It’s Official: The Crash of the U.S. Economy has begun
by Richard C. Cook
Global Research, June 14, 2007
Its official. Mark your calendars. The crash of the U.S. economy has begun. It was announced the morning of Wednesday, June 13, 2007, by economic writers Steven Pearlstein and Robert Samuelson in the pages of the Washington Post, one of the foremost house organs of the U.S. monetary elite.
Pearlstein’s column was titled, “The Takeover Boom, About to Go Bust” and concerned the extraordinary amount of debt vs. operating profits of companies currently subject to leveraged buyouts.
In language remarkably alarmist for the usually ultra-bland pages of the Post, Pearlstein wrote, “It is impossible to predict when the magic moment will be reached and everyone finally realizes that the prices being paid for these companies, and the debt taken on to support the acquisitions, are unsustainable. When that happens, it won't be pretty. Across the board, stock prices and company valuations will fall. Banks will announce painful write-offs, some hedge funds will close their doors, and private-equity funds will report disappointing returns. Some companies will be forced into bankruptcy or restructuring.”
Further, “Falling stock prices will cause companies to reduce their hiring and capital spending while governments will be forced to raise taxes or reduce services, as revenue from capital gains taxes declines. And the combination of reduced wealth and higher interest rates will finally cause consumers to pull back on their debt-financed consumption. It happened after the junk-bond and savings-and-loan collapses of the late 1980s. It happened after the tech and telecom bust of the late '90s. And it will happen this time.”
Samuelson’s column, “The End of Cheap Credit,” left the door slightly ajar in case the collapse is not quite so severe. He wrote of rising interest rates, “As the price of money increases, borrowing and the economy might weaken. The deep slump in housing could worsen. We could also discover that the long period of cheap credit has left a nasty residue.”
Other writers with less prestigious platforms than the Post have been talking about an approaching financial bust for a couple of years. Among them has been economist Michael Hudson, author of an article on the housing bubble titled, “The New Road to Serfdom” in the May 2006 issue of Harper’s. Hudson has been speaking in interviews of a “break in the chain” of debt payments leading to a “long, slow economic crash,” with “asset deflation,” “mass defaults on mortgages,” and a “huge asset grab” by the rich who are able to protect their cash through money laundering and hedging with foreign currency bonds.
Among those poised to profit from the crash is the Carlyle Group, the equity fund that includes the Bush family and other high-profile investors with insider government connections. A January 2007 memorandum to company managers from founding partner William E. Conway, Jr., recently appeared which stated that, when the current “liquidity environment”—i.e., cheap credit—ends, “the buying opportunity will be a once in a lifetime chance.”
The fact that the crash is now being announced by the Post shows that it is a done deal. The Bilderbergers, or whomever it is that the Post reports to, have decided. It lets everyone know loud and clear that it’s time to batten down the hatches, run for cover, lay in two years of canned food, shield your assets, whatever.
Those left holding the bag will be the ordinary people whose assets are loaded with debt, such as tens of millions of mortgagees, millions of young people with student loans that can never be written off due to the “reformed” 2005 bankruptcy law, or vast numbers of workers with 401(k)s or other pension plans that are locked into the stock market.
In other words, it sounds eerily like 2000-2002 except maybe on a much larger scale. Then it was “only” the tenth worse bear market in history, but over a trillion dollars in wealth simply vanished. What makes today’s instance seem particularly unfair is that the preceding recovery that is now ending—the “jobless” one—was so anemic.
Neither Perlstein nor Samuelson gets to the bottom of the crisis, though they, like Conway of the Carlyle Group, point to the end of cheap credit. But interest rates are set by people who run central banks and financial institutions. They may be influenced by “the market,” but the market is controlled by people with money who want to maximize their profits.
Key to what is going on is that the Federal Reserve is refusing to follow the pattern set during the long reign of Fed Chairman Alan Greenspan in responding to shaky economic trends with lengthy infusions of credit as he did during the dot.com bubble of the 1990s and the housing bubble of 2001-2005.
This time around, Greenspan’s successor, Ben Bernanke, is sitting tight. With the economy teetering on the brink, the Fed is allowing rates to remain steady. The Fed claims their policy is due to the danger of rising “core inflation.” But this cannot be true. The biggest consumer item, houses and real estate, is tanking. Officially, unemployment is low, but mainly due to low-paying service jobs. Commodities have edged up, including food and gasoline, but that’s no reason to allow the entire national economy to be submerged.
So what is really happening? Actually, it’s simple. The difference today is that China and other large investors from abroad, including Middle Eastern oil magnates, are telling the U.S. that if interest rates come down, thereby devaluing their already-sliding dollar portfolios further, they will no longer support with their investments the bloated U.S. trade and fiscal deficits.
Of course we got ourselves into this quandary by shipping our manufacturing to China and other cheap-labor markets over the last generation. “Dollar hegemony” is backfiring. In fact China is using its American dollars to replace the International Monetary Fund as a lender to developing nations in Africa and elsewhere. As an additional insult, China now may be dictating a new generation of economic decline for the American people who are forced to buy their products at Wal-Mart by maxing out what is left of our available credit card debt.
About a year ago, a former Reagan Treasury official, now a well-known cable TV commentator, said that China had become “America’s bank” and commented approvingly that “it’s cheaper to print money than make cars anymore.” Ha ha.
It is truly staggering that none of the “mainstream” political candidates from either party has attacked this subject on the campaign trail. All are heavily funded by the financier elite who will profit no matter how bad the U.S. economy suffers. Every candidate except Ron Paul and Dennis Kucinich treats the Federal Reserve like the fifth graven image on Mount Rushmore. And even the so-called progressives are silent. The weekend before the Perlstein/ Samuelson articles came out, there was a huge progressive conference in Washington, D.C., called “Taming the Corporate Giant.” Not a single session was devoted to financial issues.
What is likely to happen? I’d suggest four possible scenarios:
Acceptance by the U.S. population of diminished prosperity and a declining role in the world. Grin and bear it. Live with your parents into your 40s instead of your 30s. Work two or three part-time jobs on the side, if you can find them. Die young if you lose your health care. Declare bankruptcy if you can, or just walk away from your debts until they bring back debtor’s prison like they’ve done in Dubai. Meanwhile, China buys more and more U.S. properties, homes, and businesses, as economists close to the Federal Reserve have suggested. If you’re an enterprising illegal immigrant, have fun continuing to jack up the underground economy, avoid business licenses and taxes, and rent out group houses to your friends.
Times of economic crisis produce international tension and politicians tend to go to war rather than face the economic music. The classic example is the worldwide depression of the 1930s leading to World War II. Conditions in the coming years could be as bad as they were then. We could have a really big war if the U.S. decides once and for all to haul off and let China, or whomever, have it in the chops. If they don’t want our dollars or our debt any more, how about a few nukes?
Maybe we’ll finally have a revolution either from the right or the center involving martial law, suspension of the Bill of Rights, etc., combined with some kind of military or forced-labor dictatorship. We’re halfway there anyway. Forget about a revolution from the left. They wouldn’t want to make anyone mad at them for being too radical.
Could there ever be a real try at reform, maybe even an attempt just to get back to the New Deal? Since the causes of the crisis are monetary, so would be the solutions. The first step would be for the Federal Reserve System to be abolished as a bank of issue and a transformation of the nation’s credit system into a genuine public utility by the federal government. This way we could rebuild our manufacturing and public infrastructure and develop an income assurance policy that would benefit everyone.
The latter is the only sensible solution. There are monetary reformers who know how to do it if anyone gave them half a chance.
Richard C. Cook is the author of “Challenger Revealed: An Insider’s Account of How the Reagan Administration Caused the Greatest Tragedy of the Space Age.” A retired federal analyst, his career included work with the U.S. Civil Service Commission, the Food and Drug Administration, the Carter White House, and NASA, followed by twenty-one years with the U.S. Treasury Department. He is now a Washington, D.C.-based writer and consultant. His book “We Hold These Truths: The Hope of Monetary Reform,” will be published later this year. His website is at www.richardccook.com.
Richard C. Cook is a frequent contributor to Global Research.
Anonymous Coward User ID: 452634 7/28/2008 5:06 PM
Re: WTF !! WTF !! ITS OFFICIAL: THE CRASH OF US ECONOMY HAS BEGUN !! Washington Post !!
"The fact that the crash is now being announced by the Post shows that it is a done deal. The Bilderbergers, or whomever it is that the Post reports to, have decided. It lets everyone know loud and clear that it’s time to batten down the hatches, run for cover, lay in two years of canned food, shield your assets, whatever." [Quoting Washington Post article]
No shit, Sherlock!
Even though the article is "old"... and prophetic indeed ~ it's even more true today.
Buckle up, get your preps ready NOW... Wasayo
Anonymous Coward User ID: 458794 7/28/2008 7:05 PM
Re: WTF !! WTF !! ITS OFFICIAL: THE CRASH OF US ECONOMY HAS BEGUN !! Washington Post !!
DOOMSTERS the USA has enough money to fix its problems. We can thrive again but not under GOP leadership. Obama's health plan doesn't cost more, it just stops the insurance companies from raping and pillaging and cleans up a lot of other contradictory messes.
Likewise education.
Democracy is what is needed, not oligarchy.
Anonymous Coward User ID: 469902 7/28/2008 7:20 PM
Re: WTF !! WTF !! ITS OFFICIAL: THE CRASH OF US ECONOMY HAS BEGUN !! Washington Post !!
She thinks I'm iron man that I don't feel pain
I don't understand why joy must be feigned
I'm so fortunate yet filled with self hate
That the mirror shows me an ingrate
I could easily start pointing fingers
Since the blame is mine it always lingers
That the truth it lies in my reflection
Though this can't go on there's no question
Yeah I know That my world is coming down
Yeah I know
I know
I'm the one who brought it down
Brought it down
Bring it on down
How quickly pass the days long is the night
Lying in bed awake bathed in starlight
Better to live as king of beasts
Than as a lamb scared and weak
I will deny my role as a human
Holding myself hostage with no demands
It's better to burn (to burn) quickly and bright
Than slowly and dull (and dull) without a fight
Well I know
That my world is coming down
Now I know
I know
I'm the one that brought it down
Brought it down
Yeah, Bring it on down
Anonymous Coward User ID: 424731 7/28/2008 7:32 PM
Re: WTF !! WTF !! ITS OFFICIAL: THE CRASH OF US ECONOMY HAS BEGUN !! Washington Post !!
"Among those poised to profit from the crash is the Carlyle Group, the equity fund that includes the Bush family and other high-profile investors with insider government connections. "
Is anyone surprised that the Carlyle group is one of the few to profit ? Isn't it interesting that the family who rigged voting machines and stole two elections, loading the Congress & Senate with their paid for cronies, the family who has single handedly, twice , damaged the US economy and every one of us, is planning not only to profit from all of our hard work while they bankrupt us, has bought their Paraquay fortress with the money they stole from us ?
Is it any surprise that those on the Judiciary Committee Impeachment Hearings who are Repubs were about to crap in their pants ? They are about to be found out along with the Bush/Cheney/Saud/Halliburton criminal faction.
I know what the solution is. It is very simple, and also very just. It is the way to get back our ability to beat the crooks.
Cancel all consumer debt. NOW ! I may not be a financial guru, but the answer is as clear as the the sky used to be.
Most outstanding consumer debt is a direct result of the criminals who rigged the system to create & cause high interest fees, late fees, over the limit fees, double the mortgage payment fees, and inflation due to speculation by these very same criminals.
Let, MAKE THEM EAT THEIR OWN CRIMINAL CRAP.
Cancle consumer debt. We deserve a fresh start.
Those corporations who caused this, are now losing their asses while continuing to pay out multi million dollar bonuses deserve to eat the phony consumer debt that they created in order to continue funding their illegal investments & profits.
Anonymous Coward User ID: 473484 7/28/2008 7:34 PM
Re: WTF !! WTF !! ITS OFFICIAL: THE CRASH OF US ECONOMY HAS BEGUN !! Washington Post !!
DOOMSTERS the USA has enough money to fix its problems. We can thrive again but not under GOP leadership. Obama's health plan doesn't cost more, it just stops the insurance companies from raping and pillaging and cleans up a lot of other contradictory messes.
Likewise education.
Democracy is what is needed, not oligarchy.
Quoting: Anonymous Coward 419558
Democracy is two wolves and a sheep voting on whats for dinner.
Try a constitutional republic. Yahoo IM omega375hh
I keep getting this feeling that in the future, our granchildren are going to be working in sweatshops for a $1 a day making cheap trinkets to send to China for their wealthy population to buy at Wol Mart. Also if you say all consumer debt should be erased, then you better include those ridiculous student loans. It would be interesting to find out how many college grads actually get good paying jobs after graduating. Take care My-GLP-Brothers and Sisters. Its never to late to be prepared. Later All the world's indeed a stage, a we are mearly players, performers and portrayers.
Krusty User ID: 461504 7/28/2008 8:34 PM
Re: WTF !! WTF !! ITS OFFICIAL: THE CRASH OF US ECONOMY HAS BEGUN !! Washington Post !!
No they won't, and you know that because it would take a whole bunch of people like you to start a riot. You know that you and your fat ass friends are too lazy and stupid to ever pull off anything resembling a riot. Your ass is and will remain securely bolted to the TV couch where you hope to die - right after your next half gallon of Hogendoss.
I think it's permissible to mispell foreign proper names like Haagen Dasz.... Or Haagan Daas, or however it's spelled. Hell I don't even eat the stuff.
Mr Cook is a good writer. They have a ton of his articles on the austrailia.to.
I suggest you go there and read some of them. They have the power to create reality
I could explain it better but I would need charts, graphs and an easel.
*Term Coined by Douggie 7 Sept 08, 12 AM. *Apaulin, A term use to describe a ditz that is used for political purposes in order to get votes for there party. But doesnt necessarily mean that they have any qualifications for the job. Oh wait, she does have a degree in journalism.
Please excuse typo's. I type fast and dont give a crap about mistyped words.
Krusty User ID: 461504 7/28/2008 10:12 PM
Re: WTF !! WTF !! ITS OFFICIAL: THE CRASH OF US ECONOMY HAS BEGUN !! Washington Post !!
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