devaluation of the dollar has been avoided so far because of the huge
>inflows of foreign capital mentioned above; i.e. because foreign investors
>have been willing to loan US firms and household sufficient amounts to
>finance the deficit on current account.

This raises the question of why the inflows have continued if the
'fundamentals' do not justify it. The dollar has gained overall this year
against commonly used weighted baskets of currencies, despite minor
reductions in recent weeks. European companies continue to pour money into
the US to buy tech companies as unlike the Japanese they are rather
reluctant to accept unaffiliated technology exports from the US. But
doesn't this inflow put a bottom on the dollar's much feared free fall?

>Just in the last several weeks, the dollar has declined approximately 10%
>against the yen, due in part to the announcement last week of yet another
>record monthly balance of trade deficit for June.

The Japanese recovery seems very weak; only today the WSJ reports that
leading businessmen are again calling for the govt to restimulate based on
poorer than anticipated performance. The move to the yen does not seem to
threaten in any way a free fall of the dollar.

Still skeptical,