U.S. on direct path to economic Armageddon

The United States is bankrupt. And the bankers that control our economy are desperately trying to save face by stage-managing a controlled demolition of the dollar.

Over the past two weeks, the central banks of the United States, Japan and the European Union have pumped in over $500 billion worth of liquidity into international financial markets, frantically attempting to stave off a global economic collapse while publicly reassuring investors that no crisis exists.

But in late 2006, U.S. Treasury Secretary Hank Paulson quietly activated the “Plunge Protection Team,” described by the UK Telegraph as “a shadowy body with powers to support stock index, currency, and credit futures in a crash.”

Why is the U.S. government preparing for a financial catastrophe if there is supposedly no crisis?

Currently, investors are panicked over the collapse of the subprime real estate market, a $1.3 trillion bubble of high-risk mortgage loans to borrowers with poor credit. Some economists estimate that up to 7 million American families may now lose their homes to foreclosures. This is taking place even as the dollar continues to hit all-time lows against the Euro and other foreign currencies.

But the subprime blowout is merely a symptom of an unstable “house of cards” international economy dominated by unregulated, debt-based, speculative capital and excess liquidity — namely, the estimated $1.7 trillion in hedge funds and more than $500 trillion in high-risk derivatives.

These trends are characteristic of what historian Kevin Phillips calls the “debt-industrial complex,” a system where the United States and its citizens effectively go broke. Personal savings in the United States are now at a 74-year low, while real wages — wages adjusted for inflation — in the United States are down since 1965, and falling at the fastest rate in 14 years, according to the Financial Times.

Alternatively, the average CEO now earns around 821 times the minimum wage and almost every indicator shows the gap between rich and poor expanding. Furthermore, while the official debt of the United States currently towers over $9 trillion, the estimated long-term debt is at least $45 trillion.

Laurence Kotlikoff, Boston University economics chair, has warned, “The U.S. government is, indeed, bankrupt.” He estimates that in order to maintain programs like Social Security and Medicare, “you’d have to have an immediate and permanent 78 percent hike in the federal income tax.”

Instead, the U.S. government is borrowing at least $2 billion per day, allowing China, Japan, Europe and Saudi Arabia to hold the mortgage on the bankrupt American Dream.

So how did the U.S. superpower sink so hopelessly into debt? While much of the blame belongs to the runaway deficit spending under Ronald Reagan and George W. Bush, the main culprit is the Federal Reserve, the central bank that issues the U.S. currency.

The Fed’s departure from the Bretton-Woods gold standard in 1971 and subsequent reckless monetary policies have helped seed a massive half-a-quadrillion dollar bubble managed by banks like Goldman Sachs and JP Morgan.

The Fed is not alone to blame. Fed chairmen regularly coordinate policy with other groups, like the Bank of International Settlements — the self-described “central bank of central banks” in Switzerland. A grim July BIS report warned of a brewing global “Great Depression” over the emerging debt crisis.

Since the 1990s, international free trade deals — penned by corporate lobbyists and passed enthusiastically by both political parties — have accelerated the loss of U.S. manufacturing jobs to wherever labor is cheapest. But in March, the parasitic International Monetary Fund urged further depreciation in the U.S. dollar — this while U.S. manufacturing firms, highways, ports, forests and more are auctioned off at fire-sale prices to private equity groups.

Corporate insider selling of stocks is now at a 20-year high, while food prices for everything from eggs to milk skyrocketed between 5 and 20 percent in the past year, signaling a hyperinflationary spiral.

So while the stock market may appear to be up over the long term, the gains are often an illusory combination of inflation and government intervention, with pirated corporate profits siphoned to an entrenched elite. Tepid minimum wage increases and taxpayer bailouts of robber barons merely delay the inevitable crash.

Sadly, both political parties are fiddling while the economy burns. Instead, U.S. diplomats should arrange a new Bretton-Woods conference with other G8 nations to immediately restructure the imploding currency system. Congress should issue a moratorium on mortgage foreclosures and begin adequately regulating the elite debt speculators.

But such measures are likely wishful thinking. The Strangelove clique surrounding Vice-President Dick Cheney appears far more interested in borrowing additional funds to bomb Iran and expand the domestic police state, while compromised Democrats feign opposition, offering only shallow rhetoric and empty promises. As the BIS report warns, “Virtually nobody foresaw the Great Depression of the 1930s.”

Dan Abrahamson is a Sid Richardson College Senior.

Back to top