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Last Thursday’s press conference was pure Greenspan. The shriveled Fed-master used his trip to Germany to deliver the roundhouse punch that many had expected for two years. He "warned that the deficit in US trade with the rest of the world could not be sustained indefinitely."(BBC)
Really? Does anyone seriously believe that this "road to Damascus" revelation just came to Greenspan while traveling to Europe? He’s obviously foreseen the impending train-wreck for months, but stayed quiet so that Bush and Co. could continue looting the treasury. Greenspan is every bit as culpable in America’s financial holocaust as his crooked friends in the White House. The trade deficit alone is more than $500 billion in just the last year. That’s more than 5% of the country’s economy. (Argentina went through its "meltdown" at only 4%)
Why does anyone waste their time listening to Greenspan? He spent the last three months soothing jittery investors; crooning romantically that the soaring deficits were no problem. His calming words were little more than a ploy to get his buddy Bush through the election.
Now, he does a complete 180, warning that "at some point" interest in the debt-laden dollar will slow, and foreigners will start chucking greenbacks from the sinking ship. It was a con-job from the get-go. Did anyone believe that the laws of economics had been revoked by imperial fiat? Certainly, "number-cruncher" Greenspan knew what was in store; he could figure that $500 Billion deficits carry with them a hefty bit of pain. And, this is just the first bump in a rut-filled road. The worst is yet to come.
Greenspan is a thoroughly shameful waste of protoplasm. At one moment, he’s cautioning Clinton against "paying off the national debt, too fast", and in the next, he’s deflating interest rates to facilitate a war in Iraq. It doesn’t matter what the choice is, as long as it serves America’s oligarchs, Alan’s on board.
Now, of course, there’s very little "Maestro" (Bob Woodward’s term of endearment) can do. The dollar is freefalling and interest rates will have to go up. All the zillions of dollars that have been navigated to the bulging pockets of Bush’s friends (via the tax cuts) have done nothing to resuscitate the comatose economy. The nation will have to tough it out by savaging Social Security and slashing away at public services. ( a prospect that warms the cockles of Greenspan’s neo-con heart)
Even more tragic, the Republican House is voting on Monday "to raise the national debt ceiling by $800 billion to $8.2 trillion"; ensuring that the shackle of debt will be affixed to every American newborn for generations to come. (The increase is the third in as many years)
The "moral values" crowd should be tickled to find out that their champions in Congress mortgaged their future at the same time they were saving the nation from the scourge of gay marriage.
"I think there must be some spiritual immorality for children who are yet unborn to come into this world with a debt on their shoulders that their parents have no idea as to how it was accumulated," said Charles Rangel, top Democrat on the House Ways and Means Committee.
Rangel was roundly derided by his Republican counterparts. "What a fuddy-duddy", they mocked.
Even so, the borrowed billions should keep the country on life-support for the short term and leave the Bush-devotees believing that their messiah is making prudent choices. Maybe we should invest in some smelling salts for when the ugly truth rears up and shows that the Crawford cabal "took from us everything they could steal". (Thanks, Bob Dylan)
The larger problem is the economic tsunami that’ll hit when foreign investors start cashing in their dollars in reaction to the profligate behavior of the Congress. "Under the worst-case scenarios, the dollar would plummet, stock prices would plunge and US interest rates would soar, hurting US and global growth." (L.A. Times) No one doubts that a run on the dollar will send the world reeling towards recessionor worse.
A report in the UK Independent says: "Europe and Japan failed yesterday to persuade the United States to address the decline in the dollar, despite talks at a fractious meeting of the Group of 20 industrialized and developing nations The US insisted the dollar’s decline was not on the agenda at the meeting, while European politicians have been anxious for action to stem the rise in the euro that threatens to bring their economy to a halt." In other words, dollar devaluation was all part of the Bush Administration’s plan. It’s one element in a broader strategy to pulverize the EU and force them make changes in their social structure. In fact, the neocons see the EU as their ideological adversary; a veritable spawn of the socialistic menace. A falling dollar is a calculated body-blow to corporate America’s biggest rival; that’s not an advantage they’re likely to give up easily. Unfortunately, once currency begins a downward plunge it’s not always possible to control the trajectory. It’s a risky maneuver that sober people wouldn’t attempt.
As America’s good fortune melts into a bottomless chasm of debt, Greenspan stands firm in his praise of the Bush tax cuts. It’s truly astonishing. He can see the road ahead, full of deprivation and struggle for millions of his countryman, and yet, he dismisses it with a shrug of the shoulders. The only thing that seems to matter is that every last drop of blood and scrap of bone be transferred to the 1% on the top of the social dog pile. Now, that’s loyalty.
We should ponder Greenspan’s prophecy, as circuitous and opaque as it may be: "Given the size of the US current account deficit, a diminished appetite for adding to dollar balances must occur at some point."
The message is clear; the Fed’s policies have driven a wooden stake through the heart of the dollar. A lot of people are going to be hurt by the aftershocks.
MIKE WHITNEY lives in Washington state. He can be reached at: firstname.lastname@example.org