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11.12 This Land is Your Land: The Zinke effect: how the US interior department became a tool of industry [behaving ignorantly again...]
11.11 Trump responds to worst fires in California’s history by threatening to withhold federal aid [behaving ignorantly again...]
11.11 Interior department sued for ‘secretive process’ in at-risk species assessment [behaving ignorantly again...]
11.11 Keystone XL pipeline: judge rules government 'jumped the gun' and orders halt [behaving ignorantly again...]
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US Politics, Policy & 'Culture'
11.10 Trump's acting attorney general involved in firm that scammed veterans out of life savings [Absense of morals and empathy are a prerequisite in the Trump administration]
11.09 Trump administration blocks asylum claims by those crossing border illegally [Making America Less Great Again...]
11.10 US stops refuelling of Saudi-led coalition aircraft in Yemen war [But there are a few children still alive. It's too soon!]
Economics, Crony Capitalism
11.05 Under Trump, Corporate Giants See Massive Drop in Penalties: NYT [Mafia-government...]
11.02 Los Angeles’ Measure B Is a Moonshot Aimed at Creating a Public Bank [Could save the public $Billions if setup smartly]
International & Futurism
11.12 With Trump sitting nearby, Macron calls nationalism a betrayal [Trump was confused...; video]
11.09 US navy ship ignored sinking migrants' cries for help, say survivors [Making America Less Great Again...]
11.03 Trudeau won’t stop $12bn of arms sales to Saudi after Khashoggi’s death because money always wins over murder [Capitalism Trumps Morality...]
11.03 The Guardian view on Brazil’s new president: a global danger [Note the omission of the US as a prospective partner for doing good...]
11.03 US rebuffs Europeans over ensuring Iran sanctions exempt food and medicine [Unwarranted, heinous cruelty to innocent civilians]
11.02 The Dispossessed: This French Town Has Welcomed Refugees for 400 Years [How strange: They behave like... human beings!]
11.01 I live among the neo-Nazis in eastern Germany. And it’s terrifying [A Mass Sociopathic Psychosis grows for a better future, but attacks the wrong causes and enemies...; 1:07 video in Chemnitz, 1:09 video in Chemnitz]
There's Nothing Left to Recover
Originally published on 16 July 2009
There is no economy left to recover. The US manufacturing economy was lost to offshoring and free trade ideology. It was replaced by a mythical “New Economy.”
The “New Economy” was based on services. Its artificial life was fed by the Federal Reserve’s artificially low interest rates, which produced a real estate bubble, and by “free market” financial deregulation, which unleashed financial gangsters to new heights of debt leverage and fraudulent financial products.
The real economy was traded away for a make-believe economy. When the make-believe economy collapsed, Americans’ wealth in their real estate, pensions, and savings collapsed dramatically while their jobs disappeared.
The debt economy caused Americans to leverage their assets. They refinanced their homes and spent the equity. They maxed out numerous credit cards. They worked as many jobs as they could find. Debt expansion and multiple family incomes kept the economy going.
And now suddenly Americans can’t borrow in order to spend. They are over their heads in debt. Jobs are disappearing. America’s consumer economy, approximately 70% of GDP, is dead. Those Americans who still have jobs are saving against the prospect of job loss. Millions are homeless. Some have moved in with family and friends; others are living in tent cities.
Meanwhile the US government’s budget deficit has jumped from $455 billion in 2008 to $2,000 billion this year, with another $2,000 billion on the books for 2010. And President Obama has intensified America’s expensive war of aggression in Afghanistan and initiated a new war in Pakistan.
There is no way for these deficits to be financed except by printing money or by further collapse in stock markets that would drive people out of equity into bonds.
The US government’s budget is 50% in the red. That means half of every dollar the federal government spends must be borrowed or printed. Because of the worldwide debacle caused by Wall Street’s financial gangsterism, the world needs its own money and hasn’t $2 trillion annually to lend to Washington.
As dollars are printed, the growing supply adds to the pressure on the dollar’s role as reserve currency. Already America’s largest creditor, China, is admonishing Washington to protect China’s investment in US debt and lobbying for a new reserve currency to replace the dollar before it collapses. According to various reports, China is spending down its holdings of US dollars by acquiring gold and stocks of raw materials and energy.
The price of one ounce gold coins is $1,000 despite efforts of the US government to hold down the gold price. How high will this price jump when the rest of the world decides that the bankruptcy of “the world’s only superpower” is at hand?
And what will happen to America’s ability to import not only oil, but also the manufactured goods on which it is import-dependent?
When the over-supplied US dollar loses the reserve currency role, the US will no longer be able to pay for its massive imports of real goods and services with pieces of paper. Overnight, shortages will appear and Americans will be poorer.
Nothing in Presidents Bush and Obama’s economic policy addresses the real issues. Instead, Goldman Sachs was bailed out, more than once. As Eliot Spitzer said, the banks made a “bloody fortune” with US aid.
It was not the millions of now homeless homeowners who were bailed out. It was not the scant remains of American manufacturing--General Motors and Chrysler--that were bailed out. It was the Wall Street Banks.
According to Bloomberg.com, Goldman Sachs’ current record earnings from their free or low cost capital supplied by broke American taxpayers has led the firm to decide to boost compensation and benefits by 33 percent. On an annual basis, this comes to compensation of $773,000 per employee.
This should tell even the most dimwitted patriot who “their” government represents.
The worst of the economic crisis has not yet hit. I don’t mean the rest of the real estate crisis that is waiting in the wings. Home prices will fall further when the foreclosed properties currently held off the market are dumped. Store and office closings are adversely impacting the ability of owners of shopping malls and office buildings to make their mortgage payments. Commercial real estate loans were also securitized and turned into derivatives.
The real crisis awaits us. It is the crisis of high unemployment, of stagnant and declining real wages confronted with rising prices from the printing of money to pay the government’s bills and from the dollar’s loss of exchange value. Suddenly, Wal-Mart prices will look like Nieman Marcus prices.
Retirees dependent on state pension systems, which cannot print money, might not be paid, or might be paid with IOUs. They will not even have depreciating money with which to try to pay their bills. Desperate tax authorities will squeeze the remaining life out of the middle class.
Nothing in Obama’s economic policy is directed at saving the US dollar as reserve currency or the livelihoods of the American people. Obama’s policy, like Bush’s before him, is keyed to the enrichment of Goldman Sachs and the armament industries.
Matt Taibbi describes Goldman Sachs as “a great vampire squid wrapped around the face of humanity, relentless jamming its blood funnel into anything that smells like money.” Look at the Goldman Sachs representatives in the Clinton, Bush and Obama administrations. This bankster firm controls the economic policy of the United States.
Little wonder that Goldman Sachs has record earnings while the rest of us grow poorer by the day.
Paul Craig Roberts is an economist who served as an Assistant Secretary of the Treasury in the Reagan Administration earning fame as the "Father of Reaganomics". He is a former editor and columnist for the Wall Street Journal, Business Week, and Scripps Howard News Service. He is the author of Supply-Side Revolution: An Insider's Account of Policymaking in Washington; Alienation and the Soviet Economy: The Collapse of the Socialist Era and Meltdown: Inside the Soviet Economy, and is the co-author with Lawrence M. Stratton of The Tyranny of Good Intentions: How Prosecutors and Law Enforcement Are Trampling the Constitution in the Name of Justice.
This article is published in the Baltimore Chronicle with permission of the author.
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This story was published on July 17, 2009.