The U.S. economy in 1999: goldilocks meets a big bad bear?

Monthly Review

Volumn 50, Issue 10, 1999, Pages 10-21

  Moseley, Fred ^a  

^a MOUNT HOLYOKE COLLEGE   (United States)

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EID: 25444496460     PISSN: 00270520     EISSN: None     Source Type: Journal    
DOI: 10.14452/MR-050-10-1999-03_2     Document Type: Article

References (14)

1. The main example so far is the steel industry. Imports of steel have increased 50 percent in the last year. U.S. producers are having to shut down plants and lay off workers and are demanding government protection against "unfair foreign competition."
2. Cho, Dougchal, "A Year after the Korean Economic Crisis: What Next?" Presented at the Allied Social Sciences Association annual convention, January 1999.
3. William Tabb has recently emphasized in these pages this crucial aspect of the Asian economic crisis. See "The East Asian Financial Crisis," Monthly Review, vol. 50, no. 2 (June 1998), pp. 24-38.
4. The killer blow for many firms with foreign debts denominated in dollars was the 50 percent devaluation of the Asian currencies, which doubled the debt burden of these firms.
5. Jan Kregel comes to the same conclusion for essentially the same reason. See "Yes 'It' Did Happen Again - A Minsky Crisis Happened in Asia," Thejerome Levy Economics Institute, Working Paper No. 234.
6. The rate of profit in the United States declined approximately 50 percent through the mid-1970s and since then has recovered only about one-third of this decline, so that the rate of profit today remains 30-35 percent below its postwar peaks. See Fred Moseley, The Falling Rate of Profit in the Postwar United States Economy (New York: St. Martin's Press, 1992)
7. also by Moseley, "The Rate of Profit and the Future of Capitalism," Review of Radical Political Economics, vol. 29, no. 4 (Fall): p. 23-41.
8. The best-known example is the Long Term Capital Management "hedge fund" that borrowed over $100 billion from major banks in the United States and elsewhere, in order to speculate on future bonds prices around the world. It narrowly escaped bankruptcy, thanks to the intervention of the Fed. LTCM essentially bet that there would be no severe crisis that would disrupt normal spreads between different kinds of bonds, and they lost big after Russia defaulted and the crisis intensified.
9. See Kregel (" Derivatives and Global Capital Flows: Applications to Asia," The Jerome Levy Economics Institute, Working Paper No. 246) for an excellent discussion of derivatives. He argues that one of the main purposes of the development of derivatives was to get around restrictions on pension funds and other institutional investors that limited their ability to invest in "emerging markets."
10. Although the interest rate "spreads" between U.S. Treasury bonds and most grades of corporate bonds still remain several percentage points greater than normal, which indicates continued reluctance to lend to corporations.
11. See Moseley, "The U.S. Economy at the Turn of the Century: Entering a New Era of Prosperity?" (in Capital and Class, forthcoming) for a further discussion of the important role of the inflows of foreign capital in supporting the relative prosperity of the U.S. economy since the mid-1980s and especially since 1995.
12. In 1983, the last year for which there has been an official government study, the richest 10 percent of households owned 89 percent of the privately-owned corporate stock; the richest 1 percent owned 62 percent; and the richest 1/2 percent owned 47 percent. This highly concentrated ownership of corporate stock has decreased somewhat in the 1990s, but probably not that much. See the Joint Economic Committee of the U.S. Congress, "The Concentration of Wealth in the United States: Trends in the Distribution of Wealth Among American Families," 1986.
13. Wolf, Martin, "The Equity Puzzle," Financial Times, December 15, 1998, p. 15.
14. McNally, David, " Globalization on Trial: Crisis and Class Struggle in East Asia," Monthly Review, vol. 50, no. 4 (September 1998), pp. 1-14.