Re: [OPE-L] Trade Deficit Disorder

From: Paul Cockshott (wpc@DCS.GLA.AC.UK)
Date: Tue Mar 21 2006 - 03:58:45 EST

The long term trade deficit is not just a US phenomenon. The UK has

had a similar long term deficit. These used in the 60s and 70s to cause

major crises, now they don’t seem to do so.



From: OPE-L [mailto:OPE-L@SUS.CSUCHICO.EDU] On Behalf Of Alejandro Valle
Sent: 20 March 2006 02:56
Subject: Re: [OPE-L] Trade Deficit Disorder


Jerry Levy wrote:

From "How Scary Is the Deficit? by Brad Setser et al. 

via Alejandro:


Levey and Brown make three basic arguments. First, they claim 

that foreign central banks will probably continue to finance U.S. 

deficits. Second, they predict that even if foreign central banks do

 pull back at some point, private investors will step in. And finally, 

they assume that even if this financing does not materialize, a dollar 

crash would hurt Europe and Japan more than it would hurt the 

United States. Unfortunately, there is a good chance that all of these 

assumptions will prove false. Foreign central banks may well stop 

financing growing U.S. deficits, private equity investors might not 

take their place, and the resulting adjustment process would prove 

quite painful for the United States." 





Alejandro -- for how many consecutive years have you expected the 

US economy to crash?  Why hasn't it?


In solidarity, Jerry

Hi Jerry, since I was born. (It is a joke)
I sent to ope-l messages about a US economy crash possibility in 2000 or so.
I have articles discussing this issue since 1989 or so.  The crash
possibility had pointed out by quite different economist: Roubini (coauthor
in Setser article) is an economist from establishment, by example.  The main
reason for predicting a crash is that disequilibrium can not remain for a
long time and there are not balancing variables for correcting such
disequilibrium in  a smoothing path. Take, by example, stocks bubble. The
S&P index is over valuated despite 2001 correction and you have house price
bubble in addition to stocks overpricing. Hence, the US economy is in worst
shape than in 2000.  As disequilibrium’s increase; necessary adjustments
increase too. Hence a crash is more likely now than in 2000. However there
are many different ways of adjustment: a crash, or several recessions in few
years, or stagnation during several years, as in Japan happened. 
In my view Marxist researchers need to analyze the possibility of a US crash
(or any other adjustment process) and to be prepared for explain it; if it
happens. If you look at rate of profit US economy is better than in 1982 by
far. Hence, why could occur a crash now and it did not happen in 1982? Even
a great crash like 1929 have not  occurred yet; it do not mean a great
crisis can not happen again.  I think that you and Rakesh are right pointing
out US economy asymmetries with rest of the World. However, certainly, US
economy needs to be adjusted despite such asymmetries.



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