USA: A Country of Serfs Ruled By Oligarchs
- From: periodista <periodistalibre@xxxxxxx>
- Date: Tue, 16 Feb 2010 17:33:51 -0800 (PST)
By Paul Craig Roberts |
February 16, 2010 "Information Clearing House" -- The media has
headlined good economic news: fourth quarter GDP growth of 5.7 percent
("the recession is over"), Jan. retail sales up, productivity up in
4th quarter, the dollar is gaining strength. Is any of it true? What
does it mean?
The 5.7 percent growth figure is a guesstimate made in advance of the
release of the U.S. trade deficit statistic. It assumed that the U.S.
trade deficit would show an improvement. When the trade deficit was
released a few days later, it showed a deterioration, knocking the 5.7
percent growth figure down to 4.6 percent. Much of the remaining GDP
growth consists of inventory accumulation.
More than a fourth of the reported gain in Jan. retail sales is due to
higher gasoline and food prices. Questionable seasonal adjustments
account for the rest.
Productivity was up, because labor costs fell 4.4 percent in the
fourth quarter, the fourth successive decline. Initial claims for
jobless benefits rose. Productivity increases that do not translate
into wage gains cannot drive the consumer economy.
Housing is still under pressure, and commercial real estate is about
to become a big problem.
The dollar’s gains are not due to inherent strengths. The dollar is
gaining because government deficits in Greece and other EU countries
are causing the dollar carry trade to unwind. America’s low interest
rates made it profitable for investors and speculators to borrow
dollars and use them to buy overseas bonds paying higher interest,
such as Greek, Spanish and Portuguese bonds denominated in euros. The
deficit troubles in these countries have caused investors and
speculators to sell the bonds and convert the euros back into dollars
in order to pay off their dollar loans. This unwinding temporarily
raises the demand for dollars and boosts the dollar’s exchange value.
The problems of the American economy are too great to be reached by
traditional policies. Large numbers of middle class American jobs have
been moved offshore: manufacturing, industrial and professional
service jobs. When the jobs are moved offshore, consumer incomes and
U.S. GDP go with them. So many jobs have been moved abroad that there
has been no growth in U.S. real incomes in the 21st century, except
for the incomes of the super rich who collect multi-million dollar
bonuses for moving U.S. jobs offshore.
Without growth in consumer incomes, the economy can go nowhere.
Washington policymakers substituted debt growth for income growth.
Instead of growing richer, consumers grew more indebted. Federal
Reserve chairman Alan Greenspan accomplished this with his low
interest rate policy, which drove up housing prices, producing home
equity that consumers could tap and spend by refinancing their homes.
Unable to maintain their accustomed living standards with income
alone, Americans spent their equity in their homes and ran up credit
card debts, maxing out credit cards in anticipation that rising asset
prices would cover the debts. When the bubble burst, the debts
strangled consumer demand, and the economy died.
As I write about the economic hardships created for Americans by Wall
Street and corporate greed and by indifferent and bribed political
representatives, I get many letters from former middle class families
who are being driven into penury. Here is one recently arrived:
"Thank you for your continued truthful commentary on the 'New
Economy.' My husband and I could be it's poster children. Nine years
ago when we married, we were both working good paying, secure jobs in
the semiconductor manufacturing sector. Our combined income topped
$100,000 a year. We were living the dream. Then the nightmare began. I
lost my job in the great tech bubble of 2003, and decided to leave the
labor force to care for our infant son. Fine, we tightened the belt.
Then we started getting squeezed. Expenses rose, we downsized, yet my
husband's job stagnated. After several years of no pay raises, he
finally lost his job a year and a half ago. But he didn't just lose a
job, he lost a career. The semiconductor industry is virtually gone
here in Arizona. Three months later, my husband, with a technical
degree and 20-plus years of solid work experience, received one job
offer for an entry level corrections officer. He had to take it, at an
almost 40 percent reduction in pay. Bankruptcy followed when our
savings were depleted. We lost our house, a car, and any assets we had
left. His salary last year, less than $40,000, to support a family of
four. A year and a half later, we are still struggling to get by. I
can't find a job that would cover the cost of daycare. We are stuck.
Every jump in gas and food prices hits us hard. Without help from my
family, we wouldn't have made it. So, I could tell you just how that
'New Economy' has worked for us, but I'd really rather not use that
kind of language."
Policymakers who are banking on stimulus programs are thinking in
terms of an economy that no longer exists. Post-war U.S. recessions
and recoveries followed Federal Reserve policy. When the economy
heated up and inflation became a problem, the Federal Reserve would
raise interest rates and reduce the growth of money and credit. Sales
would fall. Inventories would build up. Companies would lay off
workers.
Inflation cooled, and unemployment became the problem. Then the
Federal Reserve would reverse course. Interest rates would fall, and
money and credit would expand. As the jobs were still there, the work
force would be called back, and the process would continue.
It is a different situation today. Layoffs result from the jobs being
moved offshore and from corporations replacing their domestic work
forces with foreigners brought in on H-1B, L-1 and other work visas.
The U.S. labor force is being separated from the incomes associated
with the goods and services that it consumes. With the rise of
offshoring, layoffs are not only due to restrictive monetary policy
and inventory buildup. They are also the result of the substitution of
cheaper foreign labor for U.S. labor by American corporations.
Americans cannot be called back to work to jobs that have been moved
abroad. In the New Economy, layoffs can continue despite low interest
rates and government stimulus programs.
To the extent that monetary and fiscal policy can stimulate U.S.
consumer demand, much of the demand flows to the goods and services
that are produced offshore for U.S. markets. China, for example,
benefits from the stimulation of U.S. consumer demand. The rise in
China’s GDP is financed by a rise in the U.S. public debt burden.
Another barrier to the success of stimulus programs is the high debt
levels of Americans. The banks are being criticized for a failure to
lend, but much of the problem is that there are no consumers to whom
to lend. Most Americans already have more debt than they can handle.
Hapless Americans, unrepresented and betrayed, are in store for a
greater crisis to come. President Bush’s war deficits were financed by
America’s trade deficit. China, Japan, and OPEC, with whom the U.S.
runs trade deficits, used their trade surpluses to purchase U.S.
Treasury debt, thus financing the U.S. government budget deficit.
The problem now is that the U.S. budget deficits have suddenly grown
immensely from wars, bankster bailouts, jobs stimulus programs, and
lower tax revenues as a result of the serious recession. Budget
deficits are now three times the size of the trade deficit. Thus, the
surpluses of China, Japan, and OPEC are insufficient to take the newly
issued U.S. government debt off the market.
If the Treasury’s bonds can’t be sold to investors, pension funds,
banks, and foreign governments, the Federal Reserve will have to
purchase them by creating new money. When the rest of the world
realizes the inflationary implications, the US dollar will lose its
reserve currency role. When that happens Americans will experience a
large economic shock as their living standards take another big hit.
America is on its way to becoming a country of serfs ruled by
oligarchs.
.
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