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Title: The Collapsing US Economy and the "End of the World"
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URL Source: http://globalresearch.ca/index.php?context=va&aid=31825
Published: Jul 9, 2012
Author: Dr. Paul Craig Roberts
Post Date: 2012-07-09 14:29:45 by Capitalist Eric
Keywords: None
Views: 7276
Comments: 26
In a recent column, “Can The World Survive Washington’s Hubris,” I promised to examine whether the US economy will collapse before Washington in its pursuit of world hegemony brings us into military confrontation with Russia and China. This is likely to be an ongoing subject on this site, so this column will not be the final word. Washington has been at war since October, 2001, when President George W. Bush concocted an excuse to order the US invasion of Afghanistan. This war took a back seat when Bush concocted another excuse to order the invasion of Iraq in 2003, a war that went on without significant success for 8 years and has left Iraq in chaos with dozens more killed and wounded every day, a new strong man in place of the illegally executed former strongman, and the likelihood of the ongoing violence becoming civil war. Upon his election, President Obama foolishly sent more troops to Afghanistan and renewed the intensity of that war, now in its eleventh year, to no successful effect. These two wars have been expensive. According to estimates by Joseph Stiglitz and Linda Bilmes, when all costs are counted the Iraq invasion cost US taxpayers $3 trillion dollars. Ditto for the Afghan war. In other words, the two gratuitous wars doubled the US public debt. This is the reason there is no money for Social Security, Medicare, Medicaid, food stamps, the environment, and the social safety net. Americans got nothing out of the wars, but as the war debt will never be paid off, US citizens and their descendants will have to pay interest on $6,000 billion of war debt in perpetuity. Not content with these wars, the Bush/Obama regime is conducting military operations in violation of international law in Pakistan, Yemen, and Africa, organized the overthrow by armed conflict of the government in Libya, is currently working to overthrow the Syrian government, and continues to marshall military forces against Iran. Finding the Muslim adversaries Washington created insufficient for its energies and budget, Washington has encircled Russia with military bases and has begun the encirclement of China. Washington has announced that the bulk of its naval forces will be shifted to the Pacific over the next few years, and Washington is working to re-establish its naval base in the Philippines, construct a new one on a South Korean island, acquire a naval base in Viet Nam, and air and troop bases elsewhere in Asia. In Thailand Washington is attempting to purchase with the usual bribes an air base used in the Vietnam war. There is opposition as the country does not wish to be drawn into Washington’s orchestrated conflict with China. Downplaying the real reason for the airbase, Washington, according to Thai newspapers, told the Thai government that the base was needed for “humanitarian missions.” This didn’t fly, so Washington had NASA ask for the air base in order to conduct “weather experiments.” Whether this ruse is sufficient cover remains to be seen. US Marines have been sent to Australia and elsewhere in Asia. To corral China and Russia (and Iran) is a massive undertaking for a country that is financially busted. With wars and bankster bailouts, Bush and Obama have doubled the US national debt while failing to address the disintegration of the US economy and rising hardships of US citizens. The charts below are courtesy of www.shadowstats.com The annual US budget deficit is adding to the accumulated debt at about $1.5 trillion per year with no prospect of declining. The financial system is broken and requires ongoing bailouts. The economy is busted and has been unable to create high-paying jobs, indeed any jobs. Despite years of population growth, payroll employment as of mid-2012 is the same as in 2005 and substantially below 2008. Yet, the government and financial presstitute media tell us that we have a recovery. According to the US Bureau of Labor Statistics, employment in 2011 was only 1 million more than in 2002. As it takes about 150,000 new jobs each month to stay even with population growth, that leaves a decade long job deficit of 15 million jobs. The US unemployment and inflation rates are far higher than reported. In previous columns I have explained, based on statistician John Williams’ work (shadowstats.com), the reasons that the government’s headline numbers are serious understatements. The headline (U3) unemployment rate of 8.2% counts no discouraged workers who have given up on finding a job. The government has a second unemployment rate (U6), seldom reported, which includes short-term discouraged workers. That rate is 15%. When the long-term discouraged workers are added in, the current US unemployment rate is 22%, a number closer to the unemployment rate of the Great Depression than to the unemployment rates of postwar recessions. Changes in the way inflation is measured have destroyed the Consumer Price Index (CPI) as a measure of the cost of living. The new methodology is substitution based. If the price of an item in the index rises, a lower priced alternative takes its place. In addition, some price rises are labeled quality improvements whether they are or not and thus do not show up in the CPI. People still have to pay the higher price, but it is not counted as inflation. Currently, the substitution-based rate of inflation is about 2%. However, when inflation is measured as the actual cost of living, the rate of inflation is 5%. The Misery Index is the sum of the inflation and unemployment rates. The level of the current Misery Index depends on whether the new rigged measures are used, which understate the misery, or the former methodology that accurately measures it. Prior to the November 1980 election, the Misery Index hit 22%, which was one reason for Reagan’s victory over President Carter. Today if we use previous methodology, the Misery Index stands at 27%. But if we use the new rigged methodology, the Misery Index is 10%. The understatement of inflation serves to boost Gross Domestic Product (GDP). GDP is calculated in current dollars. To be able to determine whether GDP rose because of price rises or because of increases in real output, GDP is deflated by the CPI. The higher the inflation rate, the less the growth in real output and vice versa. When the substitution based methodology is used to measure inflation, the US economy experienced real growth in the 21st century except for the sharp dip during 2008-2010. However, if the cost-of-living based methodology is used, except for a short period during 2004, the US economy has experienced no real growth since 2000 In the chart above,the lower measure (blue) of real GDP is deflated with the inflation methodology that measured cost-of-living. The higher GDP measure (red) deflates GDP with the new substitution based methodology. The lack of employment and real GDP growth go together with the decline in real household median income. The growth in consumer debt substituted for the lack of income growth and kept the economy going until consumers exhausted their ability to take on more debt. With the consumer dead in the water, the outlook for economic recovery is poor. Politicians and the Federal Reserve are making the outlook even worse. At a time of high unemployment and debt-stressed households, politicians at local, state, and federal levels are cutting back on government provision of health care, pensions, food stamps, housing subsidies and every other element of the social safety net. These cutbacks, of course, further reduce aggregate demand and the ability of income-stressed Americans to survive. The Federal Reserve has interest rates so low that retirees and others living on their savings can earn nothing on their money. The interest rates paid on bank CDs and government and corporate bonds are lower than the rate of inflation. To live on interest income, a person has to purchase Greek, Spanish, or Italian bonds and run the risk of capital loss. The Federal Reserve’s policy of negative interest rates forces retirees to spend down their capital in order to live. In other words, the Fed’s policy is destroying personal savings as people are forced to spend their capital in order to cover living expenses. In June the Federal Reserve announced that it was going to continue its policy of driving nominal interest rates even lower, this time focusing on long-term Treasury bonds. The Fed said it would be purchasing $400 billion of the Treasury’s 30-year bonds. Driving interest rates down means driving bond prices up. With 5-year Treasury bonds paying only seven-tenths of one percent and 10-year Treasuries paying only 1.6%, below even the official rate of inflation, Americans desperate for yield move into 30-year bonds currently paying 2.7%. However, the the high bond prices mean that the risk of capital loss is very high. The Fed’s debt monetization, or a drop in the exchange value of the dollar as other countries move away from its use to settle their balance of payments, could set off inflation that would take interest rates out of the Fed’s control. As interest rates rise, bond prices fall. In other words, bonds are now the bubble that real estate, stocks, and derivatives were. When this bubble pops, Americans will take another big hit to their remaining wealth. It makes no sense to invest in long-term bonds at negative interest rates when the federal government is piling up debt that the Federal Reserve is monetizing and when other countries are moving away from the flood of dollars. The potential for a rising rate of inflation is high from debt monetization and from a drop in the dollar’s exchange value. Yet, bond fund portfolio managers have to follow the herd into longer term maturities or see their performance relative to their peers drop to the bottom of the rankings. Some individual investors and foreign central banks, anticipating the dollar’s loss of value, are accumulating gold and silver bullion. Realizing the danger to the dollar and its policy from the rapid rise in the price of bullion during 2011, the Federal Reserve has arranged offsetting action. When the demand for physical bullion drives up the price, short sales of bullion in the paper market are used to drive the price back down. Similarly, when investors begin to flee Treasuries, thus causing interest rates to rise, J.P. Morgan and other dependencies of the Federal Reserve sell interest-rate swaps, thus offsetting the effect on interest rates of the bond sales. (Keep in mind that interest rates rise when bond prices fall and vice versa.) The point of all this information is to establish that except for the 1 percent, the incomes and wealth of Americans are being cut back across the board. From 2002 through 2011 the economy lost 3.5 million manufacturing jobs. These jobs were replaced with lower-paying waitress and bartender jobs (1,189,000), ambulatory health care service jobs (1,512,000) and social assistance jobs (578,000). These replacement jobs in domestic services mean that on a net basis US consumer income was moved out of the country. Potential aggregate demand in the US dropped by the differences in pay in the job categories. Clearly and unambiguously, jobs offshoring lowered US disposable income and US GDP and, thereby, employment. Despite the lack of an economic base, Washington’s hegemonic aspirations continue unabated. Other countries are amused at Washington’s unawareness. Russia, China, India, Brazil, and South Africa are forming an agreement to abandon the US dollar as the currency for international settlement between themselves. On July 4 the China Daily reported: "Japanese politicians and prominent academics from China and Japan urged Tokyo on Tuesday to abandon its outdated foreign policy of leaning on the West and accept China as a key partner as important as the United States. The Tokyo Consensus, a joint statement issued at the end of the Beijing-Tokyo Forum, also called on both countries to expand trade and promote a free-trade agreement for China, Japan and South Korea." This means that Japan is in play. The Chinese government, more intelligent than Washington, is responding to Washington’s military threats by enticing away Washington’s two key Asian allies. As the Chinese economy is now as large as the US and on far firmer footing, and as Japan now has more trade with China than with the US, the enticement is appealing. Moreover, China is next door, and Washington is distant and drowning in its hubris. Washington, which flicked its middle finger to international law and to its own law and Constitution with its arrogance and gratuitous and illegal wars and with its assertion of the right to murder its own citizens and those of its allies, such as Pakistan, has made the United States a pariah state. Washington still controls its bought-and-paid-for NATO puppets, but these puppet states are overwhelmed with derivative debt problems brought to them by Wall Street and by sovereign debt problems, some of which were covered up by Wall Street’s Goldman Sachs. Europe is on the ropes and has no money with which to subsidize Washington’s wars of hegemony. Washington is becoming an isolated and despised element of the world community. Washington has purchased Europe, Canada, Australia, the former Soviet state of Georgia (and almost Ukraine), and Columbia, and continues its effort to purchase the entire world, but sentiment is turning against the rising Gestapo state that has shown itself to be lawless, ruthless, and indifferent, even hostile, to human life and human rights. A government, whose military was unable with the help of the UK to occupy Iraq after eight years and was forced to end the conflict by putting the “insurgents” on the US military payroll and to pay them to stop killing American troops, and a government whose military has been unable to subdue a few thousand lightly armed Taliban after 11 years, is over the top when it organizes war against Iran, Russia, and China. The only prospect Washington has of prevailing in such an undertaking is first use of nuclear weapons, of catching its demonized opponents off guard by nuking them out of the blue. In other words, by the elimination of life on earth. Is this Washington’s program revealed by the neoconservative warmonger, Bill Kristol, who had no shame to ask publicly: “What’s the good of nuclear weapons if you can’t use them?”
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#1. To: Capitalist Eric (#0)
I remember Paul Craig Roberts retiring a couple of years ago. I am so glad that he is writing regularly again.
The article is clear. The end of the world as we know it now.
As iron sharpens iron, So a man sharpens the countenance of his friend. -Proverbs 27:17 (NKJV)
I was just going to ping you to this, red. But here you are ;) A long read, but well-worth the time. As long as one is willing to be depressed for a while..
A long read, but well-worth the time. As long as one is willing to be depressed for a while.. It is clear to me the following. If we put our faith and trust in 401Ks, the stock market and the "almighty" dollar or euro, the conclusion will be horrific. If we put our trust and faith in Jesus Christ and His promises, we will be personally prepared for life after this one on earth. Those who trust and obey Him may end up poor and homeless on this earth but He will always provide our needs. So I take these gloomy predictions "in stride" knowing no matter what happens, God will be there as promised for me, my family and my sisters and brothers in Christ. This promise is in John chapter 14. Dr. Gary will no doubt tell us there are many more places in the Scriptures to support this. So take heart Serenissima Venezia, all hope is not lost. As long as we put our hope in the only Hope that is not made with human hands, which is Christ Jesus.
As iron sharpens iron, So a man sharpens the countenance of his friend. -Proverbs 27:17 (NKJV)
Thank you for putting things back into perspective. Sometimes, I need to step away from the keyboard and news articles, take a deep breath, and get recentered. And remember prayer and God are my first priority. And the rest He will handle. Ok, less panicky now and more serene ;) thanks, redleghunter.
Sometimes for some of us it takes 'being taken out to the wood shed' by God to get the point across. Which is The Father's love for us.
As iron sharpens iron, So a man sharpens the countenance of his friend. -Proverbs 27:17 (NKJV)
This all has to be by design. No one could accidently make this many consistent errors--all to the bad, rather than the good. As it relates to what I picked as the quote above, haven't these idiots ever heard of 'unintended consequencs'? They may well sit in their ivory tower gloating over having nuked the ME; and then suddenly the wind changes direction only to find themselves in the pathway of fallout and suffering the results.... Alas, there will be no one around to help them overcome!
All brought on by a nation that has shunned God, IMO.
Instead of being depressed, Christians should be looking beyond man for security, happiness, etc. I would imagine athiests would be either 100% OK with what is happening to the world; and for those who make or have fralse gods/idols, they will seek comfort with them, but paper and stone and wood offer little comfort. It sure seems to fit scriptures for me.
If we put our trust and faith in Jesus Christ and His promises, we will be personally prepared for life after this one on earth. Those who trust and obey Him may end up poor and homeless on this earth but He will always provide our needs. So I take these gloomy predictions "in stride" knowing no matter what happens, God will be there as promised for me, my family and my sisters and brothers in Christ. This promise is in John chapter 14. Dr. Gary will no doubt tell us there are many more places in the Scriptures to support this. So take heart Serenissima Venezia, all hope is not lost. As long as we put our hope in the only Hope that is not made with human hands, which is Christ Jesus. We are alike in thinking on this issue. I keep all sorts of scriptures and sayings written on 3x5 cards posted on the wall around my computer screen so that I can quickly feast my eyes on something that will immediately point me in the right direction in times like these. Things like Psalms 62:8 - "Psa 62:8 Trust in God at all times, my people. Tell him all your troubles, for he is our refuge. And if that isn't enough, I try something like Psalms 54. 56:2 Mine enemies would daily swallow me up: for they be many that fight against me, O thou most High.
I agree.
As iron sharpens iron, So a man sharpens the countenance of his friend. -Proverbs 27:17 (NKJV)
Psa 56:13 For thou hast delivered my soul from death: wilt not thou deliver my feet from falling, that I may walk before God in the light of the living, All wonderful but my favorite of your 3X5 wall has to be the above in the quote box. They both show the unshakable confidence God wants from His children. Verse 13 especially. In 21st Century language we could put it this way: If You have delivered me from the fires of hell, why don't I trust You in everything else? This psalm really gets to the quick in a hurry. And when I want a good reminder on the Power of God, I go to Psalm 97: 1 The Lord reigns; Let the earth rejoice; Let the multitude of isles be glad! 2 Clouds and darkness surround Him; Righteousness and justice are the foundation of His throne. 3 A fire goes before Him, And burns up His enemies round about. 4 His lightnings light the world; The earth sees and trembles. 5 The mountains melt like wax at the presence of the Lord, At the presence of the Lord of the whole earth. 6 The heavens declare His righteousness, And all the peoples see His glory. 7 Let all be put to shame who serve carved images, Who boast of idols. Worship Him, all you gods. 8 Zion hears and is glad, And the daughters of Judah rejoice Because of Your judgments, O Lord. 9 For You, Lord, are most high above all the earth; You are exalted far above all gods. 10 You who love the Lord, hate evil! He preserves the souls of His saints; He delivers them out of the hand of the wicked. 11 Light is sown for the righteous, And gladness for the upright in heart. 12 Rejoice in the Lord, you righteous, And give thanks at the remembrance of His holy name.
As iron sharpens iron, So a man sharpens the countenance of his friend. -Proverbs 27:17 (NKJV)
Our removing God from our schools, government, life in general - will have its consequences. Yet our founding documents are based on a faith in God. Ironic.
So I take these gloomy predictions "in stride" knowing no matter what happens, God will be there as promised for me, my family and my sisters and brothers in Christ. This promise is in John chapter 14. Dr. Gary will no doubt tell us there are many more places in the Scriptures to support this. So take heart Serenissima Venezia, all hope is not lost. As long as we put our hope in the only Hope that is not made with human hands, which is Christ Jesus. Every year, every month, I wonder how myself and husband will make it. For the last several years and even through possible life taking illness our Heavenly Father has shown His grace for us. It's astounding to think that He provides in the midst of such challenges.
Never a more true statement uttered. A Father will slap you upside the head if needed to get your attention. I love God! He's so loving he will actually discipline you when you rebel, or fall!
This is a WONDERFUL idea! Thanks for that!
I also include a few special sayings, like: Don't let your faith fail! Fear is the enemy of Faith. Grace is getting something you don't deserve, and mercy is not getting something you do deserve!
Boy do I identify with that.
In that, you are not alone.
self ping
And it is clear to me, God is in EVERY detail. Things that seem like coincidences, really are not.
As iron sharpens iron, So a man sharpens the countenance of his friend. -Proverbs 27:17 (NKJV)
Mat 10:28 And fear not them which kill the body, but are not able to kill the soul: but rather fear him which is able to destroy both soul and body in hell. Mat 10:29 Are not two sparrows sold for a farthing? and one of them shall not fall on the ground without your Father. Mat 10:30 But the very hairs of your head are all numbered. Mat 10:31 Fear ye not therefore, ye are of more value than many sparrows. Mat 10:32 Whosoever therefore shall confess me before men, him will I confess also before my Father which is in heaven. Mat 10:33 But whosoever shall deny me before men, him will I also deny before my Father which is in heaven. Mat 10:34 Think not that I am come to send peace on earth: I came not to send peace, but a sword.
Spoiled, stupid and ignorant, brain dead phuckwads, libTURD fools, tools, and idiots, are the real sickness; the messiah "king" obammy and his regime are only the symptoms.
MD good quote of Scriptures on the subject. Thank you.
As iron sharpens iron, So a man sharpens the countenance of his friend. -Proverbs 27:17 (NKJV)
. GOD is not GOD if HE is not infinite and omnipresent. Many of us believe that HE is the breath that we ALL breathe. HE is HERE and EVERYWHERE, NOW and ALWAYS. In fact there is no "here" without HIS conscious thought. HE is with US ALWAYS. HE is our blood our bone and our lives. SINNERS such as I can only hope for salvation through HIS grace and mercy. We can't "earn" or "pay" for salvation. It's a GIFT of love from GOD. Who IS, and has ALWAYS been.
Spoiled, stupid and ignorant, brain dead phuckwads, libTURD fools, tools, and idiots, are the real sickness; the messiah "king" obammy and his regime are only the symptoms.
+ ?
Spoiled, stupid and ignorant, brain dead phuckwads, libTURD fools, tools, and idiots, are the real sickness; the messiah "king" obammy and his regime are only the symptoms.
"we must as a species go into a period of shrinkage that we have not experienced since the Dark Ages and the Black Plague" -- lucysmom (A.K.A. minnigold)
#2. To: Capitalist Eric (#0)
#3. To: redleghunter (#2)
The article is clear. The end of the world as we know it now.
#4. To: Serenissima Venezia, SJN, rowdee, Liberator, GarySpFc (#3)
I was just going to ping you to this, red. But here you are ;)
#5. To: redleghunter (#4)
#6. To: Serenissima Venezia (#5)
And remember prayer and God are my first priority. And the rest He will handle.
#7. To: Capitalist Eric (#0)
Is this Washington’s program revealed by the neoconservative warmonger, Bill Kristol, who had no shame to ask publicly: “What’s the good of nuclear weapons if you can’t use them?” (3 images)
#8. To: redleghunter (#2)
The article is clear. The end of the world as we know it now.
#9. To: Serenissima Venezia (#3)
As long as one is willing to be depressed for a while..
#10. To: redleghunter (#4)
It is clear to me the following. If we put our faith and trust in 401Ks, the stock market and the "almighty" dollar or euro, the conclusion will be horrific.
Psa 56:3 What time I am afraid, I will trust in thee.
Psa 56:4 In God I will praise his word, in God I have put my trust; I will not fear what flesh can do unto me.
Psa 56:5 Every day they wrest my words: all their thoughts are against me for evil.
Psa 56:6 They gather themselves together, they hide themselves, they mark my steps, when they wait for my soul.
Psa 56:7 Shall they escape by iniquity? in thine anger cast down the people, O God.
Psa 56:8 Thou tellest my wanderings: put thou my tears into thy bottle: are they not in thy book?
Psa 56:9 When I cry unto thee, then shall mine enemies turn back: this I know; for God is for me.
Psa 56:10 In God will I praise his word: in the LORD will I praise his word.
Psa 56:11 In God have I put my trust: I will not be afraid what man can do unto me.
Psa 56:12 Thy vows are upon me, O God: I will render praises unto thee.
Psa 56:13 For thou hast delivered my soul from death: wilt not thou deliver my feet from falling, that I may walk before God in the light of the living,
#11. To: rowdee (#8)
All brought on by a nation that has shunned God, IMO.
#12. To: rowdee (#10)
Psa 56:8 Thou tellest my wanderings: put thou my tears into thy bottle: are they not in thy book?
#13. To: rowdee (#9)
It sure seems to fit scriptures for me.
#14. To: redleghunter (#4)
Those who trust and obey Him may end up poor and homeless on this earth but He will always provide our needs.
#15. To: redleghunter (#6)
Sometimes for some of us it takes 'being taken out to the wood shed' by God to get the point across. Which is The Father's love for us.
#16. To: rowdee (#10)
I keep all sorts of scriptures and sayings written on 3x5 cards posted on the wall around my computer screen so that I can quickly feast my eyes on something that will immediately point me in the right direction in times like these.
#17. To: SJN (#16)
#18. To: rowdee (#17)
Grace is getting something you don't deserve, and mercy is not getting something you do deserve!
#19. To: SJN (#18)
Boy do I identify with that.
#20. To: Stoner (#0)
#21. To: SJN, rowdee, GarySpFc (#14)
Every year, every month, I wonder how myself and husband will make it. For the last several years and even through possible life taking illness our Heavenly Father has shown His grace for us. It's astounding to think that He provides in the midst of such challenges.
#22. To: redleghunter, SJN, rowdee, ALL (#21)
(Edited)
And it is clear to me, God is in EVERY detail. Things that seem like coincidences, really are not.
#23. To: Mad Dog (#22)
#24. To: redleghunter (#23)
#25. To: Mad Dog (#24)
(Edited)
#26. To: rowdee (#25)
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