On 2/6/07, Doug Henwood <[EMAIL PROTECTED]> wrote:
On Feb 5, 2007, at 11:13 PM, Yoshie Furuhashi wrote:
> On 2/5/07, paul phillips <[EMAIL PROTECTED]> wrote:
>> My followup question got lost in this reply so, in the light of
>> subsequent comments, let me ask the question of Doug and others,
>> why has
>> the employment rate held up despite the negative savings rate, the
>> deflating housing bubble and the contracting manufacturing sector?
>
> China, Japan, and the Gulf states pay for American consumption,
> keeping interest rates low.
They're lending the US the money. You make it sound like they're
picking up the tab.
"Lending" makes it sound like they are all intending to collect at a
profit. :->
The negative savings rate isn't a problem until foreigners stop
lending the US money, or US households suffer an outbreak of prudence
and rebuild their savings. Until those things happen, it's not a drag
but a stimulus.
A stimulus due to redistribution of wealth away from labor to capital,
a stimulus for big asset price appreciation in "Chimerica" (China +
America) -- which accounted for "over 60% of the cumulative growth in
world GDP over the past five years" according to Niall Ferguson and
Moritz Schularick ("Chimerical? Think Again," WSJ, 5 Feb 07, A17) --
and the world.
Housing has, for now, stabilized, so it's not that much of a drag
anymore.
Vacant homes for sale, 2.1 million in the final months of 2006, "have
climbed up to their highest level in four decades," bringing the
national homeowner vacancy rate to "2.7%, up from 2.0% a year earlier"
(Michael Corkery, "Vacant Homes for Sale Cloud Economic Hopes," WSJ, 5
Feb 07, A1+).
And with energy prices down significantly, it's possible the
US economy could accelerate.
It looks like cold weather beat the Saudi ruling class, and, what with
escalation of Washington's Iran campaign, the futures are heading
toward $60+.
--
Yoshie
<http://montages.blogspot.com/>
<http://mrzine.org>
<http://monthlyreview.org/>
