Date: 	Wed, 15 Oct 1997 18:48:27 -0800
From: bhandari-AT-phoenix.princeton.edu (Rakesh Bhandari)
Subject: Re: M-I: Re: M-TH: Liberalism and Fascism


I guess we are leaving aside my comments on the limits of Eisner's liberal
reforms and their dangerous inadequacy and the environmental destruction
liberals are willing to visit on dominatinated countries.

Doug writes:

>The U.S. has gotten away with it [current account deficit] because almost
>all >our trade is invoiced in dollars, and foreigners are still happy to
>buy US$ >bonds.

 In Capital and Class #63, Carchedi analyzes the dollars' seignorage. While
agreeing that the weakening of the dollar has already left global monetary
instability in its wake, he analyzes the appropriation of value inherent in
the system. I emphasize that this sort of value theoretic analysis of US
imperialism remains most theoretically advanced outside of the US

>U.S. budget deficits are now pretty small and tending towards 0, though who
>knows if they'll reach it, much less stay there... the U.S. state has
>pulled far >far back from the brink of bankruptcy.

Now if Doug is arguing that there is a great deal of room for further
fiscal stimulus if only the political will were there...well, here there
may be some overlap between Doug and his fellow Keynesian Eisner.

 Even without further deficit spending--though a downturn would put
pressure on the govt exactly as its tax base has been reduced--there is
already existing interest payments to be made (Doug noted about 15% of the
budget). And with further devaluation of the dollar--to be expected on the
basis of Shaikh's and Carchedi's "productivity-based" theories of exchange
rates--the US will be forced to cut spending to reduce any expectation of
inflation which would further devalue the dollar and to raise interest
rates as well. Indeed liberal fiscal policy could itself risk a massive
unwillingness of foreigner to hold on to  dollars. And this is no small
threat: From 1990-1995 the current account deficit totalled $246 billion,
half of which remained in the hands of foreign central banks. The US has
been able to keep interest rates lower than expected only because of the
willingness of foreigners to hold on to dollar, given its continued, albeit
shaky, role as a world reserve currency. The need to maintain that
confidence puts limits on the liberal use of Keyensian instruments.

The regressive, fiscal conservatism that Doug laments as a
*political-ideological* defeat of Keynesianism is most probably only the
*economic* result of the massive debt already run up according to Keyensian
dictates.

Doug, it's time to give up faith in the Keynesian panacea. Maybe Jerry can
help school both of us in some Marxism.

Of course that we can't spend liberally, tax progressively, regulate
intelligently and bargain collectively our way to utopia may be
disconcerting.
But marxism is nothing but disconcert.

Rakesh




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