The Ecstasy of Empire: How Close
Is America’s Demise?
Without
a revolution, Americans are history
By Paul Craig Roberts
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.
Disclaimer: The views expressed in this article are the sole
responsibility of the author and do not necessarily reflect those of
the Centre for Research on Globalization. The contents of this article
are of sole responsibility of the author(s). The Centre for Research on
Globalization will not be responsible or liable for any inaccurate or
incorrect statements contained in this article.
To
become a Member of Global Research
The CRG grants permission to cross-post original Global Research
articles on community internet sites as long as the text & title
are not modified. The source and the author's copyright must be
displayed. For publication of Global Research articles in print or
other forms including commercial internet sites, contact: crgeditor@yahoo.com
www.globalresearch.ca contains
copyrighted material the use of which has not always been specifically
authorized by the copyright owner. We are making such material
available to our readers under the provisions of "fair use" in an
effort to advance a better understanding of political, economic and
social issues. The material on this site is distributed without profit
to those who have expressed a prior interest in receiving it for
research and educational purposes. If you wish to use copyrighted
material for purposes other than "fair use" you must request permission
from the copyright owner.
For media inquiries: crgeditor@yahoo.com
© Copyright Paul Craig Roberts, Global Research, 2010
The url address of this article is: www.globalresearch.ca/PrintArticle.php?articleId=20650