Armageddon, or not?

Martin Weiss has written an article this week entitled 'Armageddon' in which he half-describes the absolutely horrific scenario about to play out for Americans as a consequence of the harsh 'medicine' - imminent and 'unavoidable' interest rates hikes - to fix the disease of American debt.

"If you thought Wall Street’s debt crisis was traumatic, wait till you the see the consequences of Washington’s debt crisis! Never before in history has a world power like the U.S. been so utterly buried in debt! And never before has that debt been financed so massively by foreign investors![1]

This analysis strikes me as all very strange. Weiss treats America’s debt problem as if –in the most critical sense - it mostly lives in a vacuum. But this is clearly not the reality. We live in a ‘globalised’ world and globalization is, after all, the process of America’s cultural, political, and economic integration of nation states throughout the world. Those ‘foreign investors’ who Weiss claims funds the American debt may not be so ‘foreign’ at all.

Weiss' article is notable for what is missing. I therefore list a few of my own observations and questions related to America’s debt crisis:

(i) What constitutes a ‘foreign’ investor? It has never been so important to identify who these people are. Who precisely is America is indebted to! Have they been the very recipients of US taxpayer-funded bailouts over the last year and (in fact) decades? Are they, for instance, the propped-up foreign subsidiaries and/or American ‘foreign’ investors in Goldman Sachs, Citigroup, Bank of America and other gigantic money center banks? Or American citizens invested in the foreign subsidiaries of other receivers of American generosity such as General Electric, AIG, General Motors and many others?

(ii) This is a time of extraordinary inequality. A disastrous economic and social outcome – ‘armagedon’ – would certainly come if even further rewards are given to the very tiny minority of individuals who already hold the vast majority of America’s financial wealth. In September 2008 it was noted by Forbes Magazine that the richest 400 Americans had a combined net worth last year of $1.57 trillion. “Less than 10 percent of this vast fortune could resolve the combined budget deficits of 46 states” said Tom Eley [2]. He added, “None of the states are planning increases in taxes on the wealthy.”

(iii) It is quite arguable that the crisis itself came about in the first instance through the process of Governments actively choosing winners and losers in the economy. The US Government, through the Federal Reserve and other agencies, has never imposed its economic discipline equally on everyone. Poorer nations, labor and small enterprises have been consistently scapegoated in one economic crisis after another. This led to the predicament of ‘too big to fail’ and things have clearly fallen apart from there.

(iv) The US Government sets global interest rates by virtue of its hegemonic position [3]. A rise in interest rates in America portends a rise in global rates. Mobile capital will always seek the place of highest return. How can the rest of the world finally disengage from the American governments fiscal and budgetary irresponsibility?

Martin Weiss concludes by urging Americans to ‘bite the bullet’ and accept the ‘sacrifices’. “Ultimately, there is NO choice” he says.

“We must bite the bullet. We must make the sacrifices. Like California and Greece … like every household and any company … our government MUST cut back and accept the rest of the consequences.”

But there is a choice. America and the world can reform its monetary and economic system. It, and other governments, can stop picking the rich as the winners. Non-elected central banks and government agencies need to be required to work in the public and global interests. Elected representatives need to do their job and ensure that regulation and processes of accountability occur. This is a large topic. More on this later.

It is apt for governments to be required to enhance the economic prospects for the many rather than safeguard the accumulated wealth of a few.[4]

“The Roots of Violence:
Wealth without work,
Pleasure without conscience,
Knowledge without character,
Commerce without morality,
Science without humanity,
Worship without sacrifice,
Politics without principles.”

Mohandas K. Gandhi

REFERENCES:
[1] Armageddon by Martin D. Weiss, Ph.D. 02-22-10
http://www.moneyandmarkets.com/armageddon-10-37926

[2] US states’ budget crisis sets stage for new attack on the working class
By Tom Eley. last update 29/06/2009 15:50
http://uruknet.com/?p=m55537&hd=&size=1&l=e

[3] A position America gained through its Wall Street banking cartel, its reserve currency status and through general cultural and military infiltration around the globe. This situation is changing but American dominance around the world remains in place.

[4] And how has much of that wealth been accumulated to begin with? Naked Capitalism has a revealing article posted this week describing the financial vulture behaviour of Goldman Sachs and its link to the sovereign debt crisis of Greece:
Auerback/Wray: Memo to Greece: Make War, Not Love, With Goldman Sachs
Monday, February 22, 2010

http://www.nakedcapitalism.com/2010/02/auerbackwray-memo-to-greece-make-war-not-love-with-goldman-sachs.html