cities springing up all over America are filling with the homeless
unemployed from the worst economy since the 1930s. While Americans live in
tents, the Obama government has embarked on a $1 billion crash program to build a
mega-embassy in Islamabad, Pakistan, to rival the one the Bush government built in Baghdad, Iraq.
Hard times have now afflicted Americans for so long that
even the extension of unemployment benefits from six months to 18 months for 24
high unemployment states, and to 46-72 weeks in other states, is beginning to
run out. By Christmas 1.5 million Americans will have exhausted unemployment
benefits while unemployment rolls continue to rise.
Amidst this worsening economic crisis, the House of
Representatives just passed a $636 billion �defense� bill.
Who is the United States defending against? Americans have
no enemies except those that the US government goes out of its way to create by
bombing and invading countries that comprise no threat whatsoever to the US and
by encircling others -- Russia
for example -- with threatening
America�s wars are contrived affairs to serve the money-laundering
machine: from the taxpayers and money borrowed from foreign creditors to the
armaments industry to the political contributions that ensure $636 billion �defense� bills.
President George W. Bush gave us wars in Iraq and
Afghanistan that are entirely based on lies and misrepresentations. But Obama
has done Bush one better. Obama has started a war in Pakistan with no
If the armaments industry and the neoconservative
brownshirts have their way, the US will also be at war with Iran, Russia, Sudan
and North Korea.
Meanwhile, America continues to be overrun, as it has been
for decades, not by armed foreign enemies but by illegal immigrants across
America�s porous and undefended borders.
It is more proof of the Orwellian time in which we live that
$636 billion appropriated for wars of aggression is called a �defense bill.�
Who is going to pay for all of this? When foreign countries
have spent their trade surpluses and have no more dollars to recycle into the
purchase of Treasury bonds, when US banks have used up their �bailout� money by purchasing Treasury
bonds, and when the Federal Reserve cannot print any more money to keep the
government going without pushing up inflation and interest rates, the taxpayer
will be all that is left. Already Obama�s two top economic advisors, Treasury
Secretary Timothy Geithner and director of the National Economic Council Larry
Summers, are floating
the prospect of a middle class tax increase. Will Obama be maneuvered away
from his promise just as Bush Sr.
Will Americans see the disconnect between their interests
and the interests of �their�
government? In the small town of Vassalboro, Maine, a few topless waitress jobs
in a coffee house drew
150 applicants. Women in this small town are so desperate for jobs that
they are reduced to undressing for their neighbors� amusement.
Meanwhile, the Obama government is going to straighten out
Afghanistan and Pakistan and build marble palaces to awe the locals half way
around the world.
The US government keeps hyping �recovery� the way Bush hyped �terrorist threat� and �weapons
of mass destruction.� The recovery is no more real than the threats.
Indeed, it is possible that the economic collapse has hardly begun. Let�s look
at what might await us here at home while the US government pursues hegemony
The real estate crisis is not over. More home foreclosures
await as unemployment rises and unemployment benefits are exhausted. The
commercial real estate crisis is yet to hit. More bailouts are coming, and they
will have to be financed by more debt or money creation. If there are not
sufficient purchasers for the Treasury bonds, the Federal Reserve will have to
purchase them by creating checking accounts for the Treasury, that is, by debt
monetization or the printing of money.
More debt and money creation will put more pressure on the
US dollar�s exchange value. At some point import prices, which include
offshored goods and services of US corporations, will rise, adding to the
inflation fueled by domestic money creation. The Federal Reserve will be unable
to hold down interest rates by buying bonds.
No part of US economic policy addresses the systemic crisis
in American incomes. For most Americans real income ceased to grow some years
ago. Americans have substituted second jobs and debt accumulation for the
missing growth in real wages. With most households maxed out on debt and jobs
disappearing, these substitutes for real income growth no longer exist.
The Bush-Obama economic policy actually worsens the systemic
crisis that the US dollar faces as reserve currency. The fact that there might
be no alternative to the dollar as reserve currency does not guarantee that the
dollar will continue in this role. Countries might find it less risky to settle
trade transactions in their own currencies.
How does an economy based heavily on consumer spending recover
when so many high-value-added jobs, and the GDP and payroll tax revenues
associated with them, have been moved offshore and when consumers have no more
assets to leverage in order to increase their spending?
How does the US pay for its imports if the dollar is no
longer used as reserve currency?
These are the unanswered questions.
Craig Roberts [email
him] was Assistant Secretary of the Treasury during President
Reagan�s first term. He was Associate Editor of the Wall Street Journal. He has
held numerous academic appointments, including the William E. Simon Chair,
Center for Strategic and International Studies, Georgetown University,
and Senior Research Fellow, Hoover Institution, Stanford University. He was
awarded the Legion of Honor by French President Francois Mitterrand. He is the
author of Supply-Side
Revolution : An Insider�s Account of Policymaking in Washington; Alienation
and the Soviet Economy and Meltdown:
Inside the Soviet Economy, and is the co-author with Lawrence M.
Stratton of The
Tyranny of Good Intentions : How Prosecutors and Bureaucrats Are Trampling the Constitution
in the Name of Justice. Click here for
Peter Brimelow�s Forbes Magazine interview with Roberts about the recent
epidemic of prosecutorial misconduct.