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Driving Over the Cliff

by PAUL CRAIG ROBERTS

Is there intelligent life in Washington, DC?  Not a speck of it.

The US economy is imploding, and Obama is being led by his government of neconservatives and Israeli agents into a quagmire in Afghanistan that will bring the US into confrontation with Russia, and possibly China, American’s largest creditor.

The January payroll job figures reveal that last month 20,000 Americans  lost their jobs every day.

In addition, December’s job losses were revised up by 53,000 jobs from 524,000 to 577,000.  The revision brings the two-month job loss to 1,175,000.  If this keeps up, Obama’s promised three million new jobs will be wiped out by job losses.

Statistician John Williams (shadowstats.com) reports that this huge number is an understatement.  Williams notes that built-in biases in seasonal adjustment factors caused a 118,000 understatement of January job losses, bringing the actual January job loss to 716,000 jobs.

The payroll survey counts the number of jobs, not the number of employed as some people have more than one job.  The Household Survey counts the number of people who have jobs.  The Household Survey shows that 832,000 people lost their jobs in January and 806,000 in December, for a two month reduction of Americans with jobs of 1,638,000.

The unemployment rate reported in the US media is a fabrication.  Williams reports that  in changes since 1980, particularly in the Clinton era, “‘discouraged workers’ those who had given up looking for a job because there were no jobs to be had–were redefined so as to be counted only if they had been ‘discouraged’ for less than a year. This time qualification defined away the bulk of the discouraged workers.  Adding them back into the total unemployed, actual unemployment, [according to the unemployment rate methodology used in 1980] rose to 18% in January, from 17.5% in December.”

In other words, without all the manipulations of the data, the US unemployment rate is already at depression levels.

How could it be otherwise given the enormous job loss from offshored jobs.  It is impossible for a country to create jobs when its corporations are moving production for the American consumer market offshore.  When they move the production offshore, they shift US GDP to other countries.  The US trade deficit over the past decade has reduced US GDP by $1.5 trillion dollars.  That is a lot of jobs.

I have been reporting for years that university graduates have had to take jobs as waitresses and bartenders.  As over-indebted consumers lose their jobs, they will visit restaurants and bars less frequently.  Consequently, those with university degrees will not even have jobs waiting on tables and mixing drinks.

US policymakers have ignored the fact that consumer demand in the 21st century has been driven, not by increases in real income, but by increased consumer indebtedness.  This fact makes it pointless to try to stimulate the economy by bailing out banks so that they can lend more to consumers.  The American consumers have no more capacity to borrow.

With the decline in the values of their principal assets–their homes–with the destruction of half of their pension assets, and with joblessness facing them, Americans cannot and will not spend.

Why bail out GM and Citibank when the firms are moving as many operations offshore as they possibly can?

Much of US infrastructure is in poor shape and needs renewing.  However, infrastructure jobs do not produce goods and services that can be sold abroad.  The massive commitment to infrastructure does nothing to help the US reduce its huge trade deficit, the financing of which is becoming a major problem.  Moreover, when the infrastructure projects are completed, so are the jobs.

At best, assuming Mexican immigrants do not get most of the construction jobs, all Obama’s stimulus program can do is to reduce the number of unemployed temporarily.

Unless US corporations can be required to use American labor to produce the goods and services that they sell in American markets, there is no hope for the US economy.  No one in the Obama administration has the wits to address this problem.  Thus, the economy will continue to implode.

Adding to the brewing disaster, Obama has been deceived by his military and neoconservative advisers into expanding the war in Afghanistan, a large, mountainous country.  Obama intends to use the draw-down of US soldiers in Iraq to send 30,000 more American troops to Afghanistan.  This would bring the US forces to 60,000  — 600,000 fewer than US Marine Corps and US Army counterinsurgency guidelines define as the minimum number of soldiers necessary to bring success in Afghanistan–and less than half as many as the army that was unable to occupy Iraq.

The Iranians had to bail out the Bush regime by restraining its Shi’ite allies and encouraging them to use the ballot box to attain power and push out the Americans.  In Iraq the US troops only had to fight a small Sunni insurgency drawn from a minority of the population.  Even so, the US “prevailed” by putting the insurgents on the US payroll and paying them not to fight. The withdrawal agreement was dictated by the Shi’ites.  It was not what the Bush regime wanted.

One would think that the experience with the “cakewalk” in Iraq would make the US hesitant to attempt to occupy Afghanistan, an undertaking that would require the US to occupy parts of Pakistan.  The US was hard pressed to maintain 150,000 troops in Iraq.  Where is Obama going to get another half million soldiers to add to the 150,000 to pacify Afghanistan?

One answer is the rapidly growing massive US unemployment.  Americans will sign up to go kill abroad rather than be homeless and hungry at home.

But this solves only half of the problem.  Where does the money come from to support an army in the field of 650,000, an army 4.3 times larger than US forces in Iraq, a war that has cost us $3 trillion in out-of-pocket and already incurred future costs.  This money would have to be raised in addition to the $3 trillion US budget deficit that is the result of Bush’s financial sector bailout, Obama’s stimulus package, and the rapidly failing economy.  When economies tank, as the American one is doing, tax revenues collapse.  The millions of unemployed Americans are not paying Social Security, Medicare, and income taxes.  The stores and businesses that are closing are not paying federal and state income taxes. Consumers with no money or credit to spend are not paying sales taxes.

The Washington Morons, and morons they are, have given no thought as to how they are going to finance a fiscal year 2009 budget deficit of some two to three trillion dollars.

The practically nonexistent US saving rate cannot finance it.

The trade surpluses of our trading partners, such as China, Japan, and Saudi Arabia, cannot finance it.

The US government really has only two possibilities for financing its budget deficit.  One is a second collapse in the stock market, which would drive the surviving investors with what they have left into “safe” US Treasury bonds.  The other is for the Federal Reserve to monetize the Treasury debt.

Monetizing the debt means that when no one is willing or able to purchase the Treasury’s bonds, the Federal Reserve buys them by creating bank deposits for the Treasury’s account.

In other words, the Fed “prints money” with which to buy the Treasury’s bonds.

Once this happens, the US dollar will cease to be the reserve currency.

In addition, China, Japan and Saudi Arabia, countries that hold enormous quantities of US Treasury debt in addition to other US dollar assets, will sell, hoping to get out before others.

The US dollar will become worthless, the currency of a banana republic.

The US will not be able to pay for its imports, a serious problem for a country dependent on imports for its energy, manufactured goods, and advanced technology products.

Obama’s Keynesian advisers have learned with a vengeance Milton Friedman’s lesson that the Great Depression resulted from the Federal Reserve permitting a contraction of the supply of money and credit.  In the Great Depression good debts were destroyed by monetary contraction.  Today bad debts are being preserved by the expansion of money and credit, and the US Treasury is jeopardizing its credit standing and the dollar’s reserve currency status with enormous quarterly bond auctions as far as the eye can see.

Meanwhile, the Russians, overflowing with energy and mineral resources, and not in debt, have learned that the US government is not to be trusted.  Russia has watched Reagan’s successors attempt to turn former constituent parts of the Soviet Union into US puppet states with US military bases.  The US is trying to ring Russia with missiles that neutralize Russia’s strategic deterrent.

Putin has caught on to “comrade wolf.”  He has succeeded in having the president of Kyrgyzstan, a former part of the Soviet Union, evict the US from its military base.  This base is essential to America’s ability to supply its soldiers in Afghanistan.

To stop America’s meddling in Russia’s sphere of influence, the Russian government has created a collective security treaty organization comprised of Russia, Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Tajikistan. Uzbekistan is a partial participant.

In other words, Russia has organized central Asia against US penetration.

To whose agenda is President Obama being hitched? Writing in the English language version of the Swiss newspaper, Zeit-Fragen, Stephen J. Sniegoski reports that leading figures of the neocon conspiracy–Richard Perle, Max Boot, David Brooks, and Mona Charen–are ecstatic over Obama’s appointments. They don’t see any difference between Obama and Bush/Cheney.

Not only are Obama’s appointments moving him into an expanded war in Afghanistan, but the powerful Israel Lobby is pushing Obama toward a war with Iran.

The unreality in which he US government operates is beyond belief.  A  bankrupt government  that cannot pay its bills without printing money is rushing headlong into wars in Afghanistan, Pakistan, and Iran.  According to the Center for Strategic and Budgetary Analysis, the cost to the US taxpayers of sending a single soldier to fight in Afghanistan or Iraq is $775,000 per year!

Obama’s war in Afghanistan is the Mad Hatter’s Tea Party.  After seven years of conflict, there is still no defined mission or endgame scenario for US forces in Afghanistan.  When asked about the mission, a US military official told NBC News, “Frankly, we don’t have one.”  NBC reports: “they’re working on it.”

Speaking to House Democrats on February 5, President Obama admitted that the US government does not know what its mission is in Afghanistan and that to avoid “mission creep without clear parameters,” the US “needs a clear mission.”

How would you like to be sent to a war, the point of which no one knows, including the commander-in-chief who sent you to kill or be killed?  How, fellow taxpayers, do you like paying the enormous cost of sending soldiers on an undefined mission while the economy collapses?

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

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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.

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