Date: Wed, 15 Oct 1997 16:04:16 -0700 (PDT)
From: Dennis R Redmond <dredmond-AT-gladstone.uoregon.edu>
Subject: M-TH: Re: World Currencies


On Wed, 15 Oct 1997, Doug Henwood wrote regarding Asia:

> But Japan's economy is in the tank now because of a collapsed speculative
> bubble, a hangover from the wild speculation of the 1980s, and what looks
> like a serious over-investment problem. Indeed, you could argue that the
> various problems in Asia today are the result of excessive, and now
> difficult-to-valorize, investments - a severe overcapacity problem that's
> lending a deflationary tone to the entire world economy. Much of the
> investment in Thailand and Malaysia was driven by Japanese MNCs, so even
> their problem can be traced in large part to Japanese assumptions that
> growth would continue forever. 

Japan is still making a pile of money on those investments, though: the
deflation is being exported onto the semi-peripheries, who are being
sacrificed a la Mexico for the market shares of Japan Inc. Profits before
taxes as a percentage of total revenues for Japanese manufacturers
in Asia were, so I gleaned from an article in the Asian WSJ,
around a percentage point higher than comparable investments in Japan in
1996 (3.8% to 2.7%). Of course, such foreign investments are only around
8% of the total Japanese manufacturing base, which is probably why such
surplus-rents haven't been enough to offset the general post-bubble
stagnation in Japan. We may be seeing the emergence of a nastier, more
vicious neo-colonialism in Asia, where the new metropoles are starting to
prey upon their semi-peripheries much like the US ravaged Latin America.

Incidentally, it looks like the shit is going to hit the fan in the
Eurostate: the Bubacrats recently raised the repo rate in Germany to 3.3%,
and the other European central banks quickly followed suit in order to
maintain currency parity. This, in a situation of 11% unemployment and
austerity as far as the eye can see -- amazing, to see how allegedly
postmodern economies are still in thrall to the undead hand of the gold
standard. This won't be the end of the European Union, but it probably is
the end of Maastricht monetarism. Those economies are already flatter than
the Dutch landscape, and rising interest rates would put half the
Continent under some really deep water. If nothing else, this should spook
European stock markets, which are experiencing an American-style bubblet,
if not a full-fledged mania. Could this be the fiscal needle which 
pricks the Wall Street bubble and reduces the euro to a paper shell? 
Or will Central Europe once again prove the pessimists wrong, by kicking
out the Kohl regime and throwing money at its semi-peripheries in
some vaguely Keynesian fashion? My own feeling is, it's sixty-forty in
favor of the latter. But then, Americans make notoriously bad gamblers.

-- Dennis



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