FX Macroeconomics
As Hobson explained in 1902: When productive capacity grew faster
than consumer demand,
there was very soon an excess of this capacity (relative to consumer demand), and, hence, there were few profitable domestic investment outlets. Foreign investment was the only answer.
But, insofar as the same p r obl e m existed in every indus t r ia l ize d c a p it a l is t c o u n t r y , such foreign investment was possible only if non- c apit a l is t countries could be “civilized”, “Christianized”, and “uplifted” — that is, if their traditional i n s ti t u ti o n s could be fo r c ef u l ly destroyed, and the people c o e r civ ely brought under the domain of the “invisible hand” of market capitalism.
THE EMERGENCE OF SURPLUS CAPITAL
The Great War killed 80-90 million people and destroyed
much capital. Capital was not in surplus in the post-war years and its central place in economic discourse and analysis was forgotten. To the extent that it is picked up in the late 1970s and early 1980s it was regalated to the
emerged that addressed the problem. Ever since the late 19th century, US policy makers had consistently recognized the need to export capital - foreign direct and
portfolio investment. The
Reagan-Thatcher revolution was es se n t ia l ly that
the
The so-called Minsky-moment arrived: the long credit expansion cycle promoted extensive risk taking behaviors and complex financial innovation that were its ultimate downfall.
periphery and not integrated in the mainstream discourse.
By the late 1960s and early 1970s, the surplus capital problem had reemerged. After the Bretton Woods regime collapsed, it took a good decade before a new vision and institutional arrangement
58 FX TRADER MAGAZINE October - December 2013
An g l o - Am e ri c a n e c o n omi e s , with deep c a p i t a l m a r k et s, would absorb the world’s surplus capital t h r o u g h running trade and current ac c o u n t deficit s . The US, of course, was the biggest, but for the size of their e c o n omi e s , the UK and A u s t r a l i a re c o rd e d s ubs t a n t ia l deficits.
It turned out that the surplus eventually overwhelmed the US ability to recycle it. Rules and regulations that ensured the financial pipes were robust had either been diluted, removed entirely, or went unenforced. With leverage, the proverbial house
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92