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MARX: A HERO FOR OUR TIME? — Suddenly, everyone from the Wall Street Journal to Rolling Stone seems to be talking about Karl Marx. Louis Proyect delves into this mysterious resurgence, giving a vivid assessment of Marx’s relevance in the era of globalized capitalism. THE MEANING OF MANDELA: Longtime civil rights organizer Kevin Alexander Gray gives in intimate portrait of Nelson Mandela and the global struggle of racial justice. FALLOUT OVER FUKUSHIMA: Peter Lee investigates the scandalous exposure of sailors on board the USS Reagan to radioactive fallout from Fukushima. SOUTHERN DISCOMFORT: Kim Nicolini charts the rise of Matthew McConaughey. PLUS: Mike Whitney on the coming crash of the housing market. JoAnn Wypijewski on slavery, torture and revolt. Chris Floyd on the stupidity of US policy in Ukraine. Kristin Kolb on musicians and health care. And Jeffrey St. Clair on life and death on the mean streets of an America in decline
Obliterating the Dollar ... and the Middle Class?

Preparing for the Economic Typhoon

by MIKE WHITNEY

Gold traders love George Bush. They know that his blundering mismanagement of the economy will keep gold soaring well into the future. In the last year alone gold increased nearly $200 an ounce capping off a 5 year run that has taken it from $274 per ounce to $635 at Friday’s close.

These are serious numbers and they reflect the uneasiness with the global political situation (Iran, Nigeria) as well as concern about the oceans of debt generated by our Oval Office numbskull.

Is it really possible for one man to single-handedly obliterate the world’s most robust economy?

Guess so.

After 6 years of looting the public till, the cupboard is just about bare. Bush has chalked up another $3 trillion of public debt which sounds the death-knell for Social Security, public education, and the social safety net.

Think I’m kidding? Consider what new Fed-master Ben Bernacke said just yesterday, "If the dollar declined sharply, it would not necessarily disrupt markets".

That’s right; the Fed is conspiring to reduce its debt payments by driving a wooden stake into the heart of the greenback. In three to six months the dollar will probably be valued at 1.40 to 1.50 per euro. That is, if the bottom doesn’t fall out completely. After all, allies and enemies alike are pretty sick of the good old USA, so it wouldn’t be out of the question for someone (perhaps, China) to start a sell-off that would end in disaster.

The dollar is now recognized as the empire’s Achilles heel and the primary target for any asymmetrical warfare directed at America. If that means regime change at home, count me in. I’ll worry about the wheelbarrow-loads of greenbacks for a loaf of bread some other time.

The Group of Seven industrialized nations (G-7) took a few swipes at Washington’s profligate spending this weekend; warning that they wanted "more flexibility" in the Asian currencies. This is a clear sign that the path is being paved for a freefalling dollar while the other currencies gain ground.

How do you like the idea that half of your savings will be erased through executive fiat?

Since Bush took office the dollar has plummeted 30% against the euro. The only thing that has kept it from joining the peso is the skyrocketing oil prices which have allowed the Fed to keep the printing presses going at full tilt. That’s because oil is denominated exclusively in dollars, so while the price per barrel continued upward, the Fed was able to circulate another $2.5 trillion of funny money. The high cost of oil has kept the dollar reasonably stable even though the twin-deficits have eroded its true value. Maintaining the monopoly on the sale of oil (which forces foreign central banks to hold billions of greenbacks in reserve) is critical to US prosperity. A switch to euros would weaken demand for the dollar and send the American economy into a tailspin.

Unfortunately, other countries are frustrated with the recklessness of the Bush team and are threatening to destabilize the system. First there was the danger of Iran opening an oil bourse that would compete head-on with the dollar; increasing the number of euros stockpiled in the central banks. Now, the Russian Finance Minister, Alexei Kudrin has fired a broadside at his American counterparts saying, "The US dollar is NOT the world’s absolute reserve currency". He noted that the unsustainable’ US trade deficit is "causing concern" and that "the international community can hardly be satisfied with this instability."

Kudrin’s remarks were greeted with the shock one would expect from a dirty bomb on a crowded subway. America’s global dominance requires that it maintain the dollar as the world’s reserve currency; if that changes then the US will be unable to trade its painted-script for valuable resources. It would also mean that America would have to start paying back its $9 trillion national debt.

Kudrin’s comments were interpreted to mean that Russia might ease away from the dollar in its oil transactions; a change that might spread to other countries that are equally skeptical of Uncle Sam’s recklessness.

The eroding value of the dollar is just one of the economic crises facing the American people. A 6 month downturn in housing starts signals that the housing bubble, the largest equity bubble in history, is quickly losing steam. With long term interest rates steadily rising (along with energy prices) the shaky loans that were blessed by former Fed-chief, Greenspan, are beginning to unravel. "No down payment", ARMs (Adjustable Rate Mortgages) and easy financing have the over-extended American public teetering towards insolvency. Foreclosures are up, mortgages balances are at unprecedented levels, and inventories are larger than they’ve been since the early 90s. Last month produced the biggest slowdown in sales in a decade and the real pain hasn’t even begun. At least $3 trillion of the $9 trillion equity bubble is built entirely on the cheap money pumped into the system by the Federal Reserve to keep the economy percolating while Bush and Co. stole every last farthing in the US Treasury. Greenspan’s low interest rates were nothing more than a carnival-hucksters’ scam to shift the vast wealth of America’s middle class into the pockets of well-heeled constituents.

Thanks, Alan.

Last year Americans used their homes as a personal ATM; withdrawing over $600 billion to pay off credit card debt and for personal spending. That "presto-equity" is quickly evaporating as home prices flatten out and wages continue to stagnate. Personal debt is currently in the stratosphere and there are some gloomy signs that the American consumer, that great engine of global economic power, is finally tapped out. Consumer spending represents 70% of US GDP (Gross Domestic Product) so, as housing prices retreat and energy prices increase; Americans will face the greatest economic challenge since the Great Depression.

One thing is absolutely certain; Bush will stick by his constituents to the bitter end. It is physically impossible for him to act in the interests of the American people. He won’t be deterred by the falling dollar, the deflating housing market, or the skyrocketing energy prices. He’ll make his budget-busting tax cuts permanent and plunge the country into a sea of red ink.

Betting that George Bush will do the wrong thing for the nation is not a matter of conjecture; it is a mathematical certainty. He is deliberately destroying the middle class, the prospects for upward mobility, and the currency. The economic underpinnings of American democracy have been demolished in just 6 short years. Smart people will prepare themselves for the typhoon ahead.

MIKE WHITNEY lives in Washington state. He can be reached at: fergiewhitney@msn.com