By Paul Craig Roberts
August 05, 2009
Tent 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 6 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 military bases.
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 explanation whatsoever.
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. was?
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 abroad.
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.
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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 coauthor of The Tyranny
of Good
Intentions.
Paul Craig Roberts can be emailed
here
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