and “Free Market” Zealots Bring
Death To America
By Paul Craig Roberts
-- -- March 12. 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 Euro.
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 associated jobs.
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 over-reached 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 consumption of $800
billion annually 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
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 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?
Paul Craig Roberts 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
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