Monthly Archives: September 2008
Paul Craig Roberts
Information Clearing House
September 16, 2008
We were promised a “New Economy” of high-tech tradable services to take the place of the offshore manufacturing economy. Wondering what had become of the “New Economy,” Duke University’s Offshoring Research Network searched for it and located it offshore. Yes, the activities of the “New Economy” are also outsourced offshore.
Call centers, IT operations, back-office operations, and manufacturing have long been moved offshore. Now high-value-added proprietary activities such as research and development, engineering, product development, and analytical services are being sent offshore. All that’s left is finance, and it is crumbling before our eyes.
Independent broker-dealers are disappearing: Merrill Lynch, Bear Stearns, Lehman Brothers. These venerable institutions were too thinly capitalized for the risks that they took. Merrill Lynch is now part of the Bank of America, and Lehman Brothers is history.
Ill-advised financial deregulation led to financial concentration and not to more efficient markets. Independent local banks, which focused on financing local businesses, and Saving and Loan Associations, which knew the local housing market, have been replaced with large institutions that package unanalyzed risks and sell them worldwide.
Regulation over-reached. The pendulum swung. Deregulation became an ideology and a facilitator of greed.
Deregulating electric power gave us Enron.
Deregulating the airlines destroyed famous American brand names such as Pan Am, shrank the number of companies, and caused a decline in service. When airlines were regulated, they could afford standby equipment, and cancelled flights were rare. Today, the bottom line prohibits standby equipment, and mechanical problems result in cancelled flights. When economists calculated the benefits of deregulation, they left out many of its costs.
There are no longer any blue chip companies, which means that investing for retirement has become a crapshoot. People realize this; thus, the privatization of Social Security has no support.
If we look realistically at the US economy, we see that what is not moved offshore is being bailed out. Last year, the US Department of Energy was authorized to make $25 billion in loans to auto manufacturing firms and suppliers of automotive parts. Last week the Secretary of the Treasury took $5 trillion dollars in Fannie Mae and Freddie Mac home mortgages under its wing.
The Congressional Budget Office says this action by the Treasury means “that the operations of Fannie Mae and Freddie Mac should be directly incorporated into the federal budget.” http://cboblog.cbo.gov/ Their revenues would be treated as federal revenues, and their expenditures as federal expenditures. If the former were greater than the latter, there would be no reason for the takeover.
The open question is: what do these new liabilities do to the Treasury’s own credit standing?
For now, this question is submerged. The traditional practice of fleeing to the US dollar and US Treasury bonds during periods of financial stress and uncertainty has boosted the dollar and kept interest rates low. But sooner or later the large US budget deficit, worsened by recession and bailouts, and the large trade deficit, which requires constant recycling of dollars held by foreigners into US financial and real assets, will result in renewed effort on the part of foreigners to lighten their dollar holdings.
When this time arrives, US interest rates will have to rise in order for the government to be able to continue to rely on foreigners to recycle the dollars acquired in trade to finance the US government’s annual budget deficit.
The current financial problems have pushed into the background the larger problems of the US budget and trade deficits. Goods and services for American markets that US corporations outsource offshore return as imports, which widen the US trade deficit. Moving production offshore reduces US GDP and employment and increases foreign GDP and employment. Moving production offshore reduces the export capacity of the US economy while raising the import bill.
Therefore, how is the trade deficit to be closed? One way is through the dollar’s loss in exchange value, which would reduce American consumers’ real incomes and leave them too poor to purchase the offshore goods and services.
How is the budget deficit to be closed when jobs are disappearing and GDP (tax base) is being relocated offshore?
Not by higher taxes. Higher taxes are problematic for a recessionary economy in which unemployment, properly measured, is already in double digits ( http://www.shadowstats.com ).
Some people have speculated that the budget deficit will be closed by dismantling entitlement programs such as Medicare. However, considering the cost of medical insurance, this would be catastrophic for tens of millions of older Americans.
The more likely avenue will be a raid on private pensions. The Clinton administration’s appointee, Alicia Munnell, as Assistant Secretary of the Treasury for Economic Policy argued that private pensions should face a capital levy to make up for the fact that their accumulation was tax free. I expect that the federal government, faced with its own bankruptcy, will resurrect this argument, as it will be preferable to printing money like a banana republic or Weimar Germany.
In the 21st century, the US economy has been kept going by debt expansion, not by real income growth. Economists have hyped US productivity growth, but there is no sign that increased productivity has raised family incomes, an indication that there is a problem with the productivity statistics. With consumers overloaded with debt and the value of their most important asset–housing–falling, the American consumer will not be leading a recovery.
A country that had intelligent leaders would recognize its dire straits, stop its gratuitous wars, and slash its massive military budget, which exceeds that of the rest of the world combined. But a country whose foreign policy goal is world hegemony will continue on the path to destruction until the rest of the world ceases to finance its existence.
Most Americans, including the presidential candidates and the media, are unaware that the US government today, now at this minute, is unable to finance its day to operations and must rely on foreigners to purchase its bonds. The government pays the interest to foreigners by selling more bonds, and when the bonds come due, the government redeems the bonds by selling new bonds. The day the foreigners do not buy is the day the American people and their government are brought to reality.
This is not the financial position of a superpower.
Will what happened to Lehman Brothers today be America’s fate tomorrow?
September 12, 2008
Sarah Palin is now officially the poster child for the insanity of the neocons. Interviewed by ABC News, the vice presidential candidate said war with Russia is a possibility. “We have to keep our eyes on Russia, under the leadership there,” she averred. “I mean, that is the agreement when you are a NATO ally. If another country is attacked, you’re going to be expected to be called upon and help…. For Russia to have exerted such pressure in terms of invading a smaller, democratic country, unprovoked, is unacceptable.”
Palin is wrong on all counts. First, Georgia is not a member of NATO and is not likely to become so, mostly because the Europeans are more sane than the American neocons, primarily because they live next door to Russia. Second, Russia did not invade Georgia, Russia defended South Ossetia from an attack launched by Georgia. In its defensive action, Russia took out Georgia’s military capacity and that necessitated going into Georgia proper. Third, Georgia is not a democracy as should be apparent when one looks at Saakashvili’s reaction to opposition protesters last year — he responded with tear gas, water cannons, rubber bullets, and a “state of emergency,” that is to say martial law. Of course, in Bushzarro world, a government installed by NED and Soros is considered a democracy — and black is white and up is down.
Cheney trekked to Ukraine last week to tell Yushchenko and his color revolution installed gang that the U.S. will support their effort to get into NATO, never mind this is unpopular in the country. “It is obvious that so far the majority of people in Ukraine is opposed to NATO membership and wants it to remain neutral,” reports Ilya Kramnik for RIA Novosti. “In the complicated domestic situation, forced entry into NATO may split the country and some of its regions may secede. Such an outcome is not likely to please either Kiev or Brussels, so there are no grounds to expect Ukraine’s fast NATO entry.” Naturally, the wishes of the people will not be allowed to stand in the way of the neocons and their brazen and clumsy attempts to provoke Russia.
All this NATO business increases the prospect of war between the United States and Russia, as Palin admitted. “The problem with NATO expansion is simply this: each expansion calls into question NATO’s willingness to go to war. Would the US and Europe and (importantly) Turkey really declare war with Russia over Georgia or one of the Baltic States? Or even the Ukraine?” notes Ian Welsh.
NATO expansion threatens the equilibrium of mutually assured destruction. MAD [Mutually Assured Destruction] requires that both sides have clear and transparent knowledge of what the other side will and won’t escalate over. In the Cold War, both sides knew that an attack on a NATO or Warsaw Pact member by the other side would lead to general war, and understood that that general war could easily escalate to nuclear confrontation, probably started by whoever thought they were losing.
For Palin, or rather her neocon handlers, this is not a big deal. If you think the prospect of a nuclear war will make the neocons back off, think again. It’s not simply hubris or mental illness — the neocons want war, and the bigger the better, because it will make possible the realization of their demented, crypto-fascist philosophy based on the dictatorial musings of the Nazi crown jurist Carl Schmitt. Total war, even nuclear war, will promote their Hobbesian view of the world where an absolute decider-commander demands absolute submission. Of course, a little radiation does not bother the neocons, as they have bunks reserved in the fallout shelter.
As Paul Craig Roberts notes, the neocons are determined to have a war with Russia. “The Committee on the Present Danger regarded the neocons as crazy people who would get America into a nuclear war with the Soviet Union. The neocons hated President Reagan, because he ended the cold war with diplomacy, when they desired a military victory over the Soviet Union,” writes Roberts.
The Republicans will get us into more wars. Indeed, they live for war. McCain is preaching war for 100 years. For these warmongers, it is like cheering for your home team. Win at all costs. They get a vicarious pleasure out of war. If the US has to tell lies in order to attack countries, what’s wrong with that? “If we don’t kill them over there, they will kill us over here.”
It’s funny, in a perverse sort of way, that the corporate media went around and around about Barack Obama’s lipstick on a pig comment. In fact, the lipstick is on Mars, the god of war in Roman mythology. Our neocon novi homines want their “dictator in perpetuity,” their Julius Caesar, to lead them into battle against Russia and China. McCain is a sorry dictator perpetuo, but it really does not matter who sits atop the throne because the neocons call the shots — and the final shot will come screaming in on a Russian SS-25 with a thermonuclear payload.
Palin may not realize what she is saying when she talks about NATO and confronting Russia. But then she really does not need to because she is little more than a cigar store Indian with talking points in hand composed by a coterie of madmen.
She too has a reserved spot in the bunker.
September 11, 2008
Julian Barnes, writing for the Los Angeles Times, tells us:
The chairman of the Joint Chiefs of Staff said today the U.S. is “running out of time” to get the war in Afghanistan right and announced that he was developing a “new, more comprehensive strategy” to cover the entire region.
Adm. Michael G. Mullen, the Joint Chiefs chairman, and Secretary of Defense Robert M. Gates both emphasized in congressional testimony that the military and broader U.S. government needed to look at the threat from Pakistan’s tribal regions and the insurgency in Afghanistan as a single problem.
In recent months, military leaders have looked at the movement of extremists across the border from Pakistan into Afghanistan with growing alarm. And today Gates and Mullen echoed regional commanders’ concerns that havens in Pakistan were fueling the insurgency in Afghanistan.
|Reagan meets with CIA-ISI lavished Afghan Mujahideen, later to become the Taliban and al-Qaeda. Reagan would call these religious fanatics and cutthroats “freedom fighters.”|
Once again, we have the Hegelian dialectic in action. The CIA essentially created the Afghan Mujahideen, later to be called al-Qaeda and the Taliban, as part of another dialectical project — taking down the Soviet Union, a pet project of Zbigniew Brzezinski — and this assemblage of Wahabbi religious fanatics, misfits, cutthroats, mental cases, and psychotics was set-up, with the blessing of Pakistan’s intelligence service and the CIA, in the tribal areas of Pakistan.
In 1980, writes Phil Gasper, with the “support of Pakistan’s military dictator, General Zia-ul-Haq, the U.S. began recruiting and training both mujahideen fighters from the 3 million Afghan refugees in Pakistan and large numbers of mercenaries from other Islamic countries. Estimates of how much money the U.S. government channeled to the Afghan rebels over the next decade vary, but most sources put the figure between $3 billion and $6 billion, or more. Whatever the exact amount, this was ‘the largest covert action program since World War II’ — much bigger, for example, than Washington’s intervention in Central America at the same time, which received considerably more publicity.”
In 1985, Reagan issued a National Security Decision Directive to escalate covert action in Afghanistan significantly, providing the Mujahideen “with extensive satellite reconnaissance data of Soviet targets on the Afghan battlefield, plans for military operations based on the satellite intelligence, intercepts of Soviet communications, secret communications networks for the rebels, delayed timing devices for tons of C-4 plastic explosives for urban sabotage, and sophisticated guerrilla attacks, long-range sniper rifles, a targeting device for mortars that was linked to a U.S. Navy satellite, wire-guided anti-tank missiles, and other equipment,” and eventually 1,000 state-of-the-art, shoulder-fired Stinger antiaircraft missiles.
“By 1987, the annual supply of arms had reached 65,000 tons, and a ‘ceaseless stream’ of CIA and Pentagon officials were visiting Pakistani Inter-Services Intelligence (ISI) headquarters in Rawalpindi and helping to plan mujahideen operations,” notes Gasper. “CIA operations officers helped Pakistani trainers establish schools for the mujahideen in
Seattle Indymedia Center
September 13, 2008
Homeland security has setup up 3 internal checkpoints on the Olympic Peninsula. These checkpoints are in addition to checkpoints at Washington Ferry docks and highway border crossings. According to the U.S. Border Patrol, it has a jurisdiction of about 100 miles from the border. This puts most of Washington state in an area where border checkpoints are authorized, including Seattle.
In August and again in the beginning of September, the Department of Homeland Security has set up suspicion-less checkpoints on the Washington peninsula. The checkpoints are in the town of Forks, at the west side of the Hood Canal bridge going east bound, and at the third near Discovery Bay on US 101. Forks is a timber town of 3,200 people that is 56 miles from the nearest ferry terminal connecting Washington to Canada. At the road checkpoints there and elsewhere, the border patrol ask drivers different types of questions to gauge their status in the U.S., including questions about citizenship. Please review this video to understand how to deal with this illegal check points:
You don’t have to answer Border Patrol’s questions. Ask if you are being detained.
At the end of August, about 60 people demonstrated against the Forks Border Patrol checkpoint. Edgar Ayala, a Forks High School athlete who graduated with honors in June, was arrested on August 20th at the Border Patrol checkpoint and deported to Mexico. Tanya Ward, one of the organizers of the protest, is a member of the Hoh tribe and told a reporter from the Penninsula Daily News that she felt that immigrants are treated with the same unfairness shown to Native Americans. She said, “I don’t think it’s right for them to be taken out of their homes when their children are here and they’re not doing anything wrong.”
If you are interested in protesting these illegal road blocks please contact me: ceakins at gmail dot com
I live in the Peninsula, in Kitsap county.