>X-Sender: [EMAIL PROTECTED]
>Date: Fri, 03 Dec 1999 16:07:05 -0500
>To: [EMAIL PROTECTED]
>From: Bob Olsen <[EMAIL PROTECTED]>
>Subject: What's Been Powering the U.S. Economy?
>Mime-Version: 1.0
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>Date: Thu, 2 Dec 1999 13:31:15 -1000
>From: "Viviane Lerner" <[EMAIL PROTECTED]>
>Subject: What's Been Powering the U.S. Economy?
>
>>From The Left Business Observer
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>http://www.panix.com/~dhenwood/LBO_current.html
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>An obsession of this page has been figuring out what's been powering the
>U.S. economy. Conventional explanations, like the wondrous flexibility of
>our labor markets, don't convince, since these features haven't changed
>profoundly from the time when our major economic rivals were outgrowing us.
>Technological miracles don't persuade either, since there's little
>difference between productivity growth in the U.S. and the famously stagnant
>EU - and there's strong evidence that almost all the reported improvement in
>U.S. productivity figures in recent years can be traced to the computer
>industry alone. Outside computers, economist Robert Gordon estimates that
>productivity performance in the late 1990s is worse than the 1972-95
>average. To anyone schooled in Keynesian economics, the expansion has been
>particularly puzzling because it's happened despite substantial fiscal
>tightening - the budget deficit, almost 5% of GDP in 1992, was transformed
>into a surplus of 1% in 1999, a massive shift that might have been expected
>to render an economy torpid.
>
>So what's been driving it? LBO's preferred theory has been the growth in
>debt. That theory, and then some, is nicely developed in a paper by Wynne
>Godley, published by Bard College's Levy Institute (www.levy.org). To
>Godley, the U.S. economy is characterized by seven unsustainable processes.
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>These are:
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> 1) the fall of private savings deeply into negative territory;
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> 2) the rise in the flow of lending to the private sector (with 1) and 2)
> jointly meaning more borrowing and less saving);
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> 3) rapid growth in the money supply (the trace of all that borrowing
> entering the spending stream);
>
>4) a rise in asset prices - mainly stocks - at a rate far in excess of
> growth in GDP or profits (which contributes to confidence, but provides
> no fresh cash, unlike incomes earned in production - money taken out by
> selling stock can only be replaced by fresh buying);
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> 5) the rise in the federal budget surplus;
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> 6) the rise in the current account deficit (the deficit on trade and
> investment income the U.S. is running with the outside world, which
> adds to our foreign debt); and
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> 7) the rise in U.S. foreign debt (when domestic savings fall, and
> domestic borrowings rise, the shortfall can only be made up from
> abroad).
>
>In other words, while the U.S. government has grown prudent, the private
>sector hasn't: both households and businesses are spending more than
>their income (the income of businesses being profits).
>
>- --
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> .............................................
> Bob Olsen, Toronto [EMAIL PROTECTED]
> .............................................
>
