U.S. AT A TURNING POINT
Economic weakness, unemployment, weak dollar and a huge debt mountain threaten the superpower like the unbridled enrichment of a tiny minority
By Rainer Rupp
[This article published in: Junge Welt 8/20/2010 is translated from the German on the Internet, http://www.jungewelt.de/2010/08-20/003.php
The US government will probably end fiscal year 2009/2010 at the end of September with a budget deficit of $1.5 trillion (1500 billion). This is eleven percent of its gross domestic product (GDP). In 2009, the government announced a budget deficit. The share of public indebtedness to US GDP amounted to more than 62 percent according to the National Debt Clock that constantly recalculates the current state. The Congressional Budget Office expects further deficits of the federal government -= a trillion dollars as the annual average. Thus U.S. liabilities are growing much faster than the GDP. In the most favorable case, only a slow economic recovery can be expected.
The fact that the U.S. is headed almost inexorably for Greek conditions in the coming years increasingly alarms the buyers and holders of U.S. treasuries (T-bonds). The foreign indebtedness of the strongest economic country of the world has already climbed to 94.4 percent of the GDP according to the National Debt Clock. In addition the U.S. central bank (the Fed) will again take countermeasures with “quantitative easing,” with the money printing press in view of the threatening relapse into recession. Mistrust toward the dollar intensifies in that China again appears as the largest creditor of the U.S., as a net purchaser of T-bonds.
“The US is insolvent and faces bankruptcy like a poor debtor nation. But (American) rating agencies give the U.S. first-class ratings.” So Guan Jianzhong told the Financial Times on the 21st. This could be an evil omen for the U.S. currency. Guan is the head of the first Chinese rating agency Dagong Global Credit Rating founded in July. As one of the reasons for the massive state debts, Mr. Guan identified “the gigantic military spending of the US financed with borrowed money which cannot continue in the long run. The state Chinese news agency Xinhua sang the praises of the Dagong report and noted that the establishment of the institution was an important step to break the western monopoly of rating agencies. China has been their victim for a long time. Compared with the violent conquest of the world by the U.S., Moody’s (U.S. rating agency) controls the world with the help of its dominance in judging creditworthiness,” it was said.
With great concern, Washington followed the strategically important currency decisions announced in Peking on Tuesday. The Chinese government resolved further measures promoting the use of its currency for trade agreements abroad that previously were transacted in U.S. dollars. It also allowed unlimited backflow of Yuans in the native economy at controlled exchange rates. This should help the people’s money (Renminbi) and its monetary unit Yuan breakthrough on the international plane. While China sets off for new horizons, the economic pillars on which the military superpower the U.S. stands increasingly shows cracks.
Recent studies give evidence of the increased poverty in the U.S. and the collapse of the living standard of the middle class. Lawrence Sommers, chief economist of President Barack Obama, has long worried about the political effects of the expanding “frightened middle.” When U.S. president Nixon abolished the gold standard for the dollar in 1973, a slow but constant metamorphosis of the U.S. began – from a donor country to the greatest debtor nation of the world. At the same time millions of well-paid jobs in the country were destroyed for ever through “outsourcing,” shifting production from U.S. corporations to low-wage countries. This intensified the structural unemployment which is very clear in the present crisis.
According to the Financial Times of July 30, the real income of 90% of U.S. families (corrected for inflation) only increased ten percent since 1973. For many the “American dream” has become a nightmare. More than half are even in a worse situation today than 37 years ago. The working class has not shared in the productivity growth. On the other hand, the top positions on the income hierarchy profited enormously. In the same time period, the real income of one percent of the population tripled and that of the richest tenth of one percent multiplied tenfold. While a corporate CEO took home 26-times the average income in 1973, he pockets more than 300 times today.
Paul Craig Roberts, former editor of The Wall Street Journal and undersecretary in the U.S. Treasury Department under Ronald Reagan, commented on this development: “The well-being of the U.S. and its 300 million inhabitants cannot be restored as long as the neoconservatives, Wall Street, corporations and their servile lackeys in Congress are not defeated. Without a revolution, Americans are only history.”
Marc Batko, Community Centers as a New Beginning, 2010 http://portland.indymedia.org/en/2010/08/401736.shtml
David Korten, Video: Let Wall Street Fall, PBS interview, 2009 http://www.pbs.org/now/shows/505/new-economy.html
David Korten, Video: A New Agenda for the Economy, Democracy Now interview, 2009 http://www.youtube.com/watch?v=KqWcYKUl9Ro
“Crisis as Permanent State”: Rainer Rupp, 7/17/2010 http://portland.indymedia.org/en/2010/08/401767.shtml