It’s official. Mark your calendars. The crash of the U.S. economy has begun. It
was announced the morning of Wednesday, June 13, 2007, by economic writers
Steven Pearlstein and Robert Samuelson in the pages of the Washington Post, one
of the foremost house organs of the U.S. monetary elite.
Pearlstein’s column was titled, “The Takeover Boom, About to Go Bust” and
concerned the extraordinary amount of debt vs. operating profits of companies
currently subject to leveraged buyouts.
In language remarkably alarmist for the usually ultra-bland pages of the Post,
Pearlstein wrote, “It is impossible to predict when the magic moment will be
reached and everyone finally realizes that the prices being paid for these
companies, and the debt taken on to support the acquisitions, are
unsustainable. When that happens, it won't be pretty. Across the board, stock
prices and company valuations will fall. Banks will announce painful
write-offs, some hedge funds will close their doors, and private-equity funds
will report disappointing returns. Some companies will be forced into
bankruptcy or restructuring.”
Further, “Falling stock prices will cause companies to reduce their hiring and
capital spending while governments will be forced to raise taxes or reduce
services, as revenue from capital gains taxes declines. And the combination of
reduced wealth and higher interest rates will finally cause consumers to pull
back on their debt-financed consumption. It happened after the junk-bond and
savings-and-loan collapses of the late 1980s. It happened after the tech and
telecom bust of the late '90s. And it will happen this time.”
Samuelson’s column, “The End of Cheap Credit,” left the door slightly ajar in
case the collapse is not quite so severe. He wrote of rising interest rates,
“As the price of money increases, borrowing and the economy might weaken. The
deep slump in housing could worsen. We could also discover that the long period
of cheap credit has left a nasty residue.”
Other writers with less prestigious platforms than the Post have been talking
about an approaching financial bust for a couple of years. Among them has been
economist Michael Hudson, author of an article on the housing bubble titled,
“The New Road to Serfdom” in the May 2006 issue of Harper’s. Hudson has been
speaking in interviews of a “break in the chain” of debt payments leading to a
“long, slow economic crash,” with “asset deflation,” “mass defaults on
mortgages,” and a “huge asset grab” by the rich who are able to protect their
cash through money laundering and hedging with foreign currency bonds.
Among those poised to profit from the crash is the Carlyle Group, the equity
fund that includes the Bush family and other high-profile investors with
insider government connections. A January 2007 memorandum to company managers
from founding partner William E. Conway, Jr., recently appeared which stated
that, when the current “liquidity environment”—i.e., cheap credit—ends, “the
buying opportunity will be a once in a lifetime chance.”
The fact that the crash is now being announced by the Post shows that it is a
done deal. The Bilderbergers, or whomever it is that the Post reports to, have
decided. It lets everyone know loud and clear that it’s time to batten down the
hatches, run for cover, lay in two years of canned food, shield your assets,
whatever.
Those left holding the bag will be the ordinary people whose assets are loaded
with debt, such as tens of millions of mortgagees, millions of young people
with student loans that can never be written off due to the “reformed” 2005
bankruptcy law, or vast numbers of workers with 401(k)s or other pension plans
that are locked into the stock market.
In other words, it sounds eerily like 2000-2002 except maybe on a much larger
scale. Then it was “only” the tenth worse bear market in history, but over a
trillion dollars in wealth simply vanished. What makes today’s instance seem
particularly unfair is that the preceding recovery that is now ending—the
“jobless” one—was so anemic.
Neither Perlstein nor Samuelson gets to the bottom of the crisis, though they,
like Conway of the Carlyle Group, point to the end of cheap credit. But
interest rates are set by people who run central banks and financial
institutions. They may be influenced by “the market,” but the market is
controlled by people with money who want to maximize their profits.
Key to what is going on is that the Federal Reserve is refusing to follow the
pattern set during the long reign of Fed Chairman Alan Greenspan in responding
to shaky economic trends with lengthy infusions of credit as he did during the
dot.com bubble of the 1990s and the housing bubble of 2001-2005.
This time around, Greenspan’s successor, Ben Bernanke, is sitting tight. With
the economy teetering on the brink, the Fed is allowing rates to remain steady.
The Fed claims their policy is due to the danger of rising “core inflation.”
But this cannot be true. The biggest consumer item, houses and real estate, is
tanking. Officially, unemployment is low, but mainly due to low-paying service
jobs. Commodities have edged up, including food and gasoline, but that’s no
reason to allow the entire national economy to be submerged.
So what is really happening? Actually, it’s simple. The difference today is
that China and other large investors from abroad, including Middle Eastern oil
magnates, are telling the U.S. that if interest rates come down, thereby
devaluing their already-sliding dollar portfolios further, they will no longer
support with their investments the bloated U.S. trade and fiscal deficits.
Of course we got ourselves into this quandary by shipping our manufacturing to
China and other cheap-labor markets over the last generation. “Dollar hegemony”
is backfiring. In fact China is using its American dollars to replace the
International Monetary Fund as a lender to developing nations in Africa and
elsewhere. As an additional insult, China now may be dictating a new generation
of economic decline for the American people who are forced to buy their
products at Wal-Mart by maxing out what is left of our available credit card
debt.
About a year ago, a former Reagan Treasury official, now a well-known cable TV
commentator, said that China had become “America’s bank” and commented
approvingly that “it’s cheaper to print money than make cars anymore.” Ha ha.
It is truly staggering that none of the “mainstream” political candidates from
either party has attacked this subject on the campaign trail. All are heavily
funded by the financier elite who will profit no matter how bad the U.S.
economy suffers. Every candidate except Ron Paul and Dennis Kucinich treats the
Federal Reserve like the fifth graven image on Mount Rushmore. And even the
so-called progressives are silent. The weekend before the Perlstein/ Samuelson
articles came out, there was a huge progressive conference in Washington, D.C.,
called “Taming the Corporate Giant.” Not a single session was devoted to
financial issues.
What is likely to happen? I’d suggest four possible scenarios:
Acceptance by the U.S. population of diminished prosperity and a declining role
in the world. Grin and bear it. Live with your parents into your 40s instead of
your 30s. Work two or three part-time jobs on the side, if you can find them.
Die young if you lose your health care. Declare bankruptcy if you can, or just
walk away from your debts until they bring back debtor’s prison like they’ve
done in Dubai. Meanwhile, China buys more and more U.S. properties, homes, and
businesses, as economists close to the Federal Reserve have suggested. If
you’re an enterprising illegal immigrant, have fun continuing to jack up the
underground economy, avoid business licenses and taxes, and rent out group
houses to your friends.
Times of economic crisis produce international tension and politicians tend to
go to war rather than face the economic music. The classic example is the
worldwide depression of the 1930s leading to World War II. Conditions in the
coming years could be as bad as they were then. We could have a really big war
if the U.S. decides once and for all to haul off and let China, or whomever,
have it in the chops. If they don’t want our dollars or our debt any more, how
about a few nukes?
Maybe we’ll finally have a revolution either from the right or the center
involving martial law, suspension of the Bill of Rights, etc., combined with
some kind of military or forced-labor dictatorship. We’re halfway there anyway.
Forget about a revolution from the left. They wouldn’t want to make anyone mad
at them for being too radical.
Could there ever be a real try at reform, maybe even an attempt just to get
back to the New Deal? Since the causes of the crisis are monetary, so would be
the solutions. The first step would be for the Federal Reserve System to be
abolished as a bank of issue and a transformation of the nation’s credit system
into a genuine public utility by the federal government. This way we could
rebuild our manufacturing and public infrastructure and develop an income
assurance policy that would benefit everyone.
The latter is the only sensible solution. There are monetary reformers who know
how to do it if anyone gave them half a chance.
--~--~---------~--~----~------------~-------~--~----~
You received this message because you are subscribed to the Google Groups
"Cambodia Discussion (CAMDISC) - www.cambodia.org" group.
This is an unmoderated forum. Please refrain from using foul language.
Thank you for your understanding. Peace among us and in Cambodia.
To post to this group, send email to [email protected]
To unsubscribe from this group, send email to [EMAIL PROTECTED]
For more options, visit this group at http://groups.google.com/group/camdisc
Learn more - http://www.cambodia.org
-~----------~----~----~----~------~----~------~--~---
