I agree with Paul that "crisis" isn't the appropriate world to use for the US economy. 1974 - 1992 might accurately be described as a crisis. But, this year's slump is probably no more than the common garden variety recession - a 9 month dip then return to growth. During the 1970s and 1980s the US economy was thoroughly restructured and the least internationally competitive firms were brutally weeded out. For the last 10 years Japan seems to be going through what the US went through during 1974 - 1992. Now, if the US does go into a severe slump or a slump deep enough to sharply reduce exports from Japan then the international situation could become quite precarious. But, with military Keynesianism now in vogue in Washington the latter scenario is not likely to occur. Business and household debt may be high (I'm uncertain), but public sector debt is not very high at all. So, unlike Japan which has zero real interest rates and massive public sector debt, the US can pull out of a recession by continuing to lower interest rates and ratcheting up government purchases of goods and services. Lower interest rates will help households refinance mortgages and thereby lower the strain on household debt repayment. peace, patrick l mason At 12:04 PM 10/26/01 -0400, you wrote: >On Thu, 25 Oct 2001, Paul Zarembka wrote: > > > Falling profits CAUSE U.S. crisis or are SYMPTOMS of crisis? > >Profits started falling in 1997 and investment started falling in 2000 and >the recession started in 2001. This suggests to me that falling profits >was the cause of falling investment and thus of the recession. To be >sure, profits will decline further as an effect of the recession. So >falling profits is both cause and effect of the recession. But the prior >significant decline in profits suggests that falling profits is a >cause. I would say the most important cause. > > > > Whose CRISIS? If the 1930s was a CRISIS, is using the big word today > > suggesting we are in 1929? Was using the word in 1973 suggesting then > > that we then were in 1929? Was it correct to have so described? In sum, > > I am questioning when to use CRISIS (certainly not when it subjectively > > moves us). > >I am not saying that today is like 1929. But I am saying that I think we >are closer to 1929 today than at any other time in the postwar period - >closer than in the recessions of 1974-75 and 1980-82. What is different >and much worse this time is the very high debt levels of businesses (and >of households). It is the combination of low profit and high debt that >makes the current situation similar to 1929. I am not predicting that >things will get that bad. But I am saying that the chances that things >could get that bad are higher today than they anytime since the Great >Depression. > > > > BEA made a revision. Why should we jump on THIS revision? > >The BEA's revision was not based on a change of definitions or of >estimating procedures, which sometimes happens, and which would be more >suspicious. Rather, the significant downward revision of profits from >1998 to 2001 was the result simply of taking into account more data. It >would certainly be interesting to know more about why the revision was so >large this time, and I hope to pursue this question. But it is generally >thought that such revisions based on more data are better than the old >estimates. > > >Paul, thanks for your comments. > >Comradely, >Fred
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