The Ecstasy of Empire: How Close Is America's Demise?
The Ecstasy of Empire: How Close Is America’s Demise?
Without a revolution, Americans are history
By Paul Craig Roberts
www.globalresearch.ca/index.php?context=va&aid=20650
Global Research, August 16, 2010
The
United States is running out of time to get its budget and trade
deficits under control. Despite the urgency of the situation, 2010 has
been wasted in hype about a non-existent recovery. As recently as
August 2 Treasury Secretary Timothy F. Geithner penned a New York Times
Column, “Welcome to the Recovery.”
As John Williams (shadowstats.com)
has made clear on many occasions, an appearance of recovery was created
by over-counting employment and undercounting inflation. Warnings by
Williams, Gerald Celente, and myself have gone unheeded, but our
warnings recently had echos from Boston University professor Laurence
Kotlikoff and from David Stockman, who excoriated the Republican Party
for becoming big spending Democrats.
It
is encouraging to see a bit of realization that, this time, Washington
cannot spend the economy out of recession. The deficits are already too
large for the dollar to survive as reserve currency, and deficit
spending cannot put Americans back to work in jobs that have been moved
offshore.
However,
the solutions offered by those who are beginning to recognize that
there is a problem are discouraging. Kotlikoff thinks the solution is
massive Social Security and Medicare cuts or massive tax increases or
hyperinflation to destroy the massive debts.
Perhaps
economists lack imagination, or perhaps they don’t want to be cut off
from Wall Street and corporate subsidies, but Social Security and
Medicare are insufficient at their present levels, especially
considering the erosion of private pensions by the dot com, derivative
and real estate bubbles. Cuts in Social Security and Medicare, for which
people have paid 15% of their earnings all their life, would result in
starvation and deaths from curable diseases.
Tax
increases make even less sense. It is widely acknowledged that the
majority of households cannot survive on one job. Both husband and wife
work and often one of the partners has two jobs in order to make ends
meet. Raising taxes makes it harder to make ends meet--thus more
foreclosures, more food stamps, more homelessness. What kind of
economist or humane person thinks this is a solution?
Ah, but we will tax the rich. The usual idiocy. The rich have enough money. They will simply stop earning.
Let’s
get real. Here is what the government is likely to do. Once the
Washington idiots realize that the dollar is at risk and that they can
no longer finance their wars by borrowing abroad, the government will
either levy a tax on private pensions on the grounds that the pensions
have accumulated tax-deferred, or the government will require pension
fund managers to purchase Treasury debt with our pensions. This will buy
the government a bit more time while pension accounts are loaded up
with worthless paper.
The
last Bush budget deficit (2008) was in the $400-500 billion range,
about the size of the Chinese, Japanese, and OPEC trade surpluses with
the US. Traditionally, these trade surpluses have been recycled to the
US and finance the federal budget deficit. In 2009 and 2010 the federal
deficit jumped to $1,400 billion, a back-to-back trillion dollar
increase. There are not sufficient trade surpluses to finance a deficit
this large. From where comes the money?
The
answer is from individuals fleeing the stock market into “safe”
Treasury bonds and from the bankster bailout, not so much the TARP money
as the Federal Reserve’s exchange of bank reserves for questionable
financial paper such as subprime derivatives. The banks used their
excess reserves to purchase Treasury debt.
These
financing maneuvers are one-time tricks. Once people have fled stocks,
that movement into Treasuries is over. The opposition to the bankster
bailout likely precludes another. So where does the money come from the
next time?
The
Treasury was able to unload a lot of debt thanks to “the Greek crisis,”
which the New York banksters and hedge funds multiplied into “the euro
crisis.” The financial press served as a financing arm for the US
Treasury by creating panic about European debt and the euro. Central
banks and individuals who had taken refuge from the dollar in euros were
panicked out of their euros, and they rushed into dollars by purchasing
US Treasury debt.
This
movement from euros to dollars weakened the alternative reserve
currency to the dollar, halted the dollar’s decline, and financed the
massive US budget deficit a while longer.
Possibly
the game can be replayed with Spanish debt, Irish debt, and whatever
unlucky country swept in by the thoughtless expansion of the European
Union.
But
when no countries remain that can be destabilized by Wall Street
investment banksters and hedge funds, what then finances the US budget
deficit?
The
only remaining financier is the Federal Reserve. When Treasury bonds
brought to auction do not sell, the Federal Reserve must purchase them.
The Federal Reserve purchases the bonds by creating new demand deposits,
or checking accounts, for the Treasury. As the Treasury spends the
proceeds of the new debt sales, the US money supply expands by the
amount of the Federal Reserve’s purchase of Treasury debt.
Do
goods and services expand by the same amount? Imports will increase as
US jobs have been offshored and given to foreigners, thus worsening the
trade deficit. When the Federal Reserve purchases the Treasury’s new
debt issues, the money supply will increase by more than the supply of
domestically produced goods and services. Prices are likely to rise.
How
high will they rise? The longer money is created in order that
government can pay its bills, the more likely hyperinflation will be the
result.
The
economy has not recovered. By the end of this year it will be obvious
that the collapsing economy means a larger than $1.4 trillion budget
deficit to finance. Will it be $2 trillion? Higher?
Whatever
the size, the rest of the world will see that the dollar is being
printed in such quantities that it cannot serve as reserve currency. At
that point wholesale dumping of dollars will result as foreign central
banks try to unload a worthless currency.
The
collapse of the dollar will drive up the prices of imports and
offshored goods on which Americans are dependent. Wal-Mart shoppers will
think they have mistakenly gone into Neiman Marcus.
Domestic
prices will also explode as a growing money supply chases the supply of
goods and services still made in America by Americans.
The
dollar as reserve currency cannot survive the conflagration. When the
dollar goes the US cannot finance its trade deficit. Therefore, imports
will fall sharply, thus adding to domestic inflation and, as the US is
energy import-dependent, there will be transportation disruptions that
will disrupt work and grocery store deliveries.
Panic will be the order of the day.
Will farms will be raided? Will those trapped in cities resort to riots and looting?
Is this the likely future that “our” government and “our patriotic” corporations have created for us?
To borrow from Lenin, “What can be done?”
Here
is what can be done. The wars, which benefit no one but the
military-security complex and Israel’s territorial expansion, can be
immediately ended. This would reduce the US budget deficit by hundreds
of billions of dollars per year. More hundreds of billions of dollars
could be saved by cutting the rest of the military budget, which in its
present size, exceeds the budgets of all the serious military powers on
earth combined.
US military spending reflects the unaffordable and unattainable crazed
neoconservative goal of US Empire and world hegemony. What fool in
Washington thinks that China is going to finance US hegemony over
China?
The
only way that the US will again have an economy is by bringing back the
offshored jobs. The loss of these jobs impoverished Americans while
producing over-sized gains for Wall Street, shareholders, and corporate
executives. These jobs can be brought home where they belong by taxing
corporations according to where value is added to their product. If
value is added to their goods and services in China, corporations would
have a high tax rate. If value is added to their goods and services in
the US, corporations would have a low tax rate.
This
change in corporate taxation would offset the cheap foreign labor that
has sucked jobs out of America, and it would rebuild the ladders of
upward mobility that made America an opportunity society.
If the wars are not immediately stopped and the jobs brought back to America, the US is relegated to the trash bin of history.
Obviously,
the corporations and Wall Street would use their financial power and
campaign contributions to block any legislation that would reduce
short-term earnings and bonuses by bringing jobs back to Americans.
Americans have no greater enemies than Wall Street and the corporations
and their prostitutes in Congress and the White House.
The neocons allied with Israel, who control both parties and much of the media, are strung out on the ecstasy of Empire.
The
United States and the welfare of its 300 million people cannot be
restored unless the neocons, Wall Street, the corporations, and their
servile slaves in Congress and the White House can be defeated.
Without a revolution, Americans are history.
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