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Spread this message with Digg, Del.icio.us, Reddit, or Stumbleupon, and subscribe to the RSS Feed to track articles America's Superpower Days May be OverE-mail - editor@economyincisis.org |
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The U.S. is increasingly being forced to live on imports, unmanageable debt and a crumbling manufacturing infrastructure. Strangely, we do not feel bad about it, as we have a temporary respite from this inevitable decline. Americans were alarmed last June as the price of oil raced toward $150 per barrel. Today, as the price falls toward $100, Americans feel relieved. They have forgotten that prior to the Bush regime’s wars, the price of oil was $30 per barrel.
Americans have a similar relationship with the dollar. Despair ruled as the dollar fell to 1.6 to 1 euro. Now with the dollar’s rise to 1.4 to 1 euro, relief bathes the markets. The fact that the dollar will never return to parity with the euro is out of sight and out of mind. In declines, as in rises, speculation can run ahead of fundamentals. Just as speculators in oil futures markets can drive the price too high, currency speculators can drive a currency too low. The dollar’s problems are the enormous U.S. trade and budget deficits and the fact that there appears to be no way to close either. Offshoring of U.S. manufacturing and service jobs has enlarged the trade deficit while shrinking the domestic income tax base. In addition to its energy imports, the U.S. has large trade deficits in manufactures. When inflation is properly measured, the U.S. economy has experienced little, if any, real economic growth in the 21st century. According to economist Joseph Stiglitz, however, the total cost of the Bush regime’s wars in behalf of U.S. and Israeli hegemony is $3 trillion. Without a rapidly expanding economy, there are insufficient tax revenues to cover these costs. The U.S. is dependent on foreigners to finance its $600 billion annual government budget deficit and its $800 billion annual trade deficit. The government relies on foreigners to recycle their $800 billion trade surplus dollars to buy U.S. Treasury bonds and mortgage debt. Foreigners were becoming reluctant to continue the same rate of recycling. This reluctance contributed to the dollar’s slide and to the worsening situation of Fannie Mae and Freddie Mac, which need to issue their own bonds in order to support their mortgage holdings. The U.S. Treasury took steps to avert a crisis, or perhaps more accurately to push it off into the future. Foreign central banks agreed to purchase dollars so that low U.S. interest rates could persist through the November election. High interest rates now would make the mortgage crisis unmanageable. To keep the recycling going, the U.S. Treasury took the mortgage giants under its wing in order to reassure foreign investors. According to a September 8 Reuters report from Beijing, “China owned $376 billion of debt issued by U.S. government agencies, principally Fannie and Freddie, as of mid-2007.”
If the Treasury’s new relationship with Fannie and Freddie implies a guarantee of the bad mortgages as well as the bonds issued by the two companies, it is possible that the Treasury has put its own ability to borrow at risk. The Treasury already has to borrow $600 billion a year to finance the operations of the U.S. government. How much more will the Treasury need to borrow, or co-sign, in order to keep the two companies afloat and to keep mortgages from defaulting? The total could be greater than the US Treasury’s credibility. It remains to be seen whether the Treasury has put troubled debt on the same footing as its own or brought trouble to Treasury bonds. If the latter, America’s superpower days are over, and the world will be spared the neocons’ hegemonic wars. Click here to contact your Representative in Congress. Spread this message with Digg, Del.icio.us, Reddit, or Stumbleupon, and subscribe to the RSS Feed to track articles
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guest says "You're Right" on 10/09/08
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guest says "Keep the population stupid....." on 09/16/08
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While I agree with what you say about the out of control spending the Bush Administration has done over the last 8 years, it's unfair (to blame the cost of oil) on him. The Demorats and Republirats are in the hands of Big Oil and yes sadly Obama and McCain both fall into that category as well.
Let's not forget that both parties have screwed us, we should have been off of foreign oil after the oil embargo in the 70's. Our Government has failed us and so has both political parties. They have sold us out to the big oil companies and neither parties will change that (as of right now). I also do not agree with you about "Bush regime’s wars in behalf of U.S. and Israeli hegemony." While you might not agree with the war there is no way you can tie the Iraq/Afghanistan war to trying to keep hegemony with Israel. We were attacked on 9/11 we had (bad) information that Iraq was working on WMD's and we acted on it. It was both parties (look at quotes dating back to 2002) and as we all know Congress needs to give power to the President to declare war. So we cannot have it both ways, Bush cannot be "stupid" and also trick Congress (that includes Demorats) into war with Iraq. The bottom line: both parties don't give a damn about you; it's all about lobbyists, big oil, etc. Obama talks a good game but by his own actions he is in the pocket of big oil. Obama also wants to hand out a form of socialized medicine and if you think what we are spending on wars is insane just wait until we spend a crap load of money on mediocre healthcare, it will be a lot more than what we are spending on wars now and a lot of businesses and business owners will leave America because it will be cheaper to run Corporations elsewhere. Same with McCain, so blaming it on one Regime and one President is b/s (let's not forget how the economy was going to hell in 2000 and Clinton didn't give a damn because it was his last year in office). I agree with you though, we spend waaaaaaaaaaaaaaaaaaaay too much money on other countries for wars or other things. Bush, Clinton, Bush again, all let us down in a big way. In fact, every President since the oil embargo has let us down, we shouldn't be on foreign oil anymore but no one seems to care. They just want to blame it on the current President (which I understand to a point) and they believe Obama/McCain, or whoever else comes down the line will fix it. Meanwhile our Medicare/aid and Social Security is outpacing our GDP.....yet Obama wants to hand out free health care and "tax the rich." We are screwed no matter who gets into office.....we are running this great country into the ground and while it's happening the American people are bitching back and forth about who is right, the Republirats or the Demorats. We are more worried about being a Republican or Democrat that we don't care what happens to the country and it's becoming destructive and I doubt we will recover from it. If everyone would shut the hell up for a few minutes and actually take a look at the issues (instead of abortion or religion) we would demand a President from either side to take care of the downfall of America. Both parties are equally to blame for where we are at right now and neither candidate will change any problem we are having and I am afraid it’s just too late. Our founding fathers never took into account of ignorance or empathy towards the constitution when they founded our country. 90% of college graduates have no clue how the economy works and let’s not even start on how our Government works. Unless we correct this quickly people will always believe Bush led us to war, that Roe V Wade can be overturned and that means abortion will be illegal (not true at all, it would not be protected by the federal government, thus giving states the rights), and many other falsehoods both parties play on to get elected. Our Republic is falling apart because of ignorance and lack of knowledge about how it works and the Colleges do not care because they turn out Socialists at every graduation, moving towards whatever sick goal they have in mind. |
Vote Nader!