Date: Mon Dec 19 08:27:13 2005
From: measl at mfn.org (J.A. Terranson)
Subject: .An uncontrolled fiscal crisis.. America.s future
	under George Bush.


While we're debunking George...


http://www.dissidentvoice.org/Apr05/Whitney0411.htm

 The Economic Tsunami: Sooner Than You Think
by Mike Whitney
www.dissidentvoice.org
April 11, 2005

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.If the world's central bankers accumulate fewer dollars, the result would
be an unrelenting American need to borrow in the face of an ever weaker
dollar -- a recipe for higher interest rates and higher prices. The
economic repercussions could unfold gradually, resulting in a long, slow
decline in living standards. Or there could be a quick unraveling, with
the hallmarks of an uncontrolled fiscal crisis..

-- New York Times editorial, 4/2/05

It seems that there are a growing number of people who believe, as I do,
that the economic tsunami planned by the Bush administration is probably
only months away. In just five short years the national debt has increased
by nearly $3 trillion while the dollar has continued its precipitous
decline. The dollar has fallen a whopping 38% since Bush took office, due
largely to the massive $450 billion per year tax cuts. At the same time,
numerous laws have been passed (Patriot Act, Intelligence Reform Bill,
Homeland Security Bill, National ID, Passport requirements etc)
anticipating the need for greater repression when the economy takes its
inevitable nosedive. Regrettably, that nosedive looks to be coming sooner
rather than later.

The administration is currently putting as much pressure as possible on
OPEC to ratchet up the flow of oil another 1 million barrels per day (well
over capacity) to settle down nervous markets and buy time for the planned
bombing of Iran in June. Like Fed Chief Alan Greenspan.s artificially low
interest rates, the manipulation of oil production is a way of concealing
how dire the situation really is. Rising prices at the pump signal an
upcoming recession (depression?) so the administration is pulling out all
the stops to meet the short-term demand and maintain the illusion that
things are still okay. (Bush would rather avoid massive popular unrest
until his battle plans for Iran are carried out)

But, of course, things are not okay. The country has been intentionally
plundered and will eventually wind up in the hands of its creditors as
Bush and his lieutenants planned from the very beginning. Those who don.t
believe this should note the methodical way that the deficits have been
produced at (around) $450 billion per year; a systematic and orderly
siphoning off of the nation.s future. The value of the dollar and the
increasing national debt follow exactly the same (deliberate) downward
trajectory.

This same Ponzi scheme has been carried out repeatedly by the IMF and
World Bank throughout the world; Argentina being the last dramatic
illustration. (Argentina.s economic collapse occurred when its trade
deficit was running at 4%; right now ours is at an unprecedented 6%.)
Bankruptcy is a fairly straightforward way of delivering valuable public
assets and resources to collaborative industries, and of annihilating
national sovereignty. After a nation is successfully driven to
destitution, public policy decisions are made by creditors and not by
representatives of the people. (Enter Paul Wolfowitz)

Did Americans really believe they could avoid a similar fate?

If so, they.d better forget about it, because the hammer is about to come
down big-time, and the collateral damage will be huge.

The Bush administration is mainly comprised of internationalists. That
doesn.t mean that they .hate America,. simply that they are committed to
bringing America into line with the .new world order. and an economic
regime that has been approved by corporate and financial elites alike.
Their patriotism extends no further than the garish tri-colored flag on
their lapel. The catastrophe that middle class Americans face is what
these elites breezily refer to as .shock therapy.: a sudden jolt, followed
by fundamental changes to the system. In the near future we can expect tax
reform, fiscal discipline, deregulation, free capital flows, lowered
tariffs, reduced public services, and privatization. In other words, a
society entirely designed to service the needs of corporations.

There are a number of signs that the economy is close to meltdown-stage.
Even with cheap energy, low interest rates and $450 billion in borrowed
revenue pumped into the system each year, the economy is still barely
treading water. This has a lot to due with the colossal shifting of wealth
brought on by the tax cuts. Supply side, trickle down theories have been
widely discredited and Bush.s tax cuts have done nothing to stimulate the
economy as promised. Now, with oil tilting towards $60 per barrel, the
economic landscape is changing quickly, and shock waves are already being
felt throughout the country.

The Iraq war has contributed considerably to our current dilemma. The
conflict has taken nearly one million barrels of Iraqi oil per day off
line (the exact amount that the administration is trying to replace by
pressuring OPEC). In other words, the astronomical prices at the pump are
the direct result of Bush.s war. The media has failed to report on the
negative affects the war has had on oil production, just as they have
obscured the incredibly successful insurgent strategy of destroying
pipelines. This isn.t a storyline that plays well to the American public,
who expected that Iraq would be paying for its own reconstruction by now.
Instead, the resistance is striking back at the empire.s Achilles heel
(America.s need for massive amounts of cheap oil) and it's having a
damaging affect on the US economy.

Just as the economy cannot float along with sharp increases in oil prices,
so too Bush.s profligate deficits threaten the dollar.s status as the
world.s reserve currency. This is much more serious than a simple decline
in the value of the dollar. If the major oil producers convert from the
dollar to the euro, the American economy will sink almost overnight. If
oil is traded in euros then central banks around the world would be
compelled to follow and America will be required to pay off its enormous
$8 trillion debt. That, of course, would be doomsday for the American
economy. But, a recent report indicates that two-thirds of the world.s 65
central banks have already .begun to move from dollars to euros.. The Bush
plan to savage the dollar has been telegraphed around the world and, as
the New York Times says, .the greenback has nowhere to go but down..
There.s only one thing that the administration can do to ensure that
energy dealers keep trading in dollars.control the flow of oil. That means
that an attack on Iran is nearly a certainty.

The difficulties facing both the dollar and the economy are not
insurmountable. The world has been more than willing to compensate for
America.s wasteful spending as long as America shows itself to be a
responsible steward of the global economy. However, the administration.s
military and economic recklessness suggests that some of the key players
on the world stage (particularly Russia, Iran, Venezuela, Germany, France,
China, Brazil) are collaborating on an alternate plan, a contingency plan.
If Iran is bombed in an unprovoked act of aggression, we will certainly
see this plan activated. The most likely scenario would be a quick switch
to the euro that would have grave implications for the American economy
(Russia has already indicated that it will do this). For Iran, an attack
would justify arming disparate terrorist organizations with the weaponry
they need to attack American and Israeli interests wherever they may be.
In any event, an unprovoked attack will dispel the remaining illusions
about Bush.s war against terror and confirm to everyone that we are
engaged in a new world war; a conflict for global domination.
Tough Years Ahead

The neoliberal chickens have come home to roost. America has become the
latest staging ground for the eccentric economic policies of the
Washington Consensus. The towering national debt coupled with the
staggering trade deficits have put the nation on a precipice and a seismic
shift in the fortunes of middle-class Americans is looking more likely all
the time. The New York Times summarized the country.s prospects like this:

.The economic repercussions could unfold gradually, resulting in a long,
slow decline in living standards. Or there could be a quick unraveling,
with the hallmarks of an uncontrolled fiscal crisis..

.An uncontrolled fiscal crisis.. America.s future under George Bush.

We are facing years of collective struggle ahead. If there.s a quick fix,
I have no idea what it might be.

Mike Whitney lives in Washington state, and can be reached at:
fergiewhitney@....com.

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