-Caveat Lector-
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From: [EMAIL PROTECTED]
Date: June 16, 2007 8:42:49 PM PDT
To: [EMAIL PROTECTED]
Cc: [EMAIL PROTECTED], [EMAIL PROTECTED], [EMAIL PROTECTED], [EMAIL PROTECTED]
Subject: It's Official (It's in the Washington Post): The U.S.
Economic Crash Has Begun
See what's free at AOL.com.
From: "Jim S." <[EMAIL PROTECTED]>
Date: June 16, 2007 5:54:13 PM PDT
To: undisclosed-recipients:;
Subject: It's Official: The Crash of the U.S. Economy Has Begun
http://www.ichblog.eu/text/content/view/1696/1/
*It's Official: The Crash of the U.S. Economy Has Begun*
By Richard C. Cook
06/15/07
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.
"ICH" -- 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:
1. 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.
2. 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?
3. 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.
4. 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.
~~~
[Richard C. Cook is the author of "Challenger Revealed: An
Insider’s Account of How the Reagan Administration Caused the
Greatest Tragedy of the Space Age." A retired federal analyst, his
career included work with the U.S. Civil Service Commission, the
Food and Drug Administration, the Carter White House, and N.A.S.A.,
followed by 21 years with the U.S. Treasury Department. He is now
a Washington, D.C.-based writer and consultant. His book "We Hold
These Truths: The Hope of Monetary Reform," will be published later
this year. His website is at: www.richardccook.com ]
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