Death of the American Empire
America is self-destructing & bringing the rest of the world down with it
by Tanya Cariina Hsu
Global Research, October 23, 2008
I believe that banking institutions are more dangerous to our liberties than standing armies. (Thomas Jefferson, US President; 1743 – 1826)
America is dying. It is self-destructing and bringing the rest of the world down with it.
Often referred to as a sub-prime mortgage collapse, this obfuscates the real reason. By associating tangible useless failed mortgages, at least something ‘real’ can be blamed for the carnage. The problem is, this is myth. The magnitude of this fiscal collapse happened because it was all based on hot air.
The banking industry renamed insurance betting guarantees as ‘credit default swaps’ and risky gambling wagers were called ‘derivatives’. Financial managers and banking executives were selling the ultimate con to the entire world, akin to the snake-oil salesmen from the 18th century but this time in suits and ties. And by October 2009 it was a quadrillion-dollar (that’s $1,000 trillion) industry that few could understand.
Propped up by false hope, America is now falling like a house of cards.
It all began in the early part of the 20th century. In 1907 J.P. Morgan, a private New York banker, published a rumour that a competing unnamed large bank was about to fail. It was a false charge but customers nonetheless raced to their banks to withdraw their money, in case it was their bank. As they pulled out their funds the banks lost their cash deposits and were forced to call in their loans. People now therefore had to pay back their mortgages to fill the banks with income, going bankrupt in the process. The 1907 panic resulted in a crash that prompted the creation of the Federal Reserve, a private banking cartel with the veneer of an independent government organisation. Effectively, it was a coup by elite bankers in order to control the industry.
When signed into law in 1913, the Federal Reserve would loan and supply the nation’s money, but with interest. The more money it was able to print, the more ‘income’ for itself it generated. By its very nature the Federal Reserve would forever keep producing debt to stay alive. It was able to print America’s monetary supply at will, regulating its value. To control valuation however, inflation had to be kept in check.
The Federal Reserve then doubled America’s money supply within five years, and in 1920 it called in a mass percentage of loans. Over five thousand banks collapsed overnight. One year later the Federal Reserve again increased the money supply by 62%, but in 1929 it again called the loans back in, en masse. This time, the crash of 1929 caused over sixteen thousand banks to fail and an 89% plunge on the stock market. The private and well-protected banks within the Federal Reserve system were able to snap up the failed banks at pennies on the dollar.
The nation fell into the Great Depression and in April 1933 President Roosevelt issued an executive order that confiscated all gold bullion from the public. Those who refused to turn in their gold would be imprisoned for ten years, and by the end of the year the gold standard was abolished. What had been redeemable for gold became paper ‘legal tender’, and gold could no longer be exchanged for cash as it had once been.
Later, in 1971, President Nixon removed the dollar from the gold standard altogether, therefore no longer trading at the internationally fixed price of $35. The US dollar was now worth whatever the US decided it was worth because it was ‘as good as gold’. It had no standard of measure, and became the universal currency. Treasury bills (short-term notes) and bonds (long-term notes) replaced gold as value, promissory notes of the US government and paid for by the taxpayer. Additionally, because gold was exempt from currency reporting requirements it could not be traced, unlike the fiduciary (i.e. that based upon trust) monetary systems of the West. That was not in America’s best interest.
After the Great Depression private banks remained afraid to make home loans, so Roosevelt created Fannie Mae. A state supported mortgage bank, it provided federal funding to finance home mortgages for affordable housing. In 1968 President Johnson privatised Fannie Mae, and in 1970, Freddie Mac was created to compete with Fannie Mae. Both of them bought mortgages from banks and other lenders, and sold them onto new investors.
The post World War II boom had created an America flush with cash and assets. As a military industrial complex, war exponentially profited the US and, unlike any empire in history, it shot to superpower status. But it failed to remember that, historically, whenever empires rose they fell in direct proportion.
Americans could afford all the modern conveniences, exporting its manufactured goods all over the world. After the Vietnam War, the US went into an economic decline. But people were loath to give up their elevated standard of living despite the loss of jobs, and production was increasingly sent overseas. A sense of delusion and entitlement kept Americans on the treadmill of consumer consumption.
In 1987 the US stock market plunged by 22% in one day because of high-risk futures trading, called derivatives, and in 1989 the Savings & Loan crisis resulted in President George H.W. Bush using $142 billion in taxpayer funds to rescue half of the S&L’s. To do so, Freddie Mac was given the task of giving sub-prime (below prime-rate) mortgages to low-income families. In 2000, the “irrational exuberance” of the dot-com bubble burst, and 50% of high-tech firms went bankrupt wiping $5 trillion from their over-inflated market values.
After this crisis, Federal Reserve Chairman Alan Greenspan kept interest rates so low they were less than the rate of inflation. Anyone saving his or her income actually lost money, and the savings rate soon fell into negative territory.
During the 1990s, advertisers went into overdrive, marketing an ever more luxurious lifestyle, all made available with cheap easy credit. Second mortgages became commonplace, and home equity loans were used to pay credit card bills. The more Americans bought, the more they fell into debt. But as long as they had a house their false sense of security remained: their home was their equity, it would always go up in value, and they could always remortgage at lower rates if needed. The financial industry also believed that housing prices would forever climb, but should they ever fall the central bank would cut interest rates so that prices would jump back up. It was, everyone believed, a win-win situation.
Greenspan’s rock-bottom interest rates let anyone afford a home. Minimum wage service workers with aspirations to buy a half million-dollar house were able to secure 100% loans, the mortgage lenders fully aware that they would not be able to keep up the payments.
So many people received these sub-prime loans that the investment houses and lenders came up with a new scheme: bundle these virtually worthless home loans and sell them as solid US investments to unsuspecting countries who would not know the difference. American lives of excess and consumer spending never suffered, and were being propped up by foreign nations none the wiser.
It has always been the case that a bank would lend out more than it actually had, because interest payments generated its income. The more the bank loaned, the more interest it collected even with no money in the vault. It was a lucrative industry of giving away money it never had in the first place. Mortgage banks and investment houses even borrowed money on international money markets to fund these 100% plus sub-prime mortgages, and began lending more than ten times their underlying assets.
After 9/11, George Bush told the nation to spend, and during a time of war, that’s what the nation did. It borrowed at unprecedented levels so as to not only pay for its war on terror in the Middle East (calculated to cost $4 trillion) but also pay for tax cuts at the very time it should have increased taxes. Bush removed the reserve requirements in Fannie Mae and Freddie Mac, from 10% to 2.5%. They were free to not only lend even more at bargain basement interest rates, they only needed a fraction of reserves. Soon banks lent thirty times asset value. It was, as one economist put it, an ‘orgy of excess’.
It was flagrant overspending during a time of war. At no time in history has a nation gone into conflict without sacrifice, cutbacks, tax increases, and economic conservation.
And there was a growing chance that, just like in 1929, investors would rush to claim their money all at once.
…
Complete article at:
http://www.globalresearch.ca/index.php?context=va&aid=10651
Tanya Cariina Hsu is a political researcher and analyst focusing on Saudi Arabian and US relations. One of the contributors to recent written testimony on the Kingdom of Saudi Arabia for the US Congressional Senate Judiciary Committee on behalf of FOCA (Friends of Charities Association) in its Hearing on Capitol Hill in Washington D.C., her analysis has been published and critically acclaimed throughout the US, Europe and the Middle East.
The first to break the barrier against public discussion of the Israeli influence upon US foreign policy decision making, in Capitol Hill’s “A Clean Break” Symposium in Washington D.C. in 2004, as the Institute for Research: Middle East Policy (IRmep) Director of Development and Senior Research Analyst, Ms. Hsu remains an International Fellow with the Institute.
Born in London, she re-located to Riyadh, Saudi Arabia in 2005 and is currently completing a book on US policy towards Saudi Arabia.
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Is Obama a Socialist?
Thursday, October 23, 2008
RICHARD WOLFF, RDWolff@att.net
Professor of economics at the University of Massachusetts at Amherst, Wolff is coauthor of the book “New Departures in Marxian Theory.” He contributes to Monthly Review’s online blog — at <http://mrzine.monthlyreview.org>. Monthly Review’s first issue in 1949 featured an essay by Albert Einstien titled “Why Socialism?”
http://www.monthlyreview.org/598einst.htm
Wolff said today: “A long-standing confusion and debate over socialism has served to enable all sorts of arrangements to be given that name. Anyone actually familiar with the history of socialism knows that, and thus knows that to use the word itself requires that the user define and justify which of the alternative definitions the user has chosen to deploy.
“In many European countries today, socialism means a large role for the government in its economic affairs. In the USSR and China, socialism has meant an even larger role such that the government owns and operates many industries. More abstractly, socialism has often been defined as state (or ‘social’) ownership of means of production and state planning with both distinguished from capitalism defined as private ownership of means of production and markets. Finally, Marx himself was particularly focused on the internal organization of production (inside the enterprises) where he distinguished capitalism as an organization in which a mass of workers produced a surplus (an output whose value exceeded what was paid out for inputs and for the labor power of the workers) that a tiny number of other people (boards of directors in modern corporations) appropriated and distributed to keep such a capitalism going. Marx then distinguished capitalism from communism quite simply as an alternative organization of production inside enterprises such that the workers displace capitalist boards of directors and instead become, collectively, their own board of directors.
“Re: Obama. He has endorsed precisely none of these major definitions of socialism: not Marx’s focused on the social organization of the surpluses in production, not the Soviet or Chinese models of state ownership of most industries, and not the European notion/model of significant state intervention (e.g. state production of gas, oil, transport; state subsidization of education and national health care; subsidized housing, and so on).”
From: Institute for Public Accuracy
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ABC’s Wright uncritically reported McCain’s mischaracterization of Obama’s tax plan
ABC’s David Wright reported without challenging Sen. John McCain’s claim to voters in New Hampshire that Sen. Barack Obama “wants to confiscate their hard-earned money.” Wright did not note that Obama has proposed cutting taxes for low- and middle-income taxpayers, while raising taxes only on individuals earning more than $200,000 per year and families earning more than $250,000 per year.
Read More
http://mediamatters.org/items/200810230004?lid=705677&rid=16751772
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Redistributing To The Rich
Seizing on comments Sen. Barack Obama (D-IL) made to “Joe the Plumber,” Sen. John McCain (R-AZ) campaign has argued that Obama’s economic policies would redistribute the wealth of hard working Americans and provide “just another government giveaway to others.” “The redistribution of wealth is the last thing America needs right now. The goal is not to redistribute wealth, but to create it,” McCain said during an event in Manchester, NH. But as the Tax Policy Center points out, “today’s tax code is riddled with examples of government ‘taking’ money from one taxpayer and giving it to another.” “[F]or decades, government has used the tax code for much more than raising money. These days, redistributing tax revenues are the principal way government encourages people to do what it wants and discourages them from doing what it doesn’t,” TPC wrote. In fact, during the last eight years, President Bush’s regressive economic policies have effectively redistributed the nation’s wealth to the richest Americans. According to a recent report released by the Organization for Economic Cooperation and Development (OECD), “the United States has the highest inequality and poverty in the OECD after Mexico and Turkey , and the gap has increased rapidly since 2000.” Unfortunately, McCain’s proposed economic policies would give even more wealth to the richest Americans, exacerbate the nation’s income inequality, and further erode opportunities for social mobility.
BUSH REDISTRIBUTED TO THE WEALTHY: An analysis by the Center for American Progress Action Fund shows that President Bush’s economic policies have “redistributed wealth to the richest Americans and left the majority with stagnating wages and declining household incomes.” Looking at the effects of the first three Bush tax cuts, the Congressional Budget Office concluded that “the percentage by which the effective tax rate was cut for high-income families was nearly twice the rate cut for those in the middle of the income spectrum.” Meanwhile, the administration’s failure to raise the minimum wage coupled with its poor enforcement of federal wage and hour laws, trade agreements, and union rights further undermined the economic security of middle and lower-income Americans. Data prepared by the IRS from tax returns filed during the post-9/11 recovery (2002 to 2006) reveals that household income grew by $863 billion during the period. “The 15,000 families at the top of the income scale saw their annual incomes go from about $15 million a year to nearly $30 million,” accounting for more than 25 percent of all of the growth in income for the entire country. The remaining 1.7 million families in the top 1 percent of households accounted for nearly another 50 percent. But while the “top 10 percent of families accounted for 95.3 percent of the nation’s income growth between 2002 and 2006,” the average real income for families in the bottom 90 percent of households increased by about $300 to a little less than $30,700.”
MCCAIN WOULD DOUBLE DOWN: McCain claims that “in this country, we believe in spreading opportunity.” But his Bush-like economic policies would only further America ‘s income inequality. In fact, by extending Bush’s tax cuts to the wealthy and proposing $175 billion in tax breaks to America’s largest corporations, McCain’s regressive economic agenda would redistribute wealth to the richest Americans during a period of stagnating wages and growing economic anxiety. The bottom 60 percent of taxpayers would see only 12 percent of the benefit from McCain’s plan to extend Bush’s tax cuts, while over 100 million middle class households would receive nothing from McCain’s proposal. Moreover, even though corporate profits increased by an estimated 66 percent between 2000 and 2006, McCain’s plan to slash the corporate tax rate to 25 percent from 35 percent would give even more benefits to America’s richest corporations. According to a Center for American Progress Action Fund analysis of McCain’s plan, the 200 largest companies stand to gain $45 billion a year from McCain’s proposal. Highly profitable industries like energy companies and merchandising and retailing companies would receive billions from additional tax breaks.
From: The Progress Report http://pr.thinkprogress.org/
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More Political Front Group Ads Coming, Right Up to Election Day
Source: New York Times, October 15, 2008
Get ready for an uptick in nasty “issue advocacy” advertisements in battleground states. The New York Times notes that wealthy right-wing activist Howard Rich recently mailed menacing letters to liberal contributors that read, “We are monitoring all reports of a wide variety of leftist organizations. … Should any of these organizations be found to be engaged in illegal or questionable activity, it is our intent to publicize your involvement with those activities.” Rich acknowledged that “he had read a letter that a pro-Democratic group called Accountable America,” which is run by MoveOn’s Tom Matzzie, “sent during the summer, which offered a $100,000 reward for information about ‘unlawful conduct by business-oriented or conservative’ nonprofit groups. … [B]oth letters were intended to scare off the other side’s Section 527 activities — the lightly regulated money that swamped the 2004 election. … This year, such spending is down by $104 million compared with 2004, according to Evan Tracey, president of the Campaign Media Analysis Group. But he pointed out that a recent Supreme Court ruling will permit 527 money to be spent in the final days of the campaign this year, unlike 2004. ‘If you were to write a dictionary definition for the 527s, first and foremost the purpose is to be disruptive,’ Mr. Tracey said. ‘Being allowed to run ads at the end of the campaign is most disruptive.’”
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A KEY CONCEPT THE MEDIA ARE MISSING ABOUT THE ECONOMIC CRISIS
By Bill Scher, Campaign for America’s Future
It is not only possible but potentially necessary to increase public investments in spite of a large deficit.
http://www.alternet.org/workplace/104333/
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Marketplace Op-Ed: Maybe ‘too big to fail’ is just too big
NPR
ROBERT REICH TEACHES PUBLIC POLICY AT THE UNIVERSITY OF CALIFORNIA, BERKELEY. His most recent book is called “Supercapitalism.”
October 22, 2008
…Robert Reich: According to Treasury Secretary Hank Paulson, the biggest Wall Street banks now getting money from the government are just “too big to fail.”…
Pardon me for asking, but if a company is too big to fail, maybe — just maybe — it’s too big, period….
Maybe the biggest irony today is that Washington policymakers who are funneling taxpayer dollars to these too-big-to-fail companies are simultaneously pushing them to consolidate into even bigger companies. They’ve prodded Bank of America to take over Merrill Lynch and Countrywide. JPMorgan to acquire Washington Mutual and Bear Stearns. And now they’re urging General Motors to absorb Chrysler.
So we’re ending up with even bigger giants, with even more power over the economy and politics, subsidized by taxpayers and guaranteed never to fail because they’re just — too big!
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To drill or not to drill: issue for states
By Daniel C. Vock, Stateline.org Staff Writer
Nineteen coastal states face tough decisions involving energy and the environment – whether or not to allow offshore drilling for oil and natural gas.
Read More
http://www.stateline.org/live/details/story?contentId=348701
Contact Daniel C. Vock at dvock@stateline.org .
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Borowitz Report – Good Economic News Shocker
October 24, 2008
Retail Sector Soars on News that Palin Seeks New Outfit
Guv’s Shopping Gives Economy Much-needed Jolt
Offering a sharp contrast to the general gloom on Wall Street today, retail stocks soared on the news that Gov. Sarah Palin (R-Alaska) plans to buy a new outfit for Election Night.
Major retailers had been plummeting all day but staged a stunning comeback when Gov. Palin told a reporter in Ohio, “Election Night is just eleven days away and I have nothing to wear.”
Gov. Palin said that a new dress for Election Night could cost as much as $20,000, “and that’s before you accessorize.”
Major department stores such as Neiman Marcus and Saks Fifth Avenue rebounded dramatically on the news of Gov. Palin’s plans, with some industry analysts predicting that Gov. Palin’s shopping could bail out the entire retail sector in the fourth quarter.
“Right now, the only part of the economy that’s strong is Sarah Palin’s shopping,” said Tracy Klugian of Morgan Stanley. “She is a one-woman stimulus package.”
Elsewhere, former Fed Chief Alan Greenspan gave this testimony to Congress today: “To those millions of Americans who have lost their jobs, their homes, and their life savings, let me offer a heartfelt ‘oopsy.’”
Upcoming Events
January 1, 2009 at 12:01AM
Andy’s 2009 Shows
Watch this space for Andy’s performances in 2009.
http://www.borowitzreport.com/
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three thousand words
Robert Ariail: say it ain’t so, joe!
http://tinyurl.com/6xflap (editorialcartoonists.com)
Matt Davies: but, hey. aanything to avoid socialism
Kevin Kallaugher: abandon ship
http://tinyurl.com/6has79 (politicalirony.com)
