Date: 	Wed, 10 Dec 1997 02:04:27 -0800
From: bhandari-AT-phoenix.princeton.edu (Rakesh Bhandari)
Subject: M-I: The World Economic Crisis and American Capitalism


Let's just take the basics of Marx's theory of the financial and monetary
aspects of the cycle. In the face of bankruptcy, Asian producers are trying
to honor financial obligations (sales having turned out to be at prices
lower than used in preceding obligations); they are ready to sell their
products for cash and not against credit instruments, even at a loss. Say's
Law is inane: these producers are selling in order to pay; they are pleased
if they have simply sold their commodities without immediately thinking of
a purchase (ominous of course since Asia accounted for almost 1/3 of the
growth of many leading US companies). They are all seeking cover behind
hard currency, which is desired as such not to buy goods to be invested in
productive activities. As a consequence the rate of interest becomes more
onerous because they want money at any cost to meet payments. They must
"dump" for ready cash; their exports will only destabilize stagnant Japan,
inducing yen devaluations. Net capital inflow to the US was already over
400 billion dollars last year; it should only increase in the wake of the
Asian crisis. This will increase the value of the dollar vis-a-vis the yen,
compounding the trade imbalance and the threat to domestic production. Why
is the US economy not a house of cards? I must say that I am rather
surprised that Doug thinks it possible to evaluate the "long-wave" vitality
of US capitalism, independently of the situation as a whole.

Rakesh




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