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<DIV style="FONT: 10pt arial">----- Original Message -----
<DIV style="BACKGROUND: #e4e4e4; font-color: black"><B>From:</B> <A
title=tanstl@aol.com href="mailto:tanstl@aol.com">David Sladky</A> </DIV>
<DIV><B>To:</B> <A title=undisclosed-recipients:
href="mailto:undisclosed-recipients:">undisclosed-recipients:</A> </DIV>
<DIV><B>Sent:</B> Monday, February 22, 2010 8:14 AM</DIV>
<DIV><B>Subject:</B> A Country of Serfs Ruled By Oligarchs</DIV></DIV>
<DIV><BR></DIV><FONT face=arial color=black size=2><FONT
face="Arial, Helvetica, sans-serif"></FONT><BR><BR>
<DIV lang=fr-CA style="MARGIN-BOTTOM: 0in; MARGIN-RIGHT: 0.1in"
align=justify><FONT style="FONT-SIZE: 20pt" size=5><B>A Country of Serfs Ruled
By Oligarchs</B></FONT></DIV>
<DIV style="MARGIN-BOTTOM: 0in"><BR></DIV>
<DIV style="MARGIN-BOTTOM: 0in"><FONT style="FONT-SIZE: 16pt" size=4>by Paul
Craig Roberts</FONT></DIV>
<DIV lang=fr-CA style="MARGIN-BOTTOM: 0in; MARGIN-RIGHT: 0.1in" align=justify><A
href="http://www.creators.com/">Creators Syndicate</A> - 2010-02-16</DIV>
<DIV lang=fr-CA style="MARGIN-RIGHT: 0.1in" align=justify><BR></DIV>
<DIV lang=fr-CA style="MARGIN-RIGHT: 0.1in" align=justify>The media has
headlined good economic news: fourth quarter GDP growth of 5.7 percent ("the
recession is over"), Jan. retail sales up, productivity up in 4th quarter, the
dollar is gaining strength. Is any of it true? What does it mean?</DIV>
<DIV style="MARGIN-RIGHT: 0.1in" align=justify> </DIV>
<DIV lang=fr-CA style="MARGIN-RIGHT: 0.1in" align=justify>The 5.7 percent growth
figure is a guesstimate made in advance of the release of the U.S. trade deficit
statistic. It assumed that the U.S. trade deficit would show an improvement.
When the trade deficit was released a few days later, it showed a deterioration,
knocking the 5.7 percent growth figure down to 4.6 percent. Much of the
remaining GDP growth consists of inventory accumulation.</DIV>
<DIV style="MARGIN-RIGHT: 0.1in" align=justify> </DIV>
<DIV lang=fr-CA style="MARGIN-RIGHT: 0.1in" align=justify>More than a fourth of
the reported gain in Jan. retail sales is due to higher gasoline and food
prices. Questionable seasonal adjustments account for the rest.</DIV>
<DIV style="MARGIN-RIGHT: 0.1in" align=justify> </DIV>
<DIV lang=fr-CA style="MARGIN-RIGHT: 0.1in" align=justify>Productivity was up,
because labor costs fell 4.4 percent in the fourth quarter, the fourth
successive decline. Initial claims for jobless benefits rose. Productivity
increases that do not translate into wage gains cannot drive the consumer
economy.</DIV>
<DIV style="MARGIN-RIGHT: 0.1in" align=justify> </DIV>
<DIV lang=fr-CA style="MARGIN-RIGHT: 0.1in" align=justify>Housing is still under
pressure, and commercial real estate is about to become a big problem.</DIV>
<DIV style="MARGIN-RIGHT: 0.1in" align=justify> </DIV>
<DIV lang=fr-CA style="MARGIN-RIGHT: 0.1in" align=justify>The dollar’s gains are
not due to inherent strengths. The dollar is gaining because government deficits
in Greece and other EU countries are causing the dollar carry trade to unwind.
America’s low interest rates made it profitable for investors and speculators to
borrow dollars and use them to buy overseas bonds paying higher interest, such
as Greek, Spanish and Portuguese bonds denominated in euros. The deficit
troubles in these countries have caused investors and speculators to sell the
bonds and convert the euros back into dollars in order to pay off their dollar
loans. This unwinding temporarily raises the demand for dollars and boosts the
dollar’s exchange value.</DIV>
<DIV style="MARGIN-RIGHT: 0.1in" align=justify> </DIV>
<DIV lang=fr-CA style="MARGIN-RIGHT: 0.1in" align=justify>The problems of the
American economy are too great to be reached by traditional policies. Large
numbers of middle class American jobs have been moved offshore: manufacturing,
industrial and professional service jobs. When the jobs are moved offshore,
consumer incomes and U.S. GDP go with them. So many jobs have been moved abroad
that there has been no growth in U.S. real incomes in the 21st century, except
for the incomes of the super rich who collect multi-million dollar bonuses for
moving U.S. jobs offshore.</DIV>
<DIV style="MARGIN-RIGHT: 0.1in" align=justify> </DIV>
<DIV lang=fr-CA style="MARGIN-RIGHT: 0.1in" align=justify>Without growth in
consumer incomes, the economy can go nowhere. Washington policymakers
substituted debt growth for income growth. Instead of growing richer, consumers
grew more indebted. Federal Reserve chairman Alan Greenspan accomplished this
with his low interest rate policy, which drove up housing prices, producing home
equity that consumers could tap and spend by refinancing their homes.</DIV>
<DIV style="MARGIN-RIGHT: 0.1in" align=justify> </DIV>
<DIV lang=fr-CA style="MARGIN-RIGHT: 0.1in" align=justify>Unable to maintain
their accustomed living standards with income alone, Americans spent their
equity in their homes and ran up credit card debts, maxing out credit cards in
anticipation that rising asset prices would cover the debts. When the bubble
burst, the debts strangled consumer demand, and the economy died.</DIV>
<DIV style="MARGIN-RIGHT: 0.1in" align=justify> </DIV>
<DIV lang=fr-CA style="MARGIN-RIGHT: 0.1in" align=justify>As I write about the
economic hardships created for Americans by Wall Street and corporate greed and
by indifferent and bribed political representatives, I get many letters from
former middle class families who are being driven into penury. Here is one
recently arrived:</DIV>
<DIV lang=fr-CA
style="MARGIN-BOTTOM: 0.2in; MARGIN-LEFT: 0.39in; MARGIN-RIGHT: 0.5in"
align=justify>"Thank you for your continued truthful commentary on the 'New
Economy.' My husband and I could be it's poster children. Nine years ago when we
married, we were both working good paying, secure jobs in the semiconductor
manufacturing sector. Our combined income topped $100,000 a year. We were living
the dream. Then the nightmare began. I lost my job in the great tech bubble of
2003, and decided to leave the labor force to care for our infant son. Fine, we
tightened the belt. Then we started getting squeezed. Expenses rose, we
downsized, yet my husband's job stagnated. After several years of no pay raises,
he finally lost his job a year and a half ago. But he didn't just lose a job, he
lost a career. The semiconductor industry is virtually gone here in Arizona.
Three months later, my husband, with a technical degree and 20-plus years of
solid work experience, received one job offer for an entry level corrections
officer. He had to take it, at an almost 40 percent reduction in pay. Bankruptcy
followed when our savings were depleted. We lost our house, a car, and any
assets we had left. His salary last year, less than $40,000, to support a family
of four. A year and a half later, we are still struggling to get by. I can't
find a job that would cover the cost of daycare. We are stuck. Every jump in gas
and food prices hits us hard. Without help from my family, we wouldn't have made
it. So, I could tell you just how that 'New Economy' has worked for us, but I'd
really rather not use that kind of language."</DIV>
<DIV lang=fr-CA style="MARGIN-RIGHT: 0.1in" align=justify>Policymakers who are
banking on stimulus programs are thinking in terms of an economy that no longer
exists. Post-war U.S. recessions and recoveries followed Federal Reserve policy.
When the economy heated up and inflation became a problem, the Federal Reserve
would raise interest rates and reduce the growth of money and credit. Sales
would fall. Inventories would build up. Companies would lay off workers.</DIV>
<DIV style="MARGIN-RIGHT: 0.1in" align=justify> </DIV>
<DIV lang=fr-CA style="MARGIN-RIGHT: 0.1in" align=justify>Inflation cooled, and
unemployment became the problem. Then the Federal Reserve would reverse course.
Interest rates would fall, and money and credit would expand. As the jobs were
still there, the work force would be called back, and the process would
continue.</DIV>
<DIV style="MARGIN-RIGHT: 0.1in" align=justify> </DIV>
<DIV lang=fr-CA style="MARGIN-RIGHT: 0.1in" align=justify>It is a different
situation today. Layoffs result from the jobs being moved offshore and from
corporations replacing their domestic work forces with foreigners brought in on
H-1B, L-1 and other work visas. The U.S. labor force is being separated from the
incomes associated with the goods and services that it consumes. With the rise
of offshoring, layoffs are not only due to restrictive monetary policy and
inventory buildup. They are also the result of the substitution of cheaper
foreign labor for U.S. labor by American corporations. Americans cannot be
called back to work to jobs that have been moved abroad. In the New Economy,
layoffs can continue despite low interest rates and government stimulus
programs.</DIV>
<DIV style="MARGIN-RIGHT: 0.1in" align=justify> </DIV>
<DIV lang=fr-CA style="MARGIN-RIGHT: 0.1in" align=justify>To the extent that
monetary and fiscal policy can stimulate U.S. consumer demand, much of the
demand flows to the goods and services that are produced offshore for U.S.
markets. China, for example, benefits from the stimulation of U.S. consumer
demand. The rise in China’s GDP is financed by a rise in the U.S. public debt
burden.</DIV>
<DIV style="MARGIN-RIGHT: 0.1in" align=justify> </DIV>
<DIV lang=fr-CA style="MARGIN-RIGHT: 0.1in" align=justify>Another barrier to the
success of stimulus programs is the high debt levels of Americans. The banks are
being criticized for a failure to lend, but much of the problem is that there
are no consumers to whom to lend. Most Americans already have more debt than
they can handle.</DIV>
<DIV style="MARGIN-RIGHT: 0.1in" align=justify> </DIV>
<DIV lang=fr-CA style="MARGIN-RIGHT: 0.1in" align=justify>Hapless Americans,
unrepresented and betrayed, are in store for a greater crisis to come. President
Bush’s war deficits were financed by America’s trade deficit. China, Japan, and
OPEC, with whom the U.S. runs trade deficits, used their trade surpluses to
purchase U.S. Treasury debt, thus financing the U.S. government budget
deficit.</DIV>
<DIV style="MARGIN-RIGHT: 0.1in" align=justify> </DIV>
<DIV lang=fr-CA style="MARGIN-RIGHT: 0.1in" align=justify>The problem now is
that the U.S. budget deficits have suddenly grown immensely from wars, bankster
bailouts, jobs stimulus programs, and lower tax revenues as a result of the
serious recession. Budget deficits are now three times the size of the trade
deficit. Thus, the surpluses of China, Japan, and OPEC are insufficient to take
the newly issued U.S. government debt off the market.</DIV>
<DIV style="MARGIN-RIGHT: 0.1in" align=justify> </DIV>
<DIV lang=fr-CA style="MARGIN-RIGHT: 0.1in" align=justify>If the Treasury’s
bonds can’t be sold to investors, pension funds, banks, and foreign governments,
the Federal Reserve will have to purchase them by creating new money. When the
rest of the world realizes the inflationary implications, the US dollar will
lose its reserve currency role. When that happens Americans will experience a
large economic shock as their living standards take another big hit.</DIV>
<DIV style="MARGIN-RIGHT: 0.1in" align=justify> </DIV>
<DIV lang=fr-CA style="MARGIN-RIGHT: 0.1in" align=justify>America is on its way
to becoming a country of serfs ruled by oligarchs.</DIV>
<DIV style="MARGIN-RIGHT: 0.1in" align=justify> </DIV>
<DIV style="MARGIN-RIGHT: 0.1in" align=justify><STRONG><SPAN lang=fr-CA>Paul
Craig Roberts</SPAN></STRONG><EM><SPAN lang=fr-CA> was an editor of the Wall
Street Journal and an Assistant Secretary of the U.S. Treasury. His latest
book, </SPAN></EM><EM><A
href="http://www.easycartsecure.com/CounterPunch/CounterPunch_Books.html"><FONT
color=#184b81><SPAN lang=fr-CA>HOW THE ECONOMY WAS
LOST</SPAN></FONT></A></EM><EM><SPAN lang=fr-CA>, has just been published by
CounterPunch/AK Press. He can be reached at: </SPAN></EM><EM><A
href="mailto:PaulCraigRoberts@yahoo.com"><FONT color=#184b81><SPAN
lang=fr-CA>PaulCraigRoberts@yahoo.com</SPAN></FONT></A></EM><EM><SPAN
lang=fr-CA> </SPAN></EM></DIV>
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