Date: Wed, 10 Dec 97 8:05:26 EST From: boddhisatva <kbevans-AT-panix.com> Subject: Re: M-I: The World Economic Crisis and American Capitalism Rakesh, I think that what you are talking about here nets out to what I'll call speculative deflation. If East Asian producers start knocking down prices and knocking down investment, and lenders start knocking off credit on the *assumption* of slackening returns on goods going forward, there will probably be a problem. That condition would not only discourage local investment, but would create a for-ex downtrend that would discourage already skittish foreign investors. Fortunately, Europe may be prepared to go into a cycle of increased effective credit availability because of the Euro and general restructuring, and the East Asian crisis has kept US credit markets looser than they otherwise might have been. Furthermore, the currency speculators probably did the Tigers a real favor by knocking down their currencies so far and so fast, because now the for-ex situation looks flat to up, making those countries more attractive for capitalists. Japan, by contrast, is probably suffering from the fact that its currency was too highly valued by the West, for too long, creating a downtrend that encouraged the flight of investment Yen from Japan. Interestingly, US bond markets are not panicking at the thought of Japanese bond sales, which is good because the moderate rise in US interest rates that these sales will engender is entirely appropriate if the US is going to share in and rationalize the over- investment in East Asia. It also creates a positive for-ex trend as it pushes the dollar towards technical peaks. However, panic selling of bonds would cause too much turbulence in rates and in capital markets, causing retraction of credit that would hurt businesses looking to invest their way around near-term slack demand from Asia. From a Marxian perspective, you have a crisis in surplus value generation and valuation. This effects the economy less than one might suppose because the rate of exploitation is the same or slightly rejiggered in the proletariat's favor. Unless there is a vast, unredeemable structural change in demand and capital availability (which effectively create a higher rate of exploitation) the economy can recover well assuming use-value produced is fairly intact. The connection between this and the paragraph above is that credit ameliorates the rate of exploitation, hence its absolute necessity under capitalism. peace p.s. - I actually think it would be good if the East Asian situation raised Japanese interest rates as I believe Japan may be in something very like stag-flation, and interest rate rises are the only cure for that condition in my view. --- from list marxism-international-AT-lists.village.virginia.edu ---
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