-Caveat Lector-
Begin forwarded message:
From: [EMAIL PROTECTED]
Date: August 8, 2007 7:42:52 PM PDT
To: [EMAIL PROTECTED]
Cc: [EMAIL PROTECTED], [EMAIL PROTECTED], [EMAIL PROTECTED]
Subject: Fwd: Uncle Sam, Your Banker Will See You Now
China has made it clear that U.S. interest rates depend on China,
not on the Federal Reserve. They know it, and they want us to know
they know it and are willing to act on that knowledge.
The precarious position of the U.S. dollar as reserve currency has
been thoroughly ignored and denied. The delusion that the U.S. is
"the world's sole superpower," whose currency is desirable
regardless of its excess supply, reflects American hubris, not
reality. This hubris is so extreme that, only 6 weeks ago,
McKinsey Global Institute published a study that claimed even a
doubling of the U.S. current account deficit to $1.6 trillion
"would pose no problem."
Strategic thinkers --if any remain who have not been purged by the
Neocons-- will quickly conclude that China's power over the value
of the dollar and U.S. interest rates also gives China power over
U.S. foreign policy. The U.S. was able to attack Afghanistan and
Iraq only because China provided the largest part of the financing
for Bush's wars.
Get a sneak peek of the all-new AOL.com.
From: "Jim S." <[EMAIL PROTECTED]>
Date: August 8, 2007 6:16:58 PM PDT
To: [EMAIL PROTECTED]
Subject: Uncle Sam, Your Banker Will See You Now
Reply-To: [EMAIL PROTECTED]
------------------------
"America is a nation founded on the principle that all human life
is sacred...
Destroying human life in the hopes of saving human life is not
ethical."-- G.W.
Bush on the occasion of vetoing Congressional bill on stem cell
research. June
20, 2007
http://www.informationclearinghouse.info/article18146.htm
*Uncle Sam, Your Banker Will See You Now*
By Paul Craig Roberts
08/08/07
"ICH" -- Early this morning China let the idiots in Washington, and
on Wall
Street, know that it has them by the short hairs. Two senior
spokesmen for the
Chinese government observed that China's considerable holdings of
U.S. dollars
and Treasury bonds "contributes a great deal to maintaining the
position of the
dollar as a reserve currency."
Should the U.S. proceed with sanctions intended to cause the
Chinese currency to
appreciate, "the Chinese central bank will be forced to sell
dollars, which might
lead to a mass depreciation of the dollar."
If Western financial markets are sufficiently intelligent to
comprehend the
message, U.S. interest rates will rise regardless of any further
action by China.
At this point, China does not need to sell a single bond. In an
instant, China
has made it clear that U.S. interest rates depend on China, not on
the Federal
Reserve.
The precarious position of the U.S. dollar as reserve currency has
been
thoroughly ignored and denied. The delusion that the U.S. is "the
world's sole
superpower," whose currency is desirable regardless of its excess
supply,
reflects American hubris, not reality. This hubris is so extreme
that, only 6
weeks ago, McKinsey Global Institute published a study that
concluded that even a
doubling of the U.S. current account deficit to $1.6 trillion would
pose no problem.
Strategic thinkers, if any remain who have not been purged by
neocons, will
quickly conclude that China's power over the value of the dollar
and U.S.
interest rates also gives China power over U.S. foreign policy.
The U.S. was
able to attack Afghanistan and Iraq only because China provided the
largest part
of the financing for Bush's wars.
If China ceased to buy U.S. Treasuries, Bush's wars would end. The
savings rate
of U.S. consumers is essentially zero, and several million are
afflicted with
mortgages that they cannot afford. With Bush's budget in deficit
and with no
room in the U.S. consumer’s budget for a tax increase, Bush's
wars can only be
financed by foreigners.
No country on earth, except for Israel, supports the Bush regimesâ
€™ desire to
attack Iran. It is China's decision whether it calls in the U.S.
ambassador, and
delivers the message that there will be no attack on Iran or
further war unless
the U.S. is prepared to buy back $900 billion in U.S. Treasury
bonds and other
dollar assets.
The U.S., of course, has no foreign reserves with which to make the
purchase.
The impact of such a large sale on U.S. interest rates would wreck
the U.S.
economy and effectively end Bush's war-making capability.
Moreover, other
governments would likely follow the Chinese lead, as the main
support for the
U.S. dollar has been China's willingness to accumulate them. If
the largest
holder dumped the dollar, other countries would dump dollars, too.
The value and purchasing power of the U.S. dollar would fall. When
hard-pressed
Americans went to Wal-Mart to make their purchases, the new prices
would make
them think they had wandered into Nieman Marcus. Americans would
not be able to
maintain their current living standard.
Simultaneously, Americans would be hit either with tax increases in
order to
close a budget deficit that foreigners will no longer finance or
with large cuts
in income security programs. The only other source of budgetary
finance would be
for the government to print money to pay its bills. In this event,
Americans
would experience inflation in addition to higher prices from dollar
devaluation.
This is a grim outlook. We got in this position because our
leaders are ignorant
fools. So are our economists, many of whom are paid shills for
some interest
group. So are our corporate leaders whose greed gave China power
over the U.S.
by offshoring the U.S. production of goods and services to China.
It was the
corporate fat cats who turned U.S. Gross Domestic Product into
Chinese imports,
and it was the "free trade, free market economists" who egged it on.
How did a people as stupid as Americans get so full of hubris?
~~~
Paul Craig Roberts was Assistant Secretary of the Treasury in the
Reagan
administration. He was Associate Editor of the Wall Street Journal
editorial
page and Contributing Editor of "National Review." He is co-author
of "The
Tyranny of Good Intentions."
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