Republicans and �free market� zealots bring death to America
By Paul Craig Roberts
Online Journal Guest Writer
Mar 14, 2008, 00:34
Crude oil for April delivery hit $110 per barrel. The US
dollar fell to a new low against the Euro. It now takes $1.55 to purchase one
These new highs against the dollar are the ongoing
story of the collapse of the US dollar as world reserve currency and corresponding
collapse of American power.
Each new decision from the insane Bush Regime pushes the
dollar a little further along to oblivion. The same Fed announcement that
boosted the stock market on March 11 sent the dollar reeling and the price of
oil up. The Fed�s announcement that it and other central banks are going to
deal with the derivative crisis by monetizing $200 billion of the troubled
instruments signaled more dollar inflation.
Of course, something needed to be done to forestall an
implosion of the financial system, but a less costly alternative was at hand.
The mark-to-market rule could have been suspended in order to halt the forced
sale and write down of assets and to provide time in which to sort out
derivative values, which are higher than the fire sale prices.
More pressure on the dollar resulted from the decision to award the
European company, Airbus, a $40 billion
contract that could reach $100 billion to build US Air Force tankers. In
simple terms, that means another $40 to $100 billion added to the US trade
deficit, and a loss of $40 to $100 billion in US Gross Domestic Product and
Of course, the Bush Regime had to award the contract to
Europe as a payoff for Europe�s support of the Bush Regime�s wars of aggression
in the Middle East. Europe is not going to provide Bush with diplomatic cover
for his wars and NATO troops for his war in Afghanistan without a payoff.
Here is the picture: The US economy, which has been kept
alive by enormous debt expansion that has overreached its limit, is falling
into recession. The traditional way out by expanding the supply of money and
credit is blocked by the impaired banking system, the levels of consumer debt,
the collapsing value of the US dollar, and rising inflation.
The Bush Regime is attempting to bypass the stalled credit
expansion by sending Americans $600 checks, money that will mainly be used to
reduce existing credit card debt and not to fund new consumption.
The US is dependent on foreigners not only for energy but
also for manufactured goods and advanced technology products. The US is
dependent on foreigners to finance our annual consumption of $800 billion more
than the US produces. The US is dependent on foreigners to finance its red ink
wars, and the US government�s budget deficit is now expanding as tax revenues
decline with the declining economy.
The bottom line: US power is enfeebled. US power depends on
the willingness of foreigners to finance our wars and on the willingness of
foreigners to continue to accumulate depreciating dollar assets.
The US cannot close its trade deficit. Oil prices are
rising, and offshore production of goods and services for US markets results in
a dollar-for-dollar increase in imports, while reducing the supply of domestic
goods available for export.
The US cannot close its budget deficit while it is
squandering vast sums on wars that serve no US purpose, handing out $150
billion in red ink rebates, and falling into recession.
US living standards, which have been stagnant for years,
will plummet once the dollar decline forces China off the dollar peg. So far
prices of the Chinese made goods on Wal-Mart shelves have not risen, because
the Chinese currency, pegged to the dollar, falls in value with the dollar. In
a word, tottering US living standards are being supported by China�s
willingness to subsidize US consumption by keeping its currency grossly
The US is overextended economically and militarily, just as
was Great Britain with the fall of France in the opening days of World War II.
The British had the Americans to bail them out. After the chewing gum and
bailing wire patch-ups are exhausted, who is going to bail us out?
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
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
Copyright © 1998-2007 Online Journal
Email Online Journal Editor