The Fall of the American "Empire"
David Walker, the comptroller general of the US, is sounding a warning about the financial health of the US economy. He even goes so far as to compare the US to Rome.
Drawing parallels with the end of the Roman empire, Mr Walker warned there were “striking similarities” between America’s current situation and the factors that brought down Rome, including “declining moral values and political civility at home, an over-confident and over-extended military in foreign lands and fiscal irresponsibility by the central government”.
By now the reasons for our situation are all too familiar. Fiscal debts paid for by foreign central banks, underfunding of healthcare programs, an aging population, a neglected infrastructure, etc. And he doesn't even mention the upcoming oil shortage and climate warming.
The adults have left the building. The fundamental problem with unfettered capitalism is that its horizon of concerned can be measured in months not years. What happens to our children and their children are of no concern to them. All that matters is profits, profits made today. In a capitalist environment with no regulation there is no concern for risk or the impact on the nation as a whole. The subprime meltdown illustrates this perfectly. They gave loans to people who couldn't afford them, and in the case of Ameriquest committed fraud to get approval for the loans. Then they try and rid themselves of the risk by bundling the loans and selling them as financial products that aren't properly evaluated or vetted.
Greedy investors always chasing the quick buck and more yield suck the crap up. And now when people can't pay back their loans and the whole scam starts to unravel they start crying that the Fed needs to bail them out. Yeah, all these rich capitalists become socialists when its their money thats going down the drain. So far central banks have pumped about 200 billion of liquidity into the markets trying to stem the panic. But in fact the government by way of Greenspan is just as responsible for this latest bubble that is bursting. By continually keeping interest rates low and promoting such things as variable rate mortgages he promoted an economy based on increasing debt.
For the last 5-6 years the economy has been kept afloat by the housing bubble and the extraction of equity from the ever increasing valued houses. Mistaking the increased value of their houses as money, people took out second mortgages or credit lines for vacations, boats or whatever. Of course the value of houses would always o up right? Even though young professionals were having increased trouble affording these now more expensive houses. Not a problem! The banks will finance 100% and we'll even let you pay a reduced rate for a couple of years.
Now people are finding out that the money they got from their house was, gasp, actually credit that someone wanted paid back. Well now we are at the point that many people have predicted for a long time. The consumer whose wallet and credit cards have carried this economy are now up to their eyeballs in debt, with stagnating wages, increased energy costs and increased food prices. Items like milk, eggs, meat are increasing in price by about 10-12% per year. But since they are increasing in price they are not included in the Feds estimate of inflation. Thank you president Clinton.
Meanwhile our federal deficit is now being funded almost exclusively by foreign central banks. The latest figures indicate that there is little private foreign investment coming into the country. Do you really expect countries like China nd Russia to continue to buy our paper given our actions in Iraq and else where. The argument has always been that if say China stopped buying US paper or starting dumping their dollar assets for other currencies they would take a big "hit" on the value of their holdings. But what happens when their long term interests, eg securing oil from Iran, are compromised by American actions. Maybe they will decide to take the short term hit for long term gain.
Ask yourself what does the US produce, make etc that the rest of the world really needs. We have little oil or resources and don't manufacture much, except weapon systems. Globalization means that American labor is nothing special and in fact is too expensive. Because of the US's dependence on the kindness of strangers to supply the cash to keep the country going, the US is not completely in charge of its own destiny.
Imperialism financed by credit cards is not a long term plan. Its going to be really ugly. Bush and the Republicrats plan to save the country by militarily securing the better part of the worlds energy sources so they can continue their economic terrorism, forcing countries to hand over their money to prop up our fundamentally unsound economy will only lead to misery of many including us.