Date: Sat, 13 Dec 97 7:55:53 EST From: boddhisatva <kbevans-AT-panix.com> Subject: Re: M-I: Re: The World Economic Crisis and American Capitalism Dennis, Obviously the revolution would be a better cure for Japanese stagflation, but under capitalism the only cure is higher interest rates. The hallmarks of stagflation to my mind are a lack of interest in new investment, and artificial price rises supported by custom and expectation that allow existing capitals to limp along. Japan's closed economy creates absurd price structures that are the economic equivalent of the speculative inflation found in more typical stagflation. Next, clearly nobody is demanding a lot of credit for internal investment in Japan or interest rates would be higher. Once speculative inflation sets in (inflation fueled not only by over-utilization and excess money but by entrenched inflationary expectation), the spell can only be broken by forcing lenders to charge more to refinance current capitals than can be offset by pricing. Recession is the almost certain result, but it is recession without inflation or irrational price structures. This recession is offset (far from completely) by foreign inflows of capital and reduced outflows of internal capital (that would otherwise seek higher rates abroad as the Japanese have done). That there would be bankruptcies and higher unemployment under a high interest rate regime is simply appropriate. The economy is doing badly, why shouldn't it show? Allowing the constant re-financing of an economy that's a proven loser is stupid. Let capitals compete with a higher rate of return, that's what economic growth is all about. This is capitalism we're talking about, after all. peace --- from list marxism-international-AT-lists.village.virginia.edu ---
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