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The Great Dollar Crash of ‘07
Mike
Whitney
Wednesday, February 7, 2007
The massive equity bubbles which arose from artificially low interest
rates and the deliberate destruction of the dollar by reckless increases
in the money supply have shifted trillions of dollars from working
class Americans to the predatory aristocrats at the top of the economic
food chain. The gulf between rich and poor has grown so wide that
it now poses a direct threat to our increasingly fragile democracy.
“Whatever future developments may prove to be, my best guess
is that the US will continue to maintain a façade of Constitutional
government and drift along until financial bankruptcy overtakes
it.” Chalmers Johnson, “Empire V. Democracy: Why Nemesis
is at our Door”
02/06/07 "ICHBlog" -- - Every time a US Dollar is traded,
a check is issued on an account that is overdrawn by $8.6 trillion.
(That is the present size of the national debt) It is, without question,
the biggest swindle in history. Flimsy sheets of faded-green scrip
are eagerly exchanged for costly goods and services without any
regard for the real value of the currency.
And, the real value of the currency is absolutely nothing!
How is it that this scam persists when people appear to be aware
of the massive debt and deficits which underwrite the dollar? Do
they still believe in that puerile fairy tale about “the full
faith and credit” of the United States backing up every greenback?
Or are they pacified by the wizened graybeards, like Alan Greenspan
and Hank Paulson, who soothingly bray about the “strong dollar
policy”?
What gibberish.
In truth, the dollar rests on the crumbling foundation of consumerism
and oil. The American consumer’s gluttonous appetite for spending
has kept the greenback flying high for decades. Economists marvel
at America’s lust for electronic gadgetry, the latest fashions,
and useless knick-knacks. They call our profligate spending “the
engine for global growth”; and indeed it is. No other country
in the world is nearly as addicted to binge-spending as the US consumer.
As long as he can beg, borrow or steal his way into the shopping
mall; the orgy of spending is bound to continue. (Consumer spending
is 70% of GDP)
Regrettably, there are signs that the US consumer is beginning
to buckle from the weight of personal debt. The Associated Press
reported just this week that “people are saving at the slowest
rate since the Great Depression… and the Commerce Dept stated
that the nation’s personal savings rate for 2006 was a negative
1%, the worst showing in 73 years.”
Additionally, credit card debt has skyrocketed, which is an indication
that homeowners are no longer able to siphon easy-money from their
home-equity. The nose-diving real estate market has slowed refinancing
to a dribble; cutting off the additional $825 billion of cash which
was extracted from home-equity just last year.
Clearly, the well is running dry; the housing bubble is hang-gliding
into the abyss and there’s nothing Fed-master Bernanke can
do to save it from its inevitable crash-landing.
The central banks around the world are now watching for any sign
that the American consumer is about to give up the ghost. As soon
as that happens, bank managers everywhere will swing into action,
ditch their U.S.Dollars and head for the exits. When the “global
engine” sputters to a halt; it’ll be curtains for the
greenback.
The Oil-extortion Racket
The dollar’s link to oil has helped to keep it afloat but,
in truth, it’s just another dismal rip-off. More than 70%
of the world’s oil is denominated in USD; a virtual monopoly
for the USA. Until last year, even Russia was using dollars in its
oil transactions with Germany. Imagine a comparable deal, like the
US purchasing oil from Canada in rubles?!?
It’s lunacy; and yet this is the system the US hopes to preserve
so it can maintain its unique status as the world’s “reserve
currency” and keep expanding its debt into perpetuity. It
explains why the Federal Reserve has been able to increase the money
supply by a whopping 15% for the last 6 years! Trillions of dollars
are now circulating in the oil trade keeping the value of the dollar
high by creating artificial demand.
The other reason the dollar hasn’t succumbed to hyperinflation
is because the current account deficit is running at roughly $800
billion per year. The Asian giants (China and Japan) and the oil
exporting countries are mopping up more than $700 billion of our
red ink every year!
The dollar’s link to oil forces central banks to maintain
humongous stockpiles of USD to pay the steadily rising price of
oil that keeps their industries and vehicles running. Otherwise
they would have chucked the flaccid greenback years ago and converted
to the more steadfast euro.
The so-called ‘global economic system’ has nothing to
do with competition, free markets or private enterprise; that’s
just public relations gobbledygook. In practice, it is the world’s
biggest extortion racket, wherein, the “Godfather”--
Uncle Sam-- holds a gun to the heads of his subjects and forces
them to use our fiat-paper to purchase the oil that lubricates their
economies.
Why would anyone accept a personal check from a nation that owes
the bank more than $8.6 trillion dollars?
Why, indeed?
It’s blackmail, pure and simple; and yet, the Chinese, Japanese
etc. continue to play along knowing full-well that we neither have
the inclination nor the resources to pay them back in kind?
It’s madness.
Every so often, a rebel nation will try to break the shackle of
greenback-tyranny and operate outside the US-run system?
For example, Saddam Hussein switched to euros 6 months before he
was carpet-bombed in Shock and Awe. His defiance only hastened his
ultimate downfall.
Now Iran and Venezuela are threatening to convert to euros. Is
it any surprise that they are both on Bush’s axis-of-evil
hit list?
Russia has already made the conversion to euros and rubles (and
has considerably depleted his supplies of USD) but, of course, regime
change is more difficult when a state has nuclear weapons. Instead,
the mainstream media is conducting an impressive “Swift Boat”
campaign against Putin, smearing him as a “Russian autocrat”
who is “rolling back democracy”. At the same time, the
Bush administration is threatening to deploy missile systems in
Eastern Europe and ratcheting up the pressure in the former Soviet
republics.
Bush would rather restart the Cold War than abandon the supremacy
of the greenback.
But, why? Is Dollar-primacy really that crucial to our economy?
The greenback is the baling wire that keeps the global economy
in the hands of the doddering old misers at the Federal Reserve.
It’s the cornerstone of the whole wretched system; a system
which now includes torture, extraordinary rendition, and myriad
other war crimes.
The young Muslim men who are abducted off the streets of Europe
and Asia and taken to CIA Black Sites where they are waterboarded
or stacked in naked pyramids; are tortured in defense of the crumpled
piece of green paper we carry in our pants pockets.
Think I’m kidding?
Just look at Bush’s budget for 2007-2008; $700 billion for
foreign wars?!? There’s no way the US can pay off that debt
through the normal means of increasing exports. In fact, Bush has
already said that he plans to preserve his unfunded tax cuts whether
they produce massive deficits or not.
What Bush plans to do is force the foreign central banks to hold
more dollar-based assets, thus, thrusting our gigantic debt onto
our trading partners. According to Bob Chapman of The International
Forecaster, “US debt was up 10.1% to $4.085 trillion and accounts
for 58.8% OF ALL THE CREDIT ISSUED GLOBALLY LAST YEAR. The US is
producing more debt than the rest of the world combined.
As long as foreign lenders are willing to take our paper, Bush
will keep expanding our debt. As Chalmers Johnson opined, “We
are dependent on ‘the kindness of strangers’”.
(The Blanche Dubois economy)
Of course, if the central banks grow tired of this pyramid-scheme
and dump the dollar; the world can get on with the business of addressing
global warming, poverty, AIDs, Peak Oil, nuclear proliferation etc.
That won’t happen as long as the dollar reigns supreme and
a small cadre of unelected racketeers at the Fed continue Gerry-rig
the system.
Economic justice and equitable distribution of wealth begin with
greater parity among the currencies. That requires “regime
change” for the greenback and a loosening of its tyrannical
grip on the system.
Sleepwalking in the Weimar U.S.A.
The good news is that the Bush administration is pushing the dollar
towards extinction anyway. Another few years of $800 billion trade
deficits, lavish unfunded tax cuts for the mega-rich, and a Pentagon
budget of $700 billion-plus; and the old greenback will be going
the way of the Dodo. Jim Willie of GoldenJackass.com summarized
it this way:
“Never in the history of central bankers has the hidden coordination,
influenced pressure, gargantuan money creation, doctored statistics,
and interference with financial markets been so broad, so deep,
and so profound. My allegation is clear, that we now live in Weimar
times, as has been warned for two years worth of scribbles. Collectively,
they have abused the privilege of printing money, and in doing so,
have guaranteed a gold bull market. … The more heavily the
counterfeit press dispenses electronic dollars, devoted to operations,
to credit, to consumer spending, to military adventures, to good
old fashioned fraud, the gold bull benefits from ample new oxygen
and blood flow”.
Willie is right; the system is rotten to the core. Once the dollar
crashes, other currencies rush in to fill the void generating greater
competition between the energy and manufacturing giants. A new paradigm
will emerge distributing power more equitably among the states.
It’s a way to resuscitate a system that is currently held
together through force of arms.
Besides, how long will China and Japan continue to abet Washington’s
war-mongering adventurism? My guess is that the daggers have already
been sharpened in Beijing, Caracas, Delhi and Moscow. Everyone is
just waiting for Bush to cross that invisible line in the sand before
they fling their greenbacks into the jet-stream and wait for Goliath
to tumble.
That “invisible line in the sand” is Iran.
The world is at a crossroads and everyone who can fog a mirror
knows it. The superpower model of global governance has failed miserably.
We need more responsible stewardship of the planet and its resources.
How can we build our economies when a handful of western plutocrats
control the spigot for quickly dwindling oil reserves? How can we
attack climate change when those same blinkered reprobates employ
pseudo-scientists to dispute global warming? How can we address
nuclear proliferation when neocon militarists believe in “useable”
low-yield, bunker-busting warheads?
The model is hopelessly shattered. We’d be better off boarding-up
the White House and the Federal Reserve and starting from Square
One.
The world needs a break from Washington’s wasteful spending
and unprovoked wars. At the same time, foreign creditors are increasingly
reluctant to keep financing America’s extravagant consumption.
And, no one is hoodwinked by Bush’s “war on terror”
scam; a conflict that was clearly concocted to assert control over
the world’s remaining resources.
The world is realigning according to mutual interests and a shared
vision of the future. The rise of energy alliances in Latin America
and Asia (particularly the Shanghai Cooperation Organization (SCO)
which now controls most new oil deposits and output) signals the
waning of western influence and the ascendancy of a new energy paradigm.
Power is progressively shifting away from Washington.
That’s bad news for the greenback which depends on its linkage
to oil to sustain its enormous debt.
The dollar now faces challenges from all directions. Western elites
have savaged the country’s economic base by hollowing out
our manufacturing base in order to destroy the American labor movement.
Free trade has transformed the US into the biggest creditor nation
in history. The country exports nothing but bombs and misery.
Also, as Congressman Ron Paul notes, “Most knowledgeable
people assume that inflation of the money supply is not only going
to continue, but accelerate. This anticipation, plus the fact that
many new dollars have been created over the past 15 years that have
not been fully discounted, guarantees the further depreciation of
the dollar.”
Eventually, the markets will catch on, foreign lenders will stop
buying our Treasuries, and the dollar will fall through the floor.
The laws of gravity apply to economics as well as science.
Red flags are going up everywhere. China’s central bank issued
a warning in December about the risks of the weakening dollar:
“If external capital stops flowing into the US, a significant
drop in the dollar may occur with consumption and investment shrinking,
interest rates rising, and financial markets experiencing turbulence,
endangering global financial and economic stability. There could
be adjustments to how European private capital, Asian foreign exchange
reserves and oil export proceeds are invested.”
Yes, of course, a complete economic meltdown with capital fleeing
the United States to foreign countries and the American economy
collapsing in a heap.
The Chinese central bank statement adds:
“If the US current account deficit continues to grow faster
than GDP, then the investment value of US assets may be subject
to doubts and challenges and the willingness of investors to continue
holding and buying US financial products may weaken. This could
cause changes in capital flows, the exchange rates of major currencies,
and the value of foreign exchange assets.”
The Chinese bank is giving the Bush Team a chapter out of Econ.
101: “If you keep spending more than you are taking in; the
stock market will fall, the dollar will plummet, and the US economy
will tank”.
What could be clearer than that?
The administration, however, chooses to ignore the basic laws of
economics and pursue a madcap plan to wage aggressive war across
the planet and pilfer the world’s oil reserves.
So far, the results have been less than reassuring.
The Decline of U.S. Sovereignty; blame it on the Fed
The United States set off on the road to perdition when it transferred
the power to create money to the privately-owned Federal Reserve.
It’s been downhill ever since.
The man who can set interest rates and create money is more powerful
than the man who can move armies and change laws. By conferring
that authority on the Federal Reserve we have assured that the policies
that govern our economy are decided by unelected members of the
ruling elite whose choices will naturally reflect the interests
of their class.
The wealth gap that has opened up like a yawning chasm between
rich and poor in America originated with the class-based policies
of the Fed. The massive equity bubbles which arose from artificially
low interest rates and the deliberate destruction of the dollar
by reckless increases in the money supply have shifted trillions
of dollars from working class Americans to the predatory aristocrats
at the top of the economic food chain. The gulf between rich and
poor has grown so wide that it now poses a direct threat to our
increasingly fragile democracy. That’s why Thomas Jefferson
said:
“If the American people ever allow private banks to control
the issue of our currency, first by inflation, then by deflation,
the banks and the corporations that will grow up will deprive the
people of all property until their children wake up homeless on
the continent their fathers conquered. The issuing of power should
be taken from the banks and restored to the people, to whom it properly
belongs.”
Free people cannot control their own destiny unless they control
their own currency. The Federal Reserve must be abolished.
Link to this page: http://www.ichblog.eu/content/view/405/2/
INFOWARS:
BECAUSE THERE'S A WAR ON FOR YOUR MIND
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