The rapidly deflating US wealth balloon...how much destiny does a decadent empire have?
- From: bromselick@xxxxxxx
- Date: 25 Jan 2006 21:29:35 -0800
---------------------
Let's see how our major trends are holding up...
The days of cheap energy are over. Kuwait confessed that it has about
half
the oil it once claimed. And like a fat lady in the pastry section
before
a snowstorm, China is buying up oil reserves wherever it can find them
-
in Nigeria, in Ecuador, and in Syria.
Meanwhile, wealth leaks rapidly out of the West and into the East.
Bloomberg tells us that China's economy grew at 9.9% last year,
overtaking
France's in total output. That puts China in the number five position,
just behind Britain, Germany, Japan and the United States. Economists
expect China to run past Britain this year. Then, it will be snapping
at
Germany's heels.
The U.S. Empire loses ground against China and the rest of Asia, too.
Its
domestic economy grew only about a third as fast last year, and not
half
as well. China is growing, albeit in a reckless and dangerous way, by
building more productive capacity. That's real growth...growth that can
add to its wealth. America, on the other hand, is "growing" by
consuming
its wealth, like a man who sells the family business in order to buy a
beach condo. He seems richer. He feels richer. He gets a new girl
friend
and a tan. At least, he looks healthy and happy when he arrives in
bankruptcy court.
"The American economy heads into 2006 with a full head of steam,"
claimed
the empire's chief executive. Neither war, nor high oil prices, nor
hurricanes could keep it from its rendezvous with destiny, he went on.
He
is surely right; but how much destiny does a decadent empire have?
According to the LA Times, polls show that half the public "thinks the
economy is in bad shape and that Bush is doing a bad job of managing
it."
One survey showed that 30% of the population believes the United States
is
in a recession. And the bankruptcy figures show that for many people,
the
United States might as well be in a slump; they don't seem to be able
to
make ends meet. After energy, health care, and housing cost increases,
they have less than nothing left over. But at least they have plenty of
that! They spent more than they made last year. And now comes news that
Ford is getting rid of another 30,000 decent-paying jobs.
Oh Alan, Alan ...what have you done? You have lured a whole generation
into a debt trap from which they cannot get out. Debt service, as a
percentage of income, is at a record high. Even with Mom and Dad both
working, family expenses exceed income. What can the lumpenhouseholders
do
but pray for a miracle...file for bankruptcy...or cut back even more?
And what can your successor at the Fed do? The poor man is already
checking out helicopters. He figures he might have to drop $100 bills
from
the air in order to keep America's bubbles inflated. He's probably
right.
A credit expansion must be followed by a credit contraction. Under
Greenspan's leadership, credit expanded in the homeland even faster
than
waistbands. Now, the big trend is in the other direction. In terms of
real
money (gold), asset values all over the world are going down. They may
be
going up in local currency terms, but gold is going up even faster.
Yes, gold is still edging up toward $560 an ounce. Yes, the dollar fell
yesterday. And yes, the latest experiment with paper money is beginning
a
new phase. It was relatively simple for a central bank to shepherd a
paper
money when it was rising against real money; the bankers could simply
print more of it. Everyone was happy. Now, we will see what happens
when
the paper money falls. Will investors be so ready to loan out dollars?
Will they buy Treasuries at today's low yields? Will housing prices go
up
when yields rise? Without higher house prices, how will consumers
continue
consuming?
Alan Greenspan entered the Fed with room to maneuver, for Paul Volcker
had
broken the consumer price inflation of the '70s. Gold was going down.
Consumer debt was less than half what it is today, while asset prices
were
low. And the esteem in which central banking was held was - let us say
-
moderate. All he had to do was to make money easy to get. But poor Ben
Bernanke comes upon the scene with everything running against him.
Money
has been too easy...for too long. People already have too much credit,
too
many debts, and too many expenses. But Bernanke - battling a forest
fire
with a woodpile - plans to give them more. We are already pulling up a
comfy chair and buying popcorn; it will be fun to watch the show.
[Ed. Note: No matter what the Fed and the mainstream analysts say about
the American economy's resilience, growth and recovery - and no matter
what kind of "proof" their accountants cook up - the real numbers tell
the
story. And that story is that we're in trouble. Find out the truth
about
the economy here:
Statistical Deceptions
http://www1.youreletters.com/t/331846/1504862/783705/0/
.
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