BeggarsCanBeChoosers.com
Sunday, January 11, 2009
How Bush Unwittingly Helped Bin Laden's Plan To Wreck U.S. Economy
By MARC McDONALD
"We are continuing this policy in bleeding America to the point of bankruptcy."
---Osama bin Laden, 2004 videotape statement.
"The past eight years of imperial overstretch, hubris and domestic and international abuse of power on the part of the Bush administration has left the U.S. materially weakened financially, economically, politically and morally. Even the most hard-nosed, Guantanamo Bay-indifferent potential foreign investor in the U.S. must recognize that its financial system has collapsed."
---Willem Buiter, London School of Economics, 2009.
Contrary to what George W. Bush would have us believe, Osama bin Laden does not hate America for its freedoms. Nor has bin Laden ever harbored ambitions of destroying America in a military confrontation.
No, actually, what bin Laden has long sought is to diminish America's standing in the world by wrecking our economy. Bin Laden believes this is possible because he saw first-hand how the Soviet Union met its demise.
As bin Laden said in a 2004 statement, "We, alongside the mujahedeen, bled Russia for 10 years until it went bankrupt and was forced to withdraw in defeat."
It's clear that the main goal of the 9/11 attacks was to provoke the U.S. into a costly war in Afghanistan that would drain our treasury and ultimately weaken the main lever of America's global power and influence: the U.S. dollar.
Unfortunately for America, after 9/11, Bush took bin Laden's bait. As bin Laden put it himself in 2004, Al-Qaeda found it "easy for us to provoke and bait this administration."
In fact, bin Laden succeeded beyond his wildest dreams in provoking America into not one, but two disastrous and ruinously expensive wars that have done untold damage to America's global standing, as well as our economic power.
Eight years after the 9/11 attacks, America's economy is in the worst shape it has been since the Great Depression. But the damage is actually far worse than that. As bad as things were in the 1930s, few people then seriously expected the dollar to collapse or for America to become a bankrupt nation. Now, such forecasts are increasingly common.
It's becoming frightening clear that the U.S. dollar is now teetering on the edge of a cliff. For all of the economic misery of 2008, the dollar managed to avoid a steep collapse in value. But it's increasingly likely that in 2009, the East Asian nations that hold trillions of dollars in U.S. debt will finally start off-loading their assets. And when they do, the dollar will crumble in value.
The destruction of the dollar's value will mean an end to America's reign as the world's sole superpower. Once upon a time, such a scenario was embraced only by an alarmist fringe of commentators who weren't taken seriously. But these days, more and more mainstream respectable observers now believe this will be America's fate in the near future. Even Warren Buffet, the wealthiest man on earth, has said the U.S. is at risk of becoming a "sharecropper’s society."
How Bush Took Bin Laden's Bait
During the Soviets' disastrous war in Afghanistan, bin Laden saw first-hand the devastating effects that imperial overstretch can have on a nation's economy. Clearly, that costly fiasco played a role in the ultimate demise of the Soviet Union.
The 9/11 attacks were meant to provoke the U.S. into a similarly costly and debilitating war. And in this, it succeeded beyond bin Laden's wildest dreams, as Bush proceeded to launch not one, but two disastrous wars. (That one of these wars was against the secular state of Iraq, headed by bin Laden's old nemesis, Saddam Hussein, was the icing on the cake).
The 9/11 attacks presented a series of challenges to George W. Bush. The challenges were clear: kill or capture bin Laden and destroy Al-Qaeda.
Eight years later, it's difficult to comprehend just how much Bush has utterly failed to meet this challenge. Bin Laden remains a free man. Al-Qaeda remains intact and is still as lethal as ever. And the Taliban are back and growing in strength.
On the other hand, America is a profoundly different nation than the one that existed before 9/11. We're now a country that is widely despised, feared and hated around the world. We're a vastly weaker nation, economically, than we were before 9/11. America's debts have mushroomed to fantastic levels that threaten the nation's economic security.
About the only thing future historians will remember about Bush's presidency is that he presided over the beginning of the end of the American empire. And it's clear that his bungled response to 9/11 was a key factor in America's ultimate demise as a superpower.
It's this last point that is especially noteworthy. Bin Laden realized early on that his ragtag group of Al-Qaeda fighters could never defeat the U.S. militarily. And horrific as they were, the 9/11 attacks by themselves were a mere pinprick on the overall American economy.
For bin Laden to succeed, he needed the unwitting cooperation of George W. Bush. And that's exactly what bin Laden got, with Bush's disastrous, bungling response to the 9/11 attacks.
"We are continuing this policy in bleeding America to the point of bankruptcy."
---Osama bin Laden, 2004 videotape statement.
"The past eight years of imperial overstretch, hubris and domestic and international abuse of power on the part of the Bush administration has left the U.S. materially weakened financially, economically, politically and morally. Even the most hard-nosed, Guantanamo Bay-indifferent potential foreign investor in the U.S. must recognize that its financial system has collapsed."
---Willem Buiter, London School of Economics, 2009.
Contrary to what George W. Bush would have us believe, Osama bin Laden does not hate America for its freedoms. Nor has bin Laden ever harbored ambitions of destroying America in a military confrontation.
No, actually, what bin Laden has long sought is to diminish America's standing in the world by wrecking our economy. Bin Laden believes this is possible because he saw first-hand how the Soviet Union met its demise.
As bin Laden said in a 2004 statement, "We, alongside the mujahedeen, bled Russia for 10 years until it went bankrupt and was forced to withdraw in defeat."
It's clear that the main goal of the 9/11 attacks was to provoke the U.S. into a costly war in Afghanistan that would drain our treasury and ultimately weaken the main lever of America's global power and influence: the U.S. dollar.
Unfortunately for America, after 9/11, Bush took bin Laden's bait. As bin Laden put it himself in 2004, Al-Qaeda found it "easy for us to provoke and bait this administration."
In fact, bin Laden succeeded beyond his wildest dreams in provoking America into not one, but two disastrous and ruinously expensive wars that have done untold damage to America's global standing, as well as our economic power.
Eight years after the 9/11 attacks, America's economy is in the worst shape it has been since the Great Depression. But the damage is actually far worse than that. As bad as things were in the 1930s, few people then seriously expected the dollar to collapse or for America to become a bankrupt nation. Now, such forecasts are increasingly common.
It's becoming frightening clear that the U.S. dollar is now teetering on the edge of a cliff. For all of the economic misery of 2008, the dollar managed to avoid a steep collapse in value. But it's increasingly likely that in 2009, the East Asian nations that hold trillions of dollars in U.S. debt will finally start off-loading their assets. And when they do, the dollar will crumble in value.
The destruction of the dollar's value will mean an end to America's reign as the world's sole superpower. Once upon a time, such a scenario was embraced only by an alarmist fringe of commentators who weren't taken seriously. But these days, more and more mainstream respectable observers now believe this will be America's fate in the near future. Even Warren Buffet, the wealthiest man on earth, has said the U.S. is at risk of becoming a "sharecropper’s society."
How Bush Took Bin Laden's Bait
During the Soviets' disastrous war in Afghanistan, bin Laden saw first-hand the devastating effects that imperial overstretch can have on a nation's economy. Clearly, that costly fiasco played a role in the ultimate demise of the Soviet Union.
The 9/11 attacks were meant to provoke the U.S. into a similarly costly and debilitating war. And in this, it succeeded beyond bin Laden's wildest dreams, as Bush proceeded to launch not one, but two disastrous wars. (That one of these wars was against the secular state of Iraq, headed by bin Laden's old nemesis, Saddam Hussein, was the icing on the cake).
The 9/11 attacks presented a series of challenges to George W. Bush. The challenges were clear: kill or capture bin Laden and destroy Al-Qaeda.
Eight years later, it's difficult to comprehend just how much Bush has utterly failed to meet this challenge. Bin Laden remains a free man. Al-Qaeda remains intact and is still as lethal as ever. And the Taliban are back and growing in strength.
On the other hand, America is a profoundly different nation than the one that existed before 9/11. We're now a country that is widely despised, feared and hated around the world. We're a vastly weaker nation, economically, than we were before 9/11. America's debts have mushroomed to fantastic levels that threaten the nation's economic security.
About the only thing future historians will remember about Bush's presidency is that he presided over the beginning of the end of the American empire. And it's clear that his bungled response to 9/11 was a key factor in America's ultimate demise as a superpower.
It's this last point that is especially noteworthy. Bin Laden realized early on that his ragtag group of Al-Qaeda fighters could never defeat the U.S. militarily. And horrific as they were, the 9/11 attacks by themselves were a mere pinprick on the overall American economy.
For bin Laden to succeed, he needed the unwitting cooperation of George W. Bush. And that's exactly what bin Laden got, with Bush's disastrous, bungling response to the 9/11 attacks.
Labels: dollar collapse, George W. Bush, Osama bin Laden
Tuesday, July 15, 2008
The Great Depression of 2008
By MARC McDONALD
Until last week, most economists were divided on whether the U.S. was in a recession or not. Now, with the ailing mortgage agencies Fannie Mae and Freddie Mac on the ropes, it's clear that what's unfolding is far worse than any recession.
As Britain's normally staid The Telegraph newspaper notes, the U.S. could be on the verge of a new Great Depression. That might seem far-fetched until you consider that last month, the Dow suffered its worst June since 1930.
But The Telegraph is hardly alone in using such apocalyptic language these days. The "D" word is starting to be mentioned more and more in the business media, as well as by economic commentators. As David Bullock, managing director of investment fund Advent Capital Management, put it in a comment to The New York Times on Tuesday, "We are closer to the Depression scenario than not."
Yes, a real Depression, complete with tent cities now springing up in what once were prosperous suburbs.
This doom-and-gloom language in describing the U.S. economy first began to pick up steam after investment bank Bear Stearns had to be bailed out by the government in May. In describing the bailout, the Associated Press said that Bear Stearns was "On the verge of a collapse that could have shaken the very foundations of the U.S. financial system."
The current crisis with Fannie Mae and Freddie Mac is infinitely larger than Bear Stearns. The two companies either hold or guarantee a staggering $5.3 trillion worth of mortgages. Indeed, the investment magazine MoneyWeek has noted that the crisis is big enough to doom the dollar.
As MoneyWeek notes:
Fannie Mae and Freddie Mac might have been deemed too big to fail---but who's big enough to bail out the U.S.? When investors start seriously asking themselves that question, expect the dollar to plunge.
Make no mistake, a catastrophic U.S. economic collapse is on the way. Such is the inevitable fate of any Ponzi scheme economy that has been running on nothing more than smoke and mirrors (and oceans of foreign capital) now for many years.
Of course, those who are poor or working class know first-hand that the U.S. economy has been in increasingly serious trouble since around 1980. Wages have been steadily declining for everyone but the very rich. And working class people now toil more hours for less pay than their counterparts in any other First World nation. (They have to, as a 40-hour workweek no longer is enough to put groceries on the table).
But as long as America had a tiny elite of prosperous super wealthy, we could always point to them and try to convince ourselves that our economy couldn't be all bad. After all, we would note, there are some people out there making a fortune. All it takes is hard work and ambition, right?
Today, with the stock market in the toilet, and the Fed having to step in to bail out the financial sector, it should be clear to anyone that the U.S. economy is in crisis.
If the U.S. economy actually produced anything of value, this would be nothing more than just another typical downturn in the economic cycle.
The problem is, the U.S. economy no longer produces anything of value. Our economic activity basically consists of importing trillions of dollars from central banks in East Asia---which we then use to prop up our Ponzi scheme economy. The ocean of foreign capital that flows into our nation daily is used to pay for the shopping habits of U.S. consumers.
In fact, in recent years, the Great American Consumer has been hailed by U.S. economists as the "locomotive" of the world economy. There was only one problem: U.S. consumers had zero savings and were depending on foreign capital to finance their shopping binges.
Now, with the stock market crisis and the ongoing housing mortgage crisis, nobody is in much of a mood to do any spending these days. And with the dollar rapidly declining, it's only a matter of time before the East Asian central banks start to unload their depreciating greenbacks (which will accelerate the dollar's fall even further in a vicious cycle).
The frightening thing is that East Asian central banks haven't even begun seriously dumping their dollars and yet the dollar is already plunging.
And the dollar has already lost an astonishing 40 percent against an index of U.S. trading partners' currencies over the past seven years.
The key numbers which measure the current U.S. economic crisis are so far off the chart that it is difficult to even fathom them. As economics writer Eamonn Fingleton has noted, the U.S. current account deficit (the widest and most meaningful measure of our trade position) now represents an astounding 6.5 percent of our gross domestic product.
As Fingleton notes, only one other major nation has ever exceeded this figure: Italy in 1924. That was just before Benito Mussolini seized dictatorial power.
This BBC report takes a look at tent cities that are starting to spring up outside Los Angeles:
Until last week, most economists were divided on whether the U.S. was in a recession or not. Now, with the ailing mortgage agencies Fannie Mae and Freddie Mac on the ropes, it's clear that what's unfolding is far worse than any recession.
As Britain's normally staid The Telegraph newspaper notes, the U.S. could be on the verge of a new Great Depression. That might seem far-fetched until you consider that last month, the Dow suffered its worst June since 1930.
But The Telegraph is hardly alone in using such apocalyptic language these days. The "D" word is starting to be mentioned more and more in the business media, as well as by economic commentators. As David Bullock, managing director of investment fund Advent Capital Management, put it in a comment to The New York Times on Tuesday, "We are closer to the Depression scenario than not."
Yes, a real Depression, complete with tent cities now springing up in what once were prosperous suburbs.
This doom-and-gloom language in describing the U.S. economy first began to pick up steam after investment bank Bear Stearns had to be bailed out by the government in May. In describing the bailout, the Associated Press said that Bear Stearns was "On the verge of a collapse that could have shaken the very foundations of the U.S. financial system."
The current crisis with Fannie Mae and Freddie Mac is infinitely larger than Bear Stearns. The two companies either hold or guarantee a staggering $5.3 trillion worth of mortgages. Indeed, the investment magazine MoneyWeek has noted that the crisis is big enough to doom the dollar.
As MoneyWeek notes:
Fannie Mae and Freddie Mac might have been deemed too big to fail---but who's big enough to bail out the U.S.? When investors start seriously asking themselves that question, expect the dollar to plunge.
Make no mistake, a catastrophic U.S. economic collapse is on the way. Such is the inevitable fate of any Ponzi scheme economy that has been running on nothing more than smoke and mirrors (and oceans of foreign capital) now for many years.
Of course, those who are poor or working class know first-hand that the U.S. economy has been in increasingly serious trouble since around 1980. Wages have been steadily declining for everyone but the very rich. And working class people now toil more hours for less pay than their counterparts in any other First World nation. (They have to, as a 40-hour workweek no longer is enough to put groceries on the table).
But as long as America had a tiny elite of prosperous super wealthy, we could always point to them and try to convince ourselves that our economy couldn't be all bad. After all, we would note, there are some people out there making a fortune. All it takes is hard work and ambition, right?
Today, with the stock market in the toilet, and the Fed having to step in to bail out the financial sector, it should be clear to anyone that the U.S. economy is in crisis.
If the U.S. economy actually produced anything of value, this would be nothing more than just another typical downturn in the economic cycle.
The problem is, the U.S. economy no longer produces anything of value. Our economic activity basically consists of importing trillions of dollars from central banks in East Asia---which we then use to prop up our Ponzi scheme economy. The ocean of foreign capital that flows into our nation daily is used to pay for the shopping habits of U.S. consumers.
In fact, in recent years, the Great American Consumer has been hailed by U.S. economists as the "locomotive" of the world economy. There was only one problem: U.S. consumers had zero savings and were depending on foreign capital to finance their shopping binges.
Now, with the stock market crisis and the ongoing housing mortgage crisis, nobody is in much of a mood to do any spending these days. And with the dollar rapidly declining, it's only a matter of time before the East Asian central banks start to unload their depreciating greenbacks (which will accelerate the dollar's fall even further in a vicious cycle).
The frightening thing is that East Asian central banks haven't even begun seriously dumping their dollars and yet the dollar is already plunging.
And the dollar has already lost an astonishing 40 percent against an index of U.S. trading partners' currencies over the past seven years.
The key numbers which measure the current U.S. economic crisis are so far off the chart that it is difficult to even fathom them. As economics writer Eamonn Fingleton has noted, the U.S. current account deficit (the widest and most meaningful measure of our trade position) now represents an astounding 6.5 percent of our gross domestic product.
As Fingleton notes, only one other major nation has ever exceeded this figure: Italy in 1924. That was just before Benito Mussolini seized dictatorial power.
This BBC report takes a look at tent cities that are starting to spring up outside Los Angeles:
Labels: Depression, dollar collapse, U.S. economic crisis
Tuesday, March 18, 2008
Is Dick Cheney Set To Profit From Dollar's Drop?
By MARC MCDONALD
The plunging dollar has taken a beating lately on international markets. But at least one wealthy investor may be set to profit from the dollar's decline: Dick Cheney.
Back in June 2006, Kiplinger's Personal Finance magazine reported that Cheney's financial advisers were apparently betting on a rise in inflation and on a decline in the value of the dollar against foreign currencies.
Cheney and his wife, Lynne, the magazine noted, had between $10 million and $25 million in American Century International Bond (BEGBX). As Kiplinger pointed out, the fund "buys mainly high-quality foreign bonds (predominantly in Europe) and rarely hedges against possible increases in the value of the dollar. Indeed, its prospectus limits dollar exposure to 25 percent of assets and the fund currently has only 6 percent of assets in dollars, according to an American Century spokesman."
Assuming Cheney still holds the fund, he has done well: BEGBX returned 8.3 percent in 2006 and 9.9 percent in 2007. And if he was counting on a dollar decline, of course, he's done well in that regard, as well: in recent days, the dollar has continued to plunge to new all-time lows against the euro. The dollar has also fallen to 12-year lows against the yen. The weak dollar trend looks set to continue as the Fed continues to slash interest rates.
Economists have noted that the weak dollar stems from America's titanic fiscal deficits, which have soared as a result of the disastrous Iraq War.
It's notable that Cheney once claimed that "deficits don't matter." But by banking on a declining dollar, it's clear that even Cheney knows this is bullsh*t and that deficits do indeed matter.
The plunging dollar has taken a beating lately on international markets. But at least one wealthy investor may be set to profit from the dollar's decline: Dick Cheney.
Back in June 2006, Kiplinger's Personal Finance magazine reported that Cheney's financial advisers were apparently betting on a rise in inflation and on a decline in the value of the dollar against foreign currencies.
Cheney and his wife, Lynne, the magazine noted, had between $10 million and $25 million in American Century International Bond (BEGBX). As Kiplinger pointed out, the fund "buys mainly high-quality foreign bonds (predominantly in Europe) and rarely hedges against possible increases in the value of the dollar. Indeed, its prospectus limits dollar exposure to 25 percent of assets and the fund currently has only 6 percent of assets in dollars, according to an American Century spokesman."
Assuming Cheney still holds the fund, he has done well: BEGBX returned 8.3 percent in 2006 and 9.9 percent in 2007. And if he was counting on a dollar decline, of course, he's done well in that regard, as well: in recent days, the dollar has continued to plunge to new all-time lows against the euro. The dollar has also fallen to 12-year lows against the yen. The weak dollar trend looks set to continue as the Fed continues to slash interest rates.
Economists have noted that the weak dollar stems from America's titanic fiscal deficits, which have soared as a result of the disastrous Iraq War.
It's notable that Cheney once claimed that "deficits don't matter." But by banking on a declining dollar, it's clear that even Cheney knows this is bullsh*t and that deficits do indeed matter.
Labels: dollar collapse, U.S. economic crisis
Saturday, March 15, 2008
Stocks Plunge Again As U.S. Moves Closer To Economic Apocalypse
By MARC MCDONALD
A recent Wall Street Journal survey of economists proclaimed that the U.S. is now in a recession. The good news is that they're wrong. The bad news is that the U.S. economy is facing a meltdown far more serious than any recession.
But don't take my word for it. Consider the apocalyptic tone of this excerpt from the normally dry, bland prose of the Associated Press on Friday: "On the verge of a collapse that could have shaken the very foundations of the U.S. financial system, investment bank Bear Stearns Cos. was bailed out Friday by a rival and the federal government."
I suspect we'll be seeing a lot more apocalyptic language from the MSM in the coming weeks, as the U.S. economy starts to melt down.
And make no mistake, a catastrophic economic collapse is on the way. Such is the inevitable fate of any Ponzi scheme economy that has been running on nothing more than smoke and mirrors (and oceans of foreign capital) now for many years.
Of course, those who are poor or working class know first-hand that the U.S. economy has been in increasingly serious trouble since around 1980. Wages have been steadily declining for everyone but the very rich. And working class people now toil more hours for less pay than their counterparts in any other First World nation. (They have to, as a 40-hour workweek no longer is enough to put groceries on the table).
But as long as America had a tiny elite of prosperous super wealthy, we could always point to them and try to convince ourselves that our economy couldn't be all bad. After all, we would note, there are some people out there making a fortune. All it takes is hard work and ambition, right?
Today, with the stock market in the toilet, and the Fed having to step in to bail out the financial sector, it should be clear to anyone that the U.S. economy is in crisis.
If the U.S. economy actually produced anything of value, this would be nothing more than just another typical downturn in the economic cycle.
The problem is, the U.S. economy no longer produces anything of value. Our economic activity basically consists of importing trillions of dollars from central banks in East Asia---which we then use to prop up our Ponzi scheme economy. The ocean of foreign capital that flows into our nation daily is used to pay for the shopping habits of U.S. consumers.
In fact, in recent years, the Great American Consumer has been hailed by U.S. economists as the "locomotive" of the world economy. There was only one problem: U.S. consumers had zero savings and were depending on foreign capital to finance their shopping binges.
Now, with the stock market crisis and the ongoing housing mortgage crisis, nobody is in much of a mood to do any spending these days. And with the dollar rapidly declining, it's only a matter of time before the East Asian central banks start to unload their depreciating greenbacks (which will accelerate the dollar's fall even further in a vicious cycle).
The frightening thing is that East Asian central banks haven't even begun seriously dumping their dollars and yet the dollar is already plunging.
The key numbers which measure the current U.S. economic crisis are so far off the chart that it is difficult to even fathom them. As economics writer Eamonn Fingleton has noted, the U.S. current account deficit (the widest and most meaningful measure of our trade position) now represents an astounding 6.5 percent of our gross domestic product.
As Fingleton notes, only one other major nation has ever exceeded this figure: Italy in 1924. That was just before Benito Mussolini seized dictatorial power.
A recent Wall Street Journal survey of economists proclaimed that the U.S. is now in a recession. The good news is that they're wrong. The bad news is that the U.S. economy is facing a meltdown far more serious than any recession.
But don't take my word for it. Consider the apocalyptic tone of this excerpt from the normally dry, bland prose of the Associated Press on Friday: "On the verge of a collapse that could have shaken the very foundations of the U.S. financial system, investment bank Bear Stearns Cos. was bailed out Friday by a rival and the federal government."
I suspect we'll be seeing a lot more apocalyptic language from the MSM in the coming weeks, as the U.S. economy starts to melt down.
And make no mistake, a catastrophic economic collapse is on the way. Such is the inevitable fate of any Ponzi scheme economy that has been running on nothing more than smoke and mirrors (and oceans of foreign capital) now for many years.
Of course, those who are poor or working class know first-hand that the U.S. economy has been in increasingly serious trouble since around 1980. Wages have been steadily declining for everyone but the very rich. And working class people now toil more hours for less pay than their counterparts in any other First World nation. (They have to, as a 40-hour workweek no longer is enough to put groceries on the table).
But as long as America had a tiny elite of prosperous super wealthy, we could always point to them and try to convince ourselves that our economy couldn't be all bad. After all, we would note, there are some people out there making a fortune. All it takes is hard work and ambition, right?
Today, with the stock market in the toilet, and the Fed having to step in to bail out the financial sector, it should be clear to anyone that the U.S. economy is in crisis.
If the U.S. economy actually produced anything of value, this would be nothing more than just another typical downturn in the economic cycle.
The problem is, the U.S. economy no longer produces anything of value. Our economic activity basically consists of importing trillions of dollars from central banks in East Asia---which we then use to prop up our Ponzi scheme economy. The ocean of foreign capital that flows into our nation daily is used to pay for the shopping habits of U.S. consumers.
In fact, in recent years, the Great American Consumer has been hailed by U.S. economists as the "locomotive" of the world economy. There was only one problem: U.S. consumers had zero savings and were depending on foreign capital to finance their shopping binges.
Now, with the stock market crisis and the ongoing housing mortgage crisis, nobody is in much of a mood to do any spending these days. And with the dollar rapidly declining, it's only a matter of time before the East Asian central banks start to unload their depreciating greenbacks (which will accelerate the dollar's fall even further in a vicious cycle).
The frightening thing is that East Asian central banks haven't even begun seriously dumping their dollars and yet the dollar is already plunging.
The key numbers which measure the current U.S. economic crisis are so far off the chart that it is difficult to even fathom them. As economics writer Eamonn Fingleton has noted, the U.S. current account deficit (the widest and most meaningful measure of our trade position) now represents an astounding 6.5 percent of our gross domestic product.
As Fingleton notes, only one other major nation has ever exceeded this figure: Italy in 1924. That was just before Benito Mussolini seized dictatorial power.
Labels: dollar collapse, recession, U.S. economic crisis
Saturday, January 19, 2008
Bush's Absurd Tax Rebate Scheme Won't Save Economy
By MARC MCDONALD
With the titanic cost of the Iraq War fiasco, along with his reckless tax cuts for the wealthy, George W. Bush has driven the U.S. economy off of a cliff.
Now, Bush aims to save the economy with an absurd tax rebate scheme, which will amount to about $140 billion, equal to about 1 percent of U.S. gross domestic product.
It's clear that this rebate scheme will be nothing more than a mere Band-Aid on a bleeding economy that is in deep crisis.
First of all, there's the matter of the nation's disastrous mortgage crisis. It's bad enough that 2 million people could lose their homes. What's equally ominous is that the housing bubble has been the main thing propping up the U.S. economy since Bush took office. Beside those losing their homes, some 44.5 million Americans will watch the value of their homes diminish.
Bear in mind that the "wealth effect" of inflated home values has been the main factor in getting Americans to spend money, powering our consumption-led economy.
The tax rebate of several hundred dollars that most ordinary taxpayers will get under Bush's plan may come in handy for many people who are paying off bills. But it won't save our rotten-to-the-core, faltering economy.
Even worse than the mortgage crisis is the ongoing U.S. deficit crisis that has soared out of control under Bush's watch. The U.S. national debt now stands at a staggering $9 trillion. That amounts to over $30,000 for every man, woman and child in the country.
The national debt is a ticking time bomb that Bush has completely ignored the past seven years. The Iraq War fiasco will add another $2 trillion to the nation's debt.
Bush and the NeoCons have never shown any concern about the deficit. But the East Asian nations that fund America's national debt are increasingly concerned.
Under Bush's watch, the dollar has taken a beating. This has added to the anxiety of nations like China and Japan, which hold trillions of dollars in their central bank reserves. The crisis is a vicious cycle: the more the dollar declines, the more incentive China and Japan have to sell their dollars (which, in turn, will force the dollar's value even lower).
When the dollar melts down in value, America's reign as a superpower will be over. Once upon a time, that seemed like a remote possibility. Under the disastrous Bush administration, it looks like something that could very well happen any day now.
During the brief period in his life when he tried his hand in the private sector, Bush drove all three of his companies into the ground. Despite the fact that his father and grandfather were powerful politicians, Bush was a bust in the private sector (even with his family's powerful connections and wealth).
Now, Bush is on the verge of doing to America what he did to his failed companies in the private sector. And its role in the collapse of America's economy is the main thing future historians will remember about this administration.
It's a crisis that Bush's tax rebate Band-Aid won't fix.
With the titanic cost of the Iraq War fiasco, along with his reckless tax cuts for the wealthy, George W. Bush has driven the U.S. economy off of a cliff.
Now, Bush aims to save the economy with an absurd tax rebate scheme, which will amount to about $140 billion, equal to about 1 percent of U.S. gross domestic product.
It's clear that this rebate scheme will be nothing more than a mere Band-Aid on a bleeding economy that is in deep crisis.
First of all, there's the matter of the nation's disastrous mortgage crisis. It's bad enough that 2 million people could lose their homes. What's equally ominous is that the housing bubble has been the main thing propping up the U.S. economy since Bush took office. Beside those losing their homes, some 44.5 million Americans will watch the value of their homes diminish.
Bear in mind that the "wealth effect" of inflated home values has been the main factor in getting Americans to spend money, powering our consumption-led economy.
The tax rebate of several hundred dollars that most ordinary taxpayers will get under Bush's plan may come in handy for many people who are paying off bills. But it won't save our rotten-to-the-core, faltering economy.
Even worse than the mortgage crisis is the ongoing U.S. deficit crisis that has soared out of control under Bush's watch. The U.S. national debt now stands at a staggering $9 trillion. That amounts to over $30,000 for every man, woman and child in the country.
The national debt is a ticking time bomb that Bush has completely ignored the past seven years. The Iraq War fiasco will add another $2 trillion to the nation's debt.
Bush and the NeoCons have never shown any concern about the deficit. But the East Asian nations that fund America's national debt are increasingly concerned.
Under Bush's watch, the dollar has taken a beating. This has added to the anxiety of nations like China and Japan, which hold trillions of dollars in their central bank reserves. The crisis is a vicious cycle: the more the dollar declines, the more incentive China and Japan have to sell their dollars (which, in turn, will force the dollar's value even lower).
When the dollar melts down in value, America's reign as a superpower will be over. Once upon a time, that seemed like a remote possibility. Under the disastrous Bush administration, it looks like something that could very well happen any day now.
During the brief period in his life when he tried his hand in the private sector, Bush drove all three of his companies into the ground. Despite the fact that his father and grandfather were powerful politicians, Bush was a bust in the private sector (even with his family's powerful connections and wealth).
Now, Bush is on the verge of doing to America what he did to his failed companies in the private sector. And its role in the collapse of America's economy is the main thing future historians will remember about this administration.
It's a crisis that Bush's tax rebate Band-Aid won't fix.
Labels: dollar collapse, George W. Bush, U.S. economic crisis
Monday, October 29, 2007
Why Are Free-Market Economists Still Taken Seriously?
By MARC MCDONALD
They've been shown to be wrong time and time again. And their policies have led to widespread disaster and misery for millions of people.
Who am I talking about?
The NeoCons and their wrong-headed views on Iraq?
Nope, I'm talking about free-market economists.
No group of "experts" has a worse track record on accurate information about how our world really works. And yet, mysteriously, free-market economists are still held in reverence and awe by many. And their proclamations are hailed as the gospel truth by everyone from politicians to academia to the mainstream media.
Free-market economics seemingly got an enormous boost in credibility in the 1980s and has reigned supreme as the only conceivable policy for running America's economy ever since.
There's only one problem with free-market economists and their followers: they're full of shit and they have a dismal track record on the truth. And worse, the world simply doesn't operate the way they believe it does.
Free-market economists are rabid advocates of a unfettered, dog-eat-dog, ruthless form of capitalism. Leaving everything to the "free market" is the best way to run a society, they maintain. And at the end of the day, no other economic system can possibly compete with capitalism, they say.
As "Exhibit A," the free-market economists proudly point to capitalism's vanquishing of the Soviet Union's style of communism in the Cold War.
What more proof could one want that capitalism is the best way to create wealth and prosperity?
Actually, in the years since the Cold War ended, a few dissenting voices have started to speak up about the supposed superiority of unfettered capitalism.
First, there is the issue of whether the United States really prevailed in the Cold War, after all. A number of commentators have pointed out that, without enormous sums we borrowed from Japan in the 1980s, the U.S. wouldn't have "won" the Cold War.
Indeed, as the brilliant author Chalmers Johnson has pointed, out, it was really Japan, not the U.S. that won the Cold War. Indeed, the decade of the 1980s was nicely summed up by MIT economist Lester Thurow when he wrote: "We borrowed a trillion dollars from the Japanese and threw a party."
I should point out here the irony of celebrating an economic system that is totally dependent on vast amount of foreign capital in order to function. And make no mistake, no matter how one views the Japanese economy, it is definitely NOT anything that a Western economist would recognize as "capitalism."
Indeed, the Japanese model couldn't be further removed from U.S.-style economics. In Japan, the nation's economic destiny is shaped by powerful technocrats at the Ministry of Finance. Industrial policy is set by the government, rather than determined the whims of the private sector. It is a heavily regulated system that is a million light years removed from American-style "capitalism."
What's more, the Japanese economic model has been widely imitated throughout East Asia (which is now by far the most dynamic and fast-growing area on Earth). From Taiwan to South Korea to mainland China itself, Japanese economic policies are widely implemented these days. For example, China has copied elements of Japan's employment system, its mercantile policies, its emphasis on manufacturing, and even its Keiretsu system of organizing companies into powerful groups.
This important development, of course, is completely ignored by U.S. economists. Many of them maintain that "unfettered, free-market, U.S.-style capitalism" is the model that East Asia aspires to. Indeed, the "conventional wisdom" in U.S. economics is that Japan itself is "yesterday's news" and is a fading power. It's a bizarre viewpoint indeed, when one considers that the supposedly "more efficient, superior" U.S. economy would collapse were it not for the hundreds of billions of dollars in Japanese capital that props up the American economy and the dollar these days.
A big part of the problem with U.S. economists is that they are a remarkably ignorant about the rest of the world. The only country that they've studied at all, or paid any attention to (outside of the U.S.) is Britain.
Which brings me to another misconception spread by U.S. free-market economists. The latter are constantly praising the era of Margaret Thatcher.
What more proof does one need that unfettered capitalism reigns supreme than the example set by Thatcher's Britain, they ask? After all, Thatcher busted the unions, cut regulations and decimated the welfare state---and as a result, the former "Sick Man" of Europe prospered in the 1980s.
At least that's the fairy tale we've been led to believe.
As they did with Reagan's revolution, though, the economists aren't telling the whole story of the Thatcher era as they breathlessly sing the praises of the Iron Lady. Over the years, a growing number of writers, like James Howard Kunstler,
have pointed out that what really made Britain shine in the 1980s wasn't Thatcherism at all. Rather, it was the incredible bounty that Britain reaped with the North Sea oil bonanza in the 1980s.
It's this latter point that really irritates me and makes me question the honesty of the economics profession. The field's dishonesty can be summed up thusly:
1. Starting in the 1970s, free-market "Chicago School" economists urged various "reforms," from gutting the welfare state to crushing unions to abolishing any and all regulations on business.
2. In the 1980s, the above prescriptions were implemented in the U.S. and Britain, under Reagan and Thatcher.
3. The economies of both the U.S. and Britain prospered, thanks to hundreds of billions of borrowed dollars (in the case of the U.S.) and the North Sea Oil boom (in the case of Britain).
4. As the U.S. and Britain boomed, economists proclaim their free-market prescriptions "vindicated"---completely ignoring the fact that the prosperity in both nations had nothing to do with their remedies.
Free-market economists are so arrogant and sure of the wisdom of their teachings that they've become oblivious to the fact that the real world simply doesn't work the way they believe it does. (For example, the real economic success story of the past quarter century has been China---a nation which completely rejects every single tenet of how a nation's economy should be run, according to the gospel of the free-market economists).
And their ideas remain in vogue to this day among American policy-makers. Never mind the fact that the U.S. is in increasing peril, thanks to their policies. The gigantic deficits that Reagan racked up in the 1980s now seem trivial, compared to the even-more titanic deficits that America faces today.
Free-market economics has been directly responsible for America's out-of-control and spiraling fiscal and trade deficits. The latter crisis threatens to force a collapse in the value of the dollar. And when the dollar melts down, America's reign as a superpower will come to an end.
Free-market economists, of course, are blissfully unconcerned about this looming crisis. For them, the solution to anything and everything is more of the same. More tax cuts for the rich, more union busting, more elimination of any and all red tape and the complete rejection of anything remotely resembling a national industrial policy. As far as deficits go, they maintain a "Don't Worry, Be Happy" approach.
I never thought I'd find myself agreeing with anything that Pat Buchanan ever said---but actually, he of all people, once made a comment that neatly sums up the view of all those who wear free-market economics blinders: "To worship at the altar of free-market economics is no less a form of idolatry than worshipping at the altar of socialism."
Free-market economists have done at least as much damage to our nation as the NeoCons over the past quarter century. How much longer will we as a nation continue to follow their disastrous, wrong-headed advice?
They've been shown to be wrong time and time again. And their policies have led to widespread disaster and misery for millions of people.
Who am I talking about?
The NeoCons and their wrong-headed views on Iraq?
Nope, I'm talking about free-market economists.
No group of "experts" has a worse track record on accurate information about how our world really works. And yet, mysteriously, free-market economists are still held in reverence and awe by many. And their proclamations are hailed as the gospel truth by everyone from politicians to academia to the mainstream media.
Free-market economics seemingly got an enormous boost in credibility in the 1980s and has reigned supreme as the only conceivable policy for running America's economy ever since.
There's only one problem with free-market economists and their followers: they're full of shit and they have a dismal track record on the truth. And worse, the world simply doesn't operate the way they believe it does.
Free-market economists are rabid advocates of a unfettered, dog-eat-dog, ruthless form of capitalism. Leaving everything to the "free market" is the best way to run a society, they maintain. And at the end of the day, no other economic system can possibly compete with capitalism, they say.
As "Exhibit A," the free-market economists proudly point to capitalism's vanquishing of the Soviet Union's style of communism in the Cold War.
What more proof could one want that capitalism is the best way to create wealth and prosperity?
Actually, in the years since the Cold War ended, a few dissenting voices have started to speak up about the supposed superiority of unfettered capitalism.
First, there is the issue of whether the United States really prevailed in the Cold War, after all. A number of commentators have pointed out that, without enormous sums we borrowed from Japan in the 1980s, the U.S. wouldn't have "won" the Cold War.
Indeed, as the brilliant author Chalmers Johnson has pointed, out, it was really Japan, not the U.S. that won the Cold War. Indeed, the decade of the 1980s was nicely summed up by MIT economist Lester Thurow when he wrote: "We borrowed a trillion dollars from the Japanese and threw a party."
I should point out here the irony of celebrating an economic system that is totally dependent on vast amount of foreign capital in order to function. And make no mistake, no matter how one views the Japanese economy, it is definitely NOT anything that a Western economist would recognize as "capitalism."
Indeed, the Japanese model couldn't be further removed from U.S.-style economics. In Japan, the nation's economic destiny is shaped by powerful technocrats at the Ministry of Finance. Industrial policy is set by the government, rather than determined the whims of the private sector. It is a heavily regulated system that is a million light years removed from American-style "capitalism."
What's more, the Japanese economic model has been widely imitated throughout East Asia (which is now by far the most dynamic and fast-growing area on Earth). From Taiwan to South Korea to mainland China itself, Japanese economic policies are widely implemented these days. For example, China has copied elements of Japan's employment system, its mercantile policies, its emphasis on manufacturing, and even its Keiretsu system of organizing companies into powerful groups.
This important development, of course, is completely ignored by U.S. economists. Many of them maintain that "unfettered, free-market, U.S.-style capitalism" is the model that East Asia aspires to. Indeed, the "conventional wisdom" in U.S. economics is that Japan itself is "yesterday's news" and is a fading power. It's a bizarre viewpoint indeed, when one considers that the supposedly "more efficient, superior" U.S. economy would collapse were it not for the hundreds of billions of dollars in Japanese capital that props up the American economy and the dollar these days.
A big part of the problem with U.S. economists is that they are a remarkably ignorant about the rest of the world. The only country that they've studied at all, or paid any attention to (outside of the U.S.) is Britain.
Which brings me to another misconception spread by U.S. free-market economists. The latter are constantly praising the era of Margaret Thatcher.
What more proof does one need that unfettered capitalism reigns supreme than the example set by Thatcher's Britain, they ask? After all, Thatcher busted the unions, cut regulations and decimated the welfare state---and as a result, the former "Sick Man" of Europe prospered in the 1980s.
At least that's the fairy tale we've been led to believe.
As they did with Reagan's revolution, though, the economists aren't telling the whole story of the Thatcher era as they breathlessly sing the praises of the Iron Lady. Over the years, a growing number of writers, like James Howard Kunstler,
have pointed out that what really made Britain shine in the 1980s wasn't Thatcherism at all. Rather, it was the incredible bounty that Britain reaped with the North Sea oil bonanza in the 1980s.
It's this latter point that really irritates me and makes me question the honesty of the economics profession. The field's dishonesty can be summed up thusly:
1. Starting in the 1970s, free-market "Chicago School" economists urged various "reforms," from gutting the welfare state to crushing unions to abolishing any and all regulations on business.
2. In the 1980s, the above prescriptions were implemented in the U.S. and Britain, under Reagan and Thatcher.
3. The economies of both the U.S. and Britain prospered, thanks to hundreds of billions of borrowed dollars (in the case of the U.S.) and the North Sea Oil boom (in the case of Britain).
4. As the U.S. and Britain boomed, economists proclaim their free-market prescriptions "vindicated"---completely ignoring the fact that the prosperity in both nations had nothing to do with their remedies.
Free-market economists are so arrogant and sure of the wisdom of their teachings that they've become oblivious to the fact that the real world simply doesn't work the way they believe it does. (For example, the real economic success story of the past quarter century has been China---a nation which completely rejects every single tenet of how a nation's economy should be run, according to the gospel of the free-market economists).
And their ideas remain in vogue to this day among American policy-makers. Never mind the fact that the U.S. is in increasing peril, thanks to their policies. The gigantic deficits that Reagan racked up in the 1980s now seem trivial, compared to the even-more titanic deficits that America faces today.
Free-market economics has been directly responsible for America's out-of-control and spiraling fiscal and trade deficits. The latter crisis threatens to force a collapse in the value of the dollar. And when the dollar melts down, America's reign as a superpower will come to an end.
Free-market economists, of course, are blissfully unconcerned about this looming crisis. For them, the solution to anything and everything is more of the same. More tax cuts for the rich, more union busting, more elimination of any and all red tape and the complete rejection of anything remotely resembling a national industrial policy. As far as deficits go, they maintain a "Don't Worry, Be Happy" approach.
I never thought I'd find myself agreeing with anything that Pat Buchanan ever said---but actually, he of all people, once made a comment that neatly sums up the view of all those who wear free-market economics blinders: "To worship at the altar of free-market economics is no less a form of idolatry than worshipping at the altar of socialism."
Free-market economists have done at least as much damage to our nation as the NeoCons over the past quarter century. How much longer will we as a nation continue to follow their disastrous, wrong-headed advice?
Labels: dollar collapse, NeoCons, U.S. economic crisis
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