[R-G] [BillTottenWeblog] Our Collapsing Economy

[Bill Totten]

US's Negative Net Worth at $59.3 Trillion

by Paul Craig Roberts

CounterPunch (January 12 2009)


According to the Bureau of Labor Statistics, nonfarm payroll employment
declined by 3,445,000 from December 2007 through December 2008.

The collapse in employment is across the board.

Construction lost 520,000 jobs.  Manufacturing lost 806,000 jobs. Trade,
transportation and utilities lost 1,495,000 jobs (retail trade accounted
for 1,120,000 of this loss).  Financial activities lost 145,000 jobs.
Professional and business services lost 713,000 jobs.  Even government
lost 188,000 jobs.

Only in health care and social assistance has the economy been able to
eke out a few new jobs.

Many analysts believe the job losses will be as great or greater during
2009.

Moreover, the reported job losses are likely understated.  Noted
statistician John Williams (shadowstats.com) reports that biases in
measurement have understated the job loss over the last twelve months by
1,150,000 jobs.  Williams reports the unemployment rate as it was
measured prior to "reforms" designed to minimize the measured rate of
unemployment.  According to the methodology used in 1980, the US
unemployment rate in December 2008 reached 17.5 percent.

Yes, "our" government lies to us about economic statistics, just as it
lies to us about "terrorists", "weapons of mass destruction", "building
freedom and democracy in the Middle East", and the Israeli-Palestinian
conflict.

An objective person would be hard pressed to find any statement made by
the US government that is reliable.

The collapse of the job market means even harder times for last year's
and this year's crops of college graduates.  The offshoring of
professional jobs and the widespread use by US corporations of H-1b,
L-1, and other work visa programs for foreigners have left many recent
American university graduates without careers.

Recently, Bill Gates of Microsoft was pleading with Congress to allow
even more foreigners in on work visas. According to Gates, there is a
shortage of American workers despite a 17.5 percent unemployment rate.
I personally know American computer engineers, both seasoned and recent
graduates, who cannot find jobs.

What Gates and American corporations want is cheap labor, in effect
indentured servants, unprotected people who don't demand an American
standard of living and who have no student loans to repay.

If Congress expands the work visas as US unemployment mounts, we will
have one more piece of evidence that "our" representatives have no
sympathy for the American people.

Where were America's leaders while the economy slipped over the precipice?

Our leaders were telling us lies in behalf of special interests into
whose pockets Washington was pouring the taxpayers' money.  Our leaders
engineered wars that put billions of dollars into such disreputable
pockets as Halliburton's, the firm of the American outlaw, Dick Cheney,
and into Blackwater, supplier of the overpaid mercenaries that the Bush
Regime uses to beef up its military force in Iraq.  Some of the
taxpayers' billions, of course, recycled into "our" representatives
reelection campaign funds.

Our leaders were too busy making trips to Israel to reaffirm their
support for Israel's ongoing theft of Palestine and for wars that enable
this theft.

Our leaders were too busy serving financial interests by dismantling
regulatory barriers to over-leveraged greed.  The extraordinary level of
leveraged debt and the fraudulent financial instruments resulted in
annual compensation for hedge fund managers and investment bankers
larger than a king's ransom.

When the leveraged mortgages went bust, the banksters declared a
"crisis" and Congress responded by ripping off the American taxpayers
for another trillion dollars.

More is to come.  Credit card debt, car loans, and commercial real
estate mortgages have been securitized, too.  There is little doubt
there are derivatives based on this enormous pile of debt.  As each
"crisis" unfolds, it will mean more bailout rewards for the crooks who
deep-sixed the US economy.

It is not implausible that by the end of this year the unemployment
rate, honestly measured, will be as high as during the Great Depression.

Few in Washington think there is any cause for alarm.  Obama is calling
the situation "serious" not because he believes it is but in order to
get another trillion dollar "stimulus" package on the taxpayers' books.
 Stimulus will do the trick, economists say, and, moreover, the Federal
Reserve has already extended $2 trillion in loans, but won't say to whom
the money has been lent.

This massive expansion of new debt, economists think, is going to fix
the economy and put people back to work.  They think the solution to
excessive debt is more debt.

The federal government budget deficit for the 2009 fiscal year will be
$2 trillion at a minimum.  That is five times larger than the 2008
budget deficit.

How can the Treasury finance such a huge deficit?

There are three sources of financing.  Possibly people will flee from
stocks, bank deposits, and money market funds into Treasury
"securities".  This would require a form of "money illusion" on the part
of people.  People would have to believe that investments can be
printed, and that printing so many new Treasury bonds would not dilute
the value of existing bonds or reduce their chance of redemption.  They
would have to believe that the bonds would be repaid with honest money,
not by running the printing presses.

A second source of financing might be America's foreign creditors.  So
far in our descent into massive debt foreigners have footed the bill.
Our foreign creditors now hold very large amounts of US debt and other
dollar-denominated "securities".  They are likely to develop a case of
cold feet when they see a $2 trillion expansion in US debt in one year.
 Their most likely response will be to start selling their existing
holdings.

Who would purchase them?  The only way the Treasury can redeem the bonds
that come due each year is by selling new bonds.  Not only must the
Treasury find purchasers for $2 trillion in new debt this year but also
must find buyers for the bonds that must be sold in order to redeem old
bonds that come due.

If foreigners cease buying and instead start selling from their existing
holdings - China alone holds $500 billion in Treasury debt - a deluge
will fall on an already flooded market.

The third source of financing is for the Federal Reserve to monetize the
debt.  In other words, the Treasury prints bonds and the Fed purchases
them by printing money.  The supply of money thus expands dramatically
in relation to goods and services, and high inflation, possibly
hyperinflation, would engulf America.

At that point the US dollar, if still on its feet, collapses.  The
import-dependent American population, dependent on imports for their
mobility, their clothes, shoes, manufactured goods, and advanced
technology products, no longer will be able to afford these imports.

A scary scenario?  Yes.  Overdrawn?  Perhaps, but perhaps not. The
United States has spent the last seven years in pointless wars that
benefited only the military-security complex and Israel's aggression
against Palestinians and Lebanon.  According to prominent experts, the
out-of-pocket cost and already incurred future liabilities of Bush's
wars comes to $3 trillion.

The cost of the Bush Regime's wars, together with the 2009 budget
deficit that Bush has bequeathed to Obama, equals half of the
accumulated national debt of the United States.

Several years ago United States Comptroller General David Walker
informed Congress and the White House that the accrued liabilities of
the US government exceeded the ability to pay. Yet, "our" leaders
ignored the Comptroller General and rushed headlong to add more
trillions of dollars to federal liabilities.  In effect, the United
States is bankrupt at this present moment.  According to generally
accepted accounting principles, the federal government has a negative
net worth of $59.3 trillion.

Who is going to lend to a bankrupt government that is ruled by financial
crooks, the military-security complex, and the Israel Lobby?  How long
will the world finance US aggression that disrupts energy prices, keeps
the world on edge, and makes America's creditors complicit in war crimes?

_____

Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan
administration. He is coauthor of The Tyranny of Good Intentions (2000).
He can be reached at PaulCraigRoberts at yahoo.com

http://www.counterpunch.org/roberts01122009.html

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