“Economic Meltdown” — Sorry, but We’re Toast

by Mike Whitney
www.dissidentvoice.org
March 17, 2005

Don’t look now, but Bush’s house-of-cards economy is about to come crashing to earth. Just yesterday the Commerce Department announced that the trade deficit soared to an all time high of $665 billion in 2004 — a whopping 25% increase from the previous year. America’s gluttonous appetite for cheap foreign goods and its inability to produce more of what it consumes is quickening the country’s inevitable day of reckoning. Despite the rosy projections from the Bush clan and their friends in the media, the probability of an economic meltdown becomes more likely every day.

Does the average American have any idea of the catastrophe that’s facing us?
Apparently not. As the AP’s Martin Crutsinger says, “The deficit for 2004 was not only a record in dollar terms but also as a percentage of the total U.S. economy, climbing to 5.7 percent of the gross domestic product, up from 4.8 percent of GDP in 2003. (By way of comparison; Argentina collapsed when its trade deficit hit 4% of GDP) The deficit represents the amount in resources that the United States is transferring into the hands of foreigners in exchange for foreign oil, cars and other products that Americans are purchasing.”

So, $665 billion of American assets fled the country in just one year alone! How long do you think a nation (however strong) can keep up that pace?

The danger is that central banks across the globe will start backing away from US greenbacks, a fact that’s already reflected by the steadily falling dollar.

Of course, there are ways to prop up the dollar and stabilize the economy: reverse the Bush tax cuts that are plunging the country towards disaster; reinvest in the industrial sector so America can start manufacturing things again; raise interest rates to build confidence in the dollar; and tighten up government expenses to show the world some fiscal responsibility.

Of course, none of these will happen. We know from experience that when the Bush administration is headed over the cliff, the first thing they do is hit the gas. The same suicidal scenario is unfolding now.

For example, two days ago Fed-master Alan Greenspan was addressing the Council on Foreign Relations (CFR) saying the greatest threat to America’s economic future was the huge deficits. (Ironic that Greenspan would concede this point, given his unflinching support for the Bush tax cuts) At the same time Greenspan was making his presentation, the Republican House was proposing a budget that would provide ANOTHER $106 BILLION TAX CUTS FOR AMERICA’S RICHEST PEOPLE.

Don’t expect to see any change in this behavior either. What seemed like a crazy conspiracy theory just two years ago is now a documented fact; the Bush Administration (with the help of Greenspan) is trying to bankrupt the nation and put the American people under the control of the country’s creditors. (Greenspan’s friends in the banking industry and foreign countries holding US bonds) So far, they’ve done a bang-up job by racking up another $3 trillion in debt in just four years by looting the US Treasury and jeopardizing the dollar’s status as the world’s reserve currency. If the world moves en masse away from the dollar (as it may, if Bush goes ahead with his twisted plan for attacking Iran) the US will rapidly devolve into a third world nation.

Currently, the dollar is underwritten by $8 trillion of debt, which explains why world banks are dumping their holdings. The only thread holding the economy together is (artificially) low interest rates, cheap oil and $450 billion of tax cuts that are sluiced back into the economy (according to supply-side theory). When these three buckle beneath the weight of the increasing debt load, the American dream will go up like a pillar of black smoke from a Baghdad pipeline.

From this viewpoint, it looks like Greenspan is intentionally keeping interest rates low so Bush can keep his (war) date with Iran (probably just months away). When the Fed chief finally pulls the rug out from under us and raises rates to save the dollar, housing will grind to a halt and America will stumble into recession, or worse.

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