printIt is undeniable that, for better or for worse, economist Paul Craig Roberts is a fiercely independent thinker. Make up your own mind, but I have long agreed that America’s outsourcing and trade deficits—the last being emblematic of a consumer society—are a sickly specter, although I shun Roberts’ illiberal recommendations:
“The main cause of this decline is the offshoring of U.S. high value-added jobs. Both manufacturing jobs and professional services, such as software engineering and information technology work, have been relocated to countries with large and cheap labor forces.
The wipeout of middle-class jobs was disguised by the growth in consumer debt. As Americans’ incomes ceased to grow, consumer debt expanded to take the place of income growth and to keep consumer demand rising. Unlike rises in consumer incomes due to productivity growth, there is a limit to debt expansion. When that limit is reached, the economy ceases to grow.
The immiseration of working people has not resulted from worsening crises of overproduction of goods and services, but from financial capital’s power to force the relocation of production for domestic markets to foreign shores. Wall Street’s pressures, including pressures from takeovers, forced American manufacturing firms to “increase shareholders’ earnings.” This was done by substituting cheap foreign labor for American labor.
Corporations offshored or outsourced abroad their manufacturing output, thus divorcing American incomes from the production of the goods that they consume. The next step in the process took advantage of the high-speed Internet to move professional service jobs, such as engineering, abroad. The third step was to replace the remains of the domestic workforce with foreigners brought in at one-third the salary on H-1B, L-1 and other work visas.”
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Our “moonbat” frequent poster will no doubt agree with the following Robert’s assessment:
What is happening is that the hundreds of billions of dollars in TARP money given to the large banks and the trillions of dollars that have been added to the Federal Reserve’s balance sheet have been funneled into the stock market, producing another bubble, and into the acquisition of smaller banks by banks “too large to fail.” The result is more financial concentration.
The expansion in debt that underlies this bubble has further eroded the U.S. dollar’s credibility as reserve currency. When the dollar starts to go, panicked policy-makers will raise interest rates in order to protect the U.S. Treasury’s borrowing capability. When the interest rates rise, what little remains of the U.S. economy will tank.
Much has been written about China’s military expansion, but also of it’s interest in asymmetrical warfare. China can certainly go on with this costly buildup, but the US has presented it with a far more potent weapon. Just imagine that in some future conflict, China was to drop the ‘Dollar bomb’, using its immense holdings to have it crash on the world market. People blithely assume they’d never do that, as if the cost of this tactic was higher than that of a conventional large-scale conflict with the US. Untold damage could be visited on the US, far worse than any kind of attack short of a nuclear conflict. Coupled with an all out cyber-attack, defeat would be certain, and catastrophic
“Just imagine that in some future conflict, China was to drop the ‘Dollar bomb’, using its immense holdings to have it crash on the world market.” Michel
Maybe we should decentralize out of the dollar before then? What if American business used a variety of monies, backed by say, the common stock of banks that issue them?
Impossible? All it would take would be the revocation of legal tender laws that force us to use the dollar.
Doesn’t anyone get it? Centralized power makes it easy for evil suceed. The Lord does not need a hierarchy!
For Michael C: China seems to be very slowly (and smartly) converting towards more Euros and gold.
As for militarism, the phenomenology since 1949 seems to indicate that the US is more of an aggressor nation world-wide than China is. China is interested in its own neighborhood (unlike the US who cares not a hoot of its own border) while the US stomps around in every remote corner (Somalia, Haiti, Afghanistan, for example).
Michael Cloutier’s remark reminded me of a line from the Texas S&L crisis of the 1980s.
If I owe you a dollar, it’s my problem.
If I owe you a million dollars, it’s your problem.
It’s China’s problem now.
Not Uncle Sam’s.
China is going to have to increase domestic demand in order to sop up its excess manufacturing capacity and to pacify its unemployed and underemployed.
Here’s another line I remember from one of my undergraduate finance professors: “If I (the professor) had a retarded son I would make him a banker.”
Betcha China’s central bankers are just as dumb as the rest of the world’s.
Time will tell.
A small note if I may: the Dollar isn’t “going to crash”, it is already driving into a wall, so to speak. This can easily be witnessed when we look at exchange rates. Poor moi charges his American clients $30/hour, but what we need to realize is that three months ago, it equated to ZAR250/hour, now, it comes to ZAR219/hour. That’s a 14% drop in three months. And that against a relatively volatile currency such as our’s.
I remember a few years ago, Stanley Tools moved their administration to the Islands (Jamaica or Bermuda, I think) simply because they could not manufacture tools in the US as a US company because of the taxes involved. They had a choice if they wanted to survive, Keep the administration in the US and outsource manufacturing or vice versa. They choose to outsource administration so to speak, thus saving US Worker’s Jobs. Congress lambasted them for trying to get out of paying “Their fair share.” (In the US 40 percent plus the hidden taxes in every purchase verses a maximum of 18 percent in Bermuda) and refused to discuss with the commentator the idea that lower taxes might enable US companies to remain US companies. Plus forigen companies that invest in the US, get breaks that US companies don’t. We need to remember that Tax havens (Outsources) exist because they’re necessary as much or more than just convenient. Congress needs to accept the blame as much as Wall street and the banks.
Speaking of printing money – here is a good thought from that old pacifist communist, Dwight Eisenhower:
“Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a THEFT from those who hunger and are not fed, those who are cold and are not clothed.” – Dwight Eisenhower, 4/16/53
http://millercenter.org/scripps/archive/speeches/detail/3357
Dr. Roberts’ penultimate paragraph is even better. “If the government cannot borrow, it will print money to pay its bills. Hyperinflation will hit the American population. Massive unemployment and massive inflation will inflict upon the American people misery that not even Marx and Lenin could envisage.”
Our government borrows money to finance daily operations, which include paying the interest on money borrowed in the past. So government debt can only increase. I’m no economist, but that can’t go on forever, can it?