The Game is Over. There Won't be a Rebound

[Crewleader]

An Interview with Michael Hudson on the Economy

The Game is Over. There Won't be a Rebound

By Mike Whitney

Mike Whitney: Fed chairman Bernanke has been on a spree lately, delivering three speeches in the last two weeks. Every chance he gets, he talks tough about the strong dollar and "holding the line" against inflation. Treasury Secretary Henry Paulson even said that "intervention" in the currency markets was still an option. Is all of this jawboning just saber rattling to keep the dollar from plummeting, or is there a chance that Bernanke actually will raise rates at the Fed's August meeting?

Michael Hudson: The United States always has steered its monetary policy almost exclusively with domestic objectives in mind. This means ignoring the balance of payments. Like the domestic U.S. economy itself, the global financial system also is all about getting a free lunch. When Europe and Asia receive excess dollars, these are turned over to their central banks, which have little alternative but to recycle these back to the United States by buying U.S. Treasury bonds. Foreign governments – and their taxpayers – are thus financing the domestic U.S. federal budget deficit, which itself stems largely from the war in Iraq that most foreign voters oppose.

Supporting the dollar’s exchange rate by the traditional method of raising interest rates would have a very negative effect on the stock and bond markets – and on the mortgage market. This would lead foreign investors to sell U.S. securities, and likely would end up hurting more than helping the U.S. balance of payments and hence the dollar’s exchange rate.

So Bernanke is merely being polite in not rubbing the faces of European and Asian governments in the fact that unless they are willing to make a structural break and change the world monetary system radically, they will remain powerless to avoid giving the United States a free ride – including a free ride for its military spending and war in the Near East.

http://www.counterpunch.org/whitney06212008.html

[pansypoo53219]

1. i just found a 'nixon penny' at an estate sale.

it is a tad bigger than 1/4 inch big. wonder how big georgee's would be in comparison.

[Mr_Jefferson_24]

2. From the piece:

Michael Hudson: In academic economic terms, America has never been in as “optimum” a position as it is today. That’s the bad news. An optimum position is, mathematically speaking, one in which you can’t move without making your situation worse. That’s the position we’re now in. There’s nowhere to move – at least within the existing structure. “The market” can’t be stabilized, because it was artificial to begin with, based on fictitious prices. It’s hard to impose fiction on reality for very long, and the rest of the world has woken up.

In times past, bankruptcy would have wiped out the bad debts. The problem with debt write-offs is that bad savings go by the boards too. But today, the very wealthy hold most of the savings, so the government doesn’t want to have them take a loss. It would rather wipe out pensioners, consumers, workers, industrial companies and foreign investors. So debts will be kept on the books and the economy will slowly be strangled by debt deflation. . . .


All part of the continued gassing of the American middle class.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x3502658

----snip----

In closing, if you still have a middle class job in America (hey, even if you only haven't yet been packed off to our world's largest prison system for some trivial offense), you should be thinking about an interesting statistic. The survival rate in the Warsaw Ghetto in 1944 was higher than the survival rate in the concentration camps. Yes, the middle class's situation is hopeless at this point; but we can go out fighting instead of rolling over for the likes of Pelosi, Reid, Hoyer, and Rahm Emmanuel's DSCC.(footnote)

America is not the world. Long after the demise of middle class America, historians in parts of the world that remained civilized will ask how we could have been so docile, so stupid. The answers will include television, suburbia, and corn syrup. Those historians will praise people who futilely, but bravely, resisted, like the Warsaw fighters and the July bomb plotters. They will honor people who did human things in the midst of barbarism, like Schindler and Raoul Wallenberg. They will have nothing but contempt for "good fundamentalist Christian Americans".

People always have a choice. You still have the power to determine how you will be remembered. Use that power wisely.

DUer, arendt