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.
No wiggle-room in the oil market
As if the deficits and the falling dollar were not enough to worry about, oil surged to a new high yesterday of $56.10 a barrel. When supply can’t meet demand, oil can go from $56 bbl to $156 bbl in short order. (These numbers don’t surprise anyone who has followed the peak oil issue, and they were certainly anticipated by the administration before the invasion of Iraq. Oil companies spend zillions on flow-charts, global projections and available stockpiles. There’s no doubt that they knew that this day was coming and fabricated the WMD scare to bamboozle the public into an unnecessary war). The Bush administration doesn’t intend to allow that to happen. They know that recession is typically preceded by an up tick in energy prices, so they have to nip the problem in the bud. A sharp downturn in the economy would foil Bush’s plans for an attack on Iran.
White House press secretary, Scott McClellan was asked a question at Monday’s press conference that shed some light on the administration’s strategy for dealing with potential oil shortages: “Several OPEC oil members have said that they've received phone calls from Energy Secretary Bodman. I was wondering if you could just confirm that the Energy Secretary is, indeed, lobbying OPEC to lift production? And also, my second question is, has President Bush joined in this effort?”
Yes, Bush has quietly joined the effort by pressuring the Saudi’s to push the other OPEC members to crank up production another 1 million barrels a day. But, what does that say about long-term production when the system is already operating at maximum capacity?
Gasoline stocks have fallen precipitously and Reuters is reporting that, “strong demand forecasts have exacerbated concern that cartel (OPEC) supply may not be able to meet growing global demand later this year.”
“Supply may not meet demand?”
It’s only 2005 and already the demand for oil is exceeding the (normal) supply? And, what is Bush’s response to this new state of affairs?
Hide it from the American people, so he can continue with his war-agenda.
Welcome, Fellow Sharecroppers!
This is a very serious situation. America is facing a calamity of incalculable magnitude and, yet, the government keeps obfuscating the facts while the media oozes its reassuring platitudes that “all is well.”
All is not well. Staggering deficits, rising energy costs and the falling dollar are bearing down on us like a rockslide. Looks like we’re headed for some pretty dark times.
Sorry to say it, but we’re toast.
Mike Whitney lives in Washington state, and can be reached at: firstname.lastname@example.org.
Other Articles by Mike Whitney
and the Road to Tehran