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Ref. : Local Newsbriefs
Ref. : Letters to the editor
03.05 Open Letter to Congressman Bart Stupak
Video National Health Care Systems In Other Countries
03.18 Pressure Drop: Brave Sir Dennis Ran Away
03.12 Slick Barry and the $100-Billion Medicaid/Medicare Fraud Claim
03.09 Kill Bill: Death to Obamacare!
03.09 Obama’s Rhetoric May Be “Fiery,” But His Health Care Reform Is Still Lukewarm
03.17 CNN Scrapes Bottom of Right-Wing Barrel With Erickson Hire
03.16 WPost Blames Obama First, on Israel
03.16 Letter to the New York Times' Editor: Stovepiping To Persia
03.12 Cud and Complicity: Burying the Alternatives to Empire's Dominion
03.11 NYT and the ACORN Hoax
03.05 Sorry, Rove, Bush Did Lie About Iraq
03.03 It's Snow News
03.03 The Woeful Washington Post
Ref. : The Daily Howler
02.26 America's Supremes: Court Over Constitution
03.11 Power Rangers: Policing the System With the "Fightin' Progressives"
03.09 Thinking About Countings
03.07 Unnatural Acts: Breaking the Fever of Militarism
02.25 Future Shock: A Better World Beyond the Imperium
03.19 Israel's Troubling Tilt Toward Apartheid
03.18 The Lawfare Project's Anti-Democratic Agenda
03.16 America's Secret Prisons
03.13 Palestinian Dispossession in East Jerusalem
03.12 Israeli Settlement Expansions Continue
03.11 Brutalizing Palestinian Children
03.08 The Russell Tribunal on Palestine: Barcelona Session
03.05 Targeting Israeli Apartheid
03.01 America's Permanent War Agenda
02.25 Global Sweatshop Wage Slavery
03.19 The Growing Movement For Publicly-Owned Banks
03.19 America's "Houdini Recovery" under IMF-Type Austerity
03.14 The Crisis in America's Telecommunications Network
03.09 The Business of Water: Privatizing An Essential Resource
03.05 Is the Recovery Real?
03.04 IMF-Style Austerity Measures come to America: What “Fiscal Responsibility” Means To You
03.04 Barry C. Lynn's "Cornered: The New Monopoly Capitalism and Economics of Destruction"
03.01 Thinking About Fees
03.15 Peace Process Hypocrisy: Stillborn from Inception
03.03 Muslim Disunity
03.02 Funding Israeli Militarism, Belligerence and Occupation
02.26 Iran Captures a 'Good' Terrorist
ECONOMIC ANALYSIS:
Uncle Sam, Your Banker Will See You Now
Should the US proceed with sanctions intended to cause the Chinese currency to appreciate, “the Chinese central bank will be forced to sell dollars, which might lead to a mass depreciation of the dollar.”
The precarious position of the US dollar as reserve currency has been thoroughly ignored and denied. The delusion that the US is “the world’s sole superpower,” whose currency is desirable regardless of its excess supply, reflects American hubris, not reality. This hubris is so extreme that only 6 weeks ago McKinsey Global Institute published a study that concluded that even a doubling of the US current account deficit to $1.6 trillion would pose no problem.
Strategic thinkers, if any remain who have not been purged by neocons, will quickly conclude that China’s power over the value of the dollar and US interest rates also gives China power over US foreign policy. The US was able to attack Afghanistan and Iraq only because China provided the largest part of the financing for Bush’s wars.
If China ceased to buy US Treasuries, Bush’s wars would end. The savings rate of US consumers is essentially zero, and several million are afflicted with mortgages that they cannot afford. With Bush’s budget in deficit and with no room in the US consumer’s budget for a tax increase, Bush’s wars can only be financed by foreigners.
No country on earth, except for Israel, supports the Bush regimes’ desire to attack Iran. It is China’s decision whether it calls in the US ambassador, and delivers the message that there will be no attack on Iran or further war unless the US is prepared to buy back $900 billion in US Treasury bonds and other dollar assets.
The US, of course, has no foreign reserves with which to make the purchase. The impact of such a large sale on US interest rates would wreck the US economy and effectively end Bush’s war-making capability. Moreover, other governments would likely follow the Chinese lead, as the main support for the US dollar has been China’s willingness to accumulate them. If the largest holder dumped the dollar, other countries would dump dollars, too.
The value and purchasing power of the US dollar would fall. When hard-pressed Americans went to Wal-Mart to make their purchases, the new prices would make them think they had wandered into Nieman Marcus. Americans would not be able to maintain their current living standard.
Simultaneously, Americans would be hit either with tax increases in order to close a budget deficit that foreigners will no longer finance or with large cuts in income security programs. The only other source of budgetary finance would be for the government to print money to pay its bills. In this event, Americans would experience inflation in addition to higher prices from dollar devaluation.
This is a grim outlook. We got in this position because our leaders are ignorant fools. So are our economists, many of whom are paid shills for some interest group. So are our corporate leaders whose greed gave China power over the US by offshoring the US production of goods and services to China. It was the corporate fat cats who turned US Gross Domestic Product into Chinese imports, and it was the “free trade, free market economists” who egged it on.
How did a people as stupid as Americans get so full of hubris?
This commentary is republished in the Baltimore Chronicle with the permission of the author.
Republication or redistribution of Baltimore Chronicle content is expressly prohibited without their prior written consent.
This story was published on August 16, 2007.
