FacebookTwitterGoogle+RedditEmail

Is It Time to Bail Out of America?

by PAUL CRAIG ROBERTS

California State Controller John Chiang announced on January 26 that California’s bills exceed its tax revenues and credit line and that the state is going to print its own money known as IOUs.  The template is already designed.

Instead of receiving their state tax refunds in dollars, California residents will receive IOUs.  Student aid and payments to disabled and needy will also come in the form of  IOUs.  California is negotiating with banks to get them to accept the IOUs as deposits.

California is often identified as the world’s eighth largest economy, and it is broke.

A person might think that California’s plight would introduce some realism into Washington, DC, but it has not.  President Obama is taking steps to intensify the war in Afghanistan and, perhaps, to expand it to Pakistan.

Obama has retained the Republican warmongers in the Pentagon, and the US continues to illegally bomb Pakistan and to murder its civilians.  At the World Economic Forum at Davos this week, Pakistan’s prime minister, Y. R. Gilani, said that the American attacks on Pakistan are counterproductive and done without Pakistan’s permission.  In an interview with CNN, Gilani said: “I want to put on record that we do not have any agreement between the government of the United States and the government of Pakistan.”

How long before Washington will be printing money?

On January 28 Obama announced his $825 billion bailout plan.  This comes on top of President Bush’s $700 billion bailout of just a few months ago.

Obama says his plan will be more transparent than Bush’s and will do more good for the economy.

As large as the bailouts are–a total of $1.5 trillion in four months–the amount is small in relation to the reported size of troubled assets that are in the tens of trillions of dollars.  How do we know that by June there won’t be another bailout, say $950 billion?

Where will the money come from?

Obama’s bailout plan, added to the FY 2009 budget deficit he has inherited from Bush, opens a gaping expenditure hole of about $3 trillion.
Who is going to purchase $3 trillion of US Treasury bonds?

Not the US consumer.  The consumer is out of work and out of money. Private sector credit market debt is 174% of GDP.  The personal savings rate is 2 percent.  Ten percent of households are in foreclosure or arrears. Household debt-service ratio is at an all-time high. Household net worth has declined at a record rate.  Housing inventories are at record highs.

Not America’s foreign creditors.  At best, the Chinese, Japanese, and Saudis can recycle their trade surpluses with the US into Treasury bonds, but the combined surplus does not approach the size of the US budget deficit.

Perhaps another drop in the stock market will drive Americans’ remaining wealth into “safe” US Treasury bonds.

If not, there’s only the printing press.

The printing press would turn a deflationary depression into an inflationary depression.
Unemployment combined with rising prices would be a killer.

Inflation would kill the dollar as well, leaving the US unable to pay for its imports.

All the Obama regime sees is a “credit problem.”  But the crisis goes far beyond banks’ bad investments. The United States is busted.  Many of the state governments are busted.  Homeowners are busted. Consumers are busted.  Jobs are busted.  Companies are busted.

And Obama thinks he has the money to fight wars in Afghanistan and Pakistan.

Except for the superrich and those banksters and CEOs who stole wealth from investors and shareholders, Americans have suffered enormous losses in wealth and income.

The stock market decline has destroyed about 45% of their IRAs, 401Ks, and other equity investments.  On top of this comes the decline in home prices, lost jobs and health care, lost customers.  The realized gains in mutual funds and investment partnerships, on which Americans paid taxes, have been wiped out.

The government should give those taxes back.

Americans who have seen their retirement savings devastated by complicity of government regulators and lawmakers with financial gangsters should not have to pay
any income tax when they draw on their pensions.

The financial damage inflicted on Americans by their own government is as great as would be expected from foreign conquest.  While Washington “protected” us from terrorists by fighting pointless wars abroad, the US economy collapsed.

How can President Obama even think about fighting wars half way around the world while California cannot pay its bills, while Americans are being turned out of their homes, while, as Business Week reports, retirees will work throughout their retirement (which assumes that there will be jobs), while careers are being destroyed and stores and factories shuttered.

Americans are facing tremendous unemployment and hardship.  Obama doesn’t have another dollar to spend on Bush’s wars.

Taxpayers are busted.  They cannot stand another day of being milked by the military-security complex.  The US government is paying private mercenaries more by the day than the monthly checks it is providing to Social Security retirees.

This is insanity.

The banksters robbed us twice.  First it was our home and stock values.  Then the government rewarded the banksters for their misdeeds by bailing out the banksters, not their victims, and putting the cost on the taxpayers’ books.

The government has also robbed the taxpayers of $3 trillion dollars to fight its wars.  About $600 billion are out of pocket costs, and the rest is on the taxpayers’ books.

When foreign creditors look at the debt piled on the taxpayers’ books, they don’t see a good credit risk.

Washington is so accustomed to ripping off the taxpayers for the benefit of special interests that the practice is now in the DNA.  While bailouts are being piled upon bailouts, wars are being piled upon wars.

Before Obama gets in any deeper, he must ask his economic team where the money is coming from.  When he finds out, he needs to tell the rest of us.

PAUL CRAIG ROBERTS was Assistant Secretary of the Treasury in the Reagan administration. He is coauthor of The Tyranny of Good Intentions.He can be reached at: PaulCraigRoberts@yahoo.com

More articles by:

Paul Craig Roberts is a former Assistant Secretary of the US Treasury and Associate Editor of the Wall Street Journal. Roberts’ How the Economy Was Lost is now available from CounterPunch in electronic format. His latest book is The Neoconservative Threat to World Order.

Weekend Edition
November 17, 2017
Friday - Sunday
Paul Street
Thank an Anti-War Veteran
Andrew Levine
What’s Wrong With Bible Thumpers Nowadays?
Jeffrey St. Clair - Alexander Cockburn
The CIA’s House of Horrors: the Abominable Dr. Gottlieb
Wendy Wolfson – Ken Levy
Why We Need to Take Animal Cruelty Much More Seriously
Mike Whitney
Brennan and Clapper: Elder Statesmen or Serial Fabricators?
David Rosen
Of Sex Abusers and Sex Offenders
Ryan LaMothe
A Christian Nation?
Dave Lindorff
Trump’s Finger on the Button: Why No President Should Have the Authority to Launch Nuclear Weapons
W. T. Whitney
A Bizarre US Pretext for Military Intrusion in South America
Deepak Tripathi
Sex, Lies and Incompetence: Britain’s Ruling Establishment in Crisis 
Howard Lisnoff
Who You’re Likely to Meet (and Not Meet) on a College Campus Today
Roy Morrison
Trump’s Excellent Asian Adventure
John W. Whitehead
Financial Tyranny
Ted Rall
How Society Makes Victimhood a No-Win Proposition
Jim Goodman
Stop Pretending the Estate Tax has Anything to do With Family Farmers
Thomas Klikauer
The Populism of Germany’s New Nazis
Murray Dobbin
Is Trudeau Ready for a Middle East war?
Jeiddy Martínez Armas
Firearm Democracy
Jill Richardson
Washington’s War on Poor Grad Students
Ralph Nader
The Rule of Power Over the Rule of Law
Justin O'Hagan
Capitalism Equals Peace?
Matthew Stevenson
Into Africa: From the Red Sea to Nairobi
Geoff Dutton
The Company We Sadly Keep
Evan Jones
The Censorship of Jacques Sapir, French Dissident
Linn Washington Jr.
Meek Moment Triggers Demands for Justice Reform
Gerry Brown
TPP, Indo Pacific, QUAD: What’s Next to Contain China’s Rise?
Robert Fisk
The Exile of Saad Hariri
Romana Rubeo - Ramzy Baroud
Anti-BDS Laws and Pro-Israeli Parliament: Zionist Hasbara is Winning in Italy
Robert J. Burrowes
Why are Police in the USA so Terrified?
Chuck Collins
Stop Talking About ‘Winners and Losers’ From Corporate Tax Cuts
Ron Jacobs
Private Property Does Not Equal Freedom
Kollibri terre Sonnenblume
Mass Shootings, Male Toxicity and their Roots in Agriculture
Binoy Kampmark
The Fordist Academic
Frank Scott
Weapons of Mass Distraction Get More Destructive
Missy Comley Beattie
Big Dick Diplomacy
Michael Doliner
Democracy, Real Life Acting and the Movies
Dan Bacher
Jerry Brown tells indigenous protesters in Bonn, ‘Let’s put you in the ground’
Winslow Myers
The Madness of Deterrence
Cesar Chelala
A Kiss is Not a Kiss: Sexual Abuse and Exploitation of Children
Jimmy Centeno
Garcia Meets Guayasamin: A De-Colonial Experience
Stephen Martin
When Boot Becomes Bot: Surplus Population and The Human Face.
Martin Billheimer
Homer’s Iliad, la primera nota roja
Louis Proyect
Once There Were Strong Men
Charles R. Larson
Review: Mike McCormack’s Solar Bones
David Yearsley
Academics Take Flight
FacebookTwitterGoogle+RedditEmail