[R-G] US Empire: An Orgy of Debt

[Anthony Fenton]

Published on Sunday, September 21, 2008 by the Toronto Sun
US Empire: An Orgy of Debt
http://www.commondreams.org/view/2008/09/21-4
by Eric Margolis

NEW YORK -- The financial panic sweeping the globe is maddeningly  
complex, but the cause of the worst financial crisis since the 1930s  
Great Depression is clear.

America has reveled for two decades in an orgy of debt. The U.S.  
national debt is now twice its net worth. From Wall Street's "masters  
of the universe" financial powerhouses such as Goldman Sachs, Merrill  
Lynch, Lehman, and Morgan Stanley, to the humblest homeowners,  
America's national motto became "borrow to the hilt and bet."

The traditional regulated banking system was pushed aside by Wall  
Street's financial titans who created their own money in the form of  
complex securities and furiously traded these exotic instruments and  
borrowed recklessly against them with little government regulation or  
oversight.

As Kevin Phillips points out in his prophetic book, Bad Money,  
America's primary business became non-productive finance.  
Manufacturing fell to only 12% of GDP. Wall Street titans grew  
obscenely rich by simply passing around paper. Inflated or semi- 
worthless securities increased in bogus value at each stage of the  
trading process.

Wall Street was allowed to virtually print money and peddle toxic  
securities around the globe because the big financial houses and heads  
of hedge funds bought the politicians of both parties.

Equally important, the mammoth financial and housing bubble thus  
created was hailed by the Bush administration as proof positive of  
Republican free market philosophy and the true road to prosperity.

More cautious European and Canadian bankers were dismissed by  
Republican chest thumpers as financial sissies.

This Ponzi scheme worked so long as markets kept rising. When the  
music stopped - disaster.

It's uncertain how far damage from America's financial equivalent of  
Hurricane Katrina will spread. Hedge funds, money market funds and  
automakers could be next. Real estate losses may reach $636 billion by  
2012.

All stock market gains of the past 10 years have been wiped out in the  
most dangerous crash since the 1930s.

The "free market" Republican administration has ended up nationalizing  
nearly $1 trillion worth of businesses, including the federal mortgage  
agencies Fannie Mae and Freddie Mac, Bear Stearns, and global insurer  
AIG. Welcome to Wall Street socialism.

One thing is now clear. When great empires run onto the financial  
rocks, their power quickly ebbs. France's Sun King, Louis XIV, ended  
his once glorious rein in near bankruptcy caused by his long, ruinous  
wars with the British and Dutch. Louis XVI's runaway borrowing to  
finance the American Revolution helped ignite the French Revolution.  
The Soviet Union's collapse was caused by spending half its national  
income on arms, and failure to modernize industry.

Over the past decade, the U.S. foreign debt doubled. Japan and China  
now hold 47% of the U.S. foreign debt and finance Washington's wars.  
The addition in recent days of at least $1 trillion in new debt will  
cause interest rates to rise and the dollar to weaken. Even the U.S.  
government's AAA credit rating now is in question.

Washington may no longer be able to spend half the globe's defence  
budgets.

The $12-13 billion a month wars in Iraq and Afghanistan will end up  
costing $750 billion by December 2008. There will be less cash in  
Washington's kitty to buy foreign dictators and prop up their regimes,  
as in the Mideast and Central Asia. Less cash to pay for little wars  
in Africa.

Less for exotic anti-missile systems and death rays.

America's enormous global power is based as much on its financial  
might as military muscle. Wall Street has been the vehicle and  
policeman of America's hegemony. It shaped the destiny of the globe  
and made many nations subservient to the demands of New York's titan  
bankers. Wall Street is essential to raising capital for business  
expansion, but often it resembled New York's ruthless loan sharks:  
Once you borrowed from them, you never got off the hook.

Americans will have to relearn the hard truth that you can't borrow  
your way to prosperity.