11 December 2010 By Jeff Gates The U.S. is slipping into a debt-induced recession
from which we're assured that more debt is the remedy. At the close of World War II, the U.S. was home to
50% of the world's productive power. That economic
strength assured America's dominant financial position
for at least two decades. That strength included the
ability to issue the world's top-rated bonds. Look at us now. The financial cost to the U.S. of wars in Iraq and
Afghanistan is projected to top $3 trillion-all of it
borrowed. The interest expense alone could reach $700
billion. The U.S. Congress is debating whether to authorize
the borrowing of $700 billion to extend Bush-era tax
cuts for another decade. At this pace, annual interest payments on the debt
could top $1 trillion by 2020. In 1980, the total
federal debt was $900 billion. The greater the debt, the greater the Wall Street
skim. Bond traders don't care whether markets rise or
fall. So long as markets move, they make money. Thus the financial appeal of warfare, a proven debt
creator. Likewise the allure of crises and even
perceived crises as either will move financial
markets. Thus too the tragic logic of warfare-from the
creditor's perspective. Funds lent for war generate output that does not
compete with other goods and services. It was not the
New Deal but WWII that put America back to work and
ended the Great Depression. Thus the recent appeal by veteran Washington
Post columnist David Broder when he proposed war
with Iran as a strategy for reviving the U.S. economy. Governed By Debt As the strongest currency of the post-WWII era, the
U.S. dollar was destined to emerge as the dominant
reserve currency for global trade. That result was
fully foreseeable by those sophisticated in trade and
finance. America's productive might ensured that U.S. bonds
would set the standard for debt as a safe financial
security. In 1971, our creation of debt was unleashed
from physical limits when we abandoned precious metals
as security for the dollar. Within the decade, a purported fiscal conservative
(Ronald Reagan) championed an investment stimulus that
was projected to expand the federal debt by $872
billon at a time when total securitized debt was $900
billion Known as "supply-side" economics, this
deficit-financed subsidy set off a frenzy of debt that
fueled leveraged buyouts (LBOs), the leveraging of
savings and loans, the overvaluation of dotcom
companies and, most recently, the subprime mortgage
meltdown. By 2008, combined private and public debt topped
$50 trillion plus another $50 trillion in unfunded
liabilities. While LBO artisans leveraged private
sector balance sheets, specialists in public debt
turned to politics to leverage the nation's fiscal
balance sheet. With trust by then the primary collateral for U.S.
debt, America's credibility became a strategic
vulnerability. With our ‘full faith and credit' in the
crosshairs of transnational financial sophisticates,
the U.S. soon became financially ungovernable. With American IOUs now growing at $100 billion per
month secured by a sputtering economy growing at $50
billion per month, that faith is faltering and our
credit crumbling. Self-Correcting Systems? The source of this threat is difficult to see
because the weaponry deployed is the shared mindset
with which we've been seduced to do our seeing. At the risk of over-simplification, the mindset is
this: money is smarter than people. Just let money to
do what money does best and stand aside. No need to worry about trade deficits that the U.S.
amassed with China. According to Nobel Prize economist
Milton Friedman, those imbalances will "self correct." The same mindset rationalized the sustained
loosening of credit by Federal Reserve chairman Alan
Greenspan. While enabling and praising what he called
"financial creativity," he assured Americans that
capital markets would "self correct" any imbalances. How did this deceit succeed? How was
self-governance displaced by a money-myopic mindset
touted as self-correcting? America was seduced by an education curriculum in
which this narrow viewpoint was imbedded. Then we were
induced to comply by policies granting this mindset
the force of law. To financial sophisticates, the
results were foreseeable. Finance: The One True Faith China is now recycling U.S. purchasing power to
build a world-class navy, nurture allies and invest in
commodities. Meanwhile we Americans hold steadfast to
our faith in financial securities. This mindset is now branded globally as the
U.S.-discrediting "Washington" consensus as the World
Bank Group (led by an American since 1946) insisted
that emerging economies embrace a worldview that has
served us poorly and them worse. With deference granted the creditor, debtors must
adjust-no matter what the cost. The greater the debt,
the greater the creditor's influence-and the greater
the skim. The U.S. is slipping into a debt-induced recession
from which we're assured that more debt is the remedy.
Only when Americans grasp the internalized source of
this subtle warfare can we prevail over this enemy
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