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The U.S. is slipping into a debt-induced recession from which we’re assured that more debt is the remedy.

Only when Americans grasp the internalized source of this subtle warfare can we prevail over this enemy within.

At the close of World War II, the U.S. was home to 50% of the world’s productive power. That economic strength assured America’s dominant financial position for at least two decades. That strength included the ability to issue the world’s top-rated bonds.

Look at us now.

The financial cost to the U.S. of wars in Iraq and Afghanistan is projected to top $3 trillion-all of it borrowed. The interest expense alone could reach $700 billion.

The U.S. Congress is debating whether to authorize the borrowing of $700 billion to extend Bush-era tax cuts for another decade.

At this pace, annual interest payments on the debt could top $1 trillion by 2020. In 1980, the total federal debt was $900 billion.

The greater the debt, the greater the Wall Street skim. Bond traders don’t care whether markets rise or fall. So long as markets move, they make money.

Thus the financial appeal of warfare, a proven debt creator. Likewise the allure of crises and even perceived crises as either will move financial markets. Thus too the tragic logic of warfare-from the creditor’s perspective.

Funds lent for war generate output that does not compete with other goods and services. It was not the New Deal but WWII that put America back to work and ended the Great Depression.

Thus the recent appeal by veteran Washington Post columnist David Broder when he proposed war with Iran as a strategy for reviving the U.S. economy.

Governed By Debt

As the strongest currency of the post-WWII era, the U.S. dollar was destined to emerge as the dominant reserve currency for global trade. That result was fully foreseeable by those sophisticated in trade and finance.

America’s productive might ensured that U.S. bonds would set the standard for debt as a safe financial security. In 1971, our creation of debt was unleashed from physical limits when we abandoned precious metals as security for the dollar.

Within the decade, a purported fiscal conservative (Ronald Reagan) championed an investment stimulus that was projected to expand the federal debt by $872 billon at a time when total securitized debt was $900 billion

Known as “supply-side” economics, this deficit-financed subsidy set off a frenzy of debt that fueled leveraged buyouts (LBOs), the leveraging of savings and loans, the overvaluation of dotcom companies and, most recently, the subprime mortgage meltdown.

By 2008, combined private and public debt topped $50 trillion plus another $50 trillion in unfunded liabilities. While LBO artisans leveraged private sector balance sheets, specialists in public debt turned to politics to leverage the nation’s fiscal balance sheet.

With trust by then the primary collateral for U.S. debt, America’s credibility became a strategic vulnerability. With our ‘full faith and credit’ in the crosshairs of transnational financial sophisticates, the U.S. soon became financially ungovernable.

With American IOUs now growing at $100 billion per month secured by a sputtering economy growing at $50 billion per month, that faith is faltering and our credit crumbling.

Self-Correcting Systems?

The source of this threat is difficult to see because the weaponry deployed is the shared mindset with which we’ve been seduced to do our seeing.

At the risk of over-simplification, the mindset is this: money is smarter than people. Just let money to do what money does best and stand aside.

No need to worry about trade deficits that the U.S. amassed with China. According to Nobel Prize economist Milton Friedman, those imbalances will “self correct.”

The same mindset rationalized the sustained loosening of credit by Federal Reserve chairman Alan Greenspan. While enabling and praising what he called “financial creativity,” he assured Americans that capital markets would “self correct” any imbalances.

How did this deceit succeed? How was self-governance displaced by a money-myopic mindset touted as self-correcting?

America was seduced by an education curriculum in which this narrow viewpoint was imbedded. Then we were induced to comply by policies granting this mindset the force of law. To financial sophisticates, the results were foreseeable.

Finance: The One True Faith

China is now recycling U.S. purchasing power to build a world-class navy, nurture allies and invest in commodities. Meanwhile we Americans hold steadfast to our faith in financial securities.

This mindset is now branded globally as the U.S.-discrediting “Washington” consensus as the World Bank Group (led by an American since 1946) insisted that emerging economies embrace a worldview that has served us poorly and them worse.

With deference granted the creditor, debtors must adjust-no matter what the cost. The greater the debt, the greater the creditor’s influence-and the greater the skim.

The U.S. is slipping into a debt-induced recession from which we’re assured that more debt is the remedy. Only when Americans grasp the internalized source of this subtle warfare can we prevail over this enemy within.

Jeff Gates is author of Guilt By Association – How Deception and Self-Deceit Took America to War. He served for seven years as counsel to the U.S. Senate Committee on Finance. He is widely published in the trade, popular and academic press.  His Website: http://www.criminalstate.com His latest book is Guilt by Association: How Deception and Self-Deceit Took America to War. His previous books include Democracy at Risk: Rescuing Main Street From Wall StreetThe Ownership Solution: Toward a Shared Capitalism for the 21st Century.

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3 Comments

  1. Rehmat on the 08. Dec, 2010 remarked #

    Almost every ISM (Capitalism, Communism, Socialism, Nazism, Zionism, Fascism, etc.) – has been created and maintained to serve the interests of a small rich minority and their not-so-rich collaborators. All these ISMs have been worshipped and protected like some divine religions. The high priests (mostly Jews), who conceived these ISMs, made sure that their doctrine is accepted blindly by the great majority of world’s middle-class and poor people.

    The rich and parasites, who have been the main beneficiary of capitalist system – also created wage-disparity, bankruptcy, loan, paper-money, credit cards, and world monetary organizations like World Bank, IMF, Frderal Reseve, etc. – to keep their grip over world monetary system, so much so, that during every recession – it’s the poor majority which suffers, while the rich become richer on the expense of their victims – the taxpayers.

    Capitalism is based on shear philosophy of loot – where the major shareholders of banking institutes take public money (deposit) against lower interest rates and then loan the same money (invest) to businesses and individuals against much higher interests rates to earn profits. The projectors of this system call it ‘the risk taking’ – that if banks’ investment suffer a loass – the depositor is still ensure of his/her ‘profit’ in the shape of interest. However, in practice it never happens that way. The bank loss is always covered by ‘low or no annual raise’ for the employees or some additional ‘service charges’ to the customers – or the banking institution declaring an outrght bankruptcy- which is usually put on the taxpayers’ shoulders – for the fear of more layoffs and thus increased unemployment – while the rich bank shareholders keep receiving their fat salaries and annual bonuses.

    Americans have a long history of recessions – but ironically, the fat fish always emerged from them – more fat than before the recession. During the 1930s US recession – 10 million Americans became unemployed while approximately 30 million Americans were without any income at all. However, US president Hoover in his self-denial declared: “Nobody is actually starving.” In the 1970s, American went through another recession as result of OPEC raising the price of crude oil (for America’s blind support for Israel) – resulting in greater trade deficit of tens of billions a year to pay for the additional cost of oil imports. Then came the Black Monday – on October 19, 1987 – the great crash on the stock market – evaporating of US$900 billion in stocks within a few days.

    According to Federal Reserve, in 1990 – the richest one percent of US owned 40% of its wealth – while the richest 20% owned 80% of America – meaning that 80% of Americans only owned only one fifth of country’s wealth.

    While Bush administration’s War on Terror for Israel and American arms and oil industries is about to reach US$1 trillion mark – American taxpayers’ are asked to bailout the same crooks, most of whom were behind the Amercan invasion of Afghanistan, Iraq and now are demanding that more US soldiers die in Iran for the sake of Zionist entity.

    The Wall Street is full of Jewish billionaire and millionaire crooks, who while milking the less fortunates for decades – are now benefiting the most from ‘bailouts’ handed over to them in several western governments. One of such crooks is Bernard Madoff, a billionaire Jew from New York, who engineered a US$50 billion fraud including US$600 million from Jewish Charities!!

    You may wonder how the ‘bailout’ money is being spent by the ‘Capitalist parasites’? Matt Apuzo of Associated Press explains how the cat is skinned!

    “With US$30 billion per year, world hunger (923 million including 10.5 million Americans) could be eliminated,” – Director General, UN Food & Agriculture Organization, Report, June 2008. In other word’s Bush Zionist-administration’s initial US$700 billion to Wall Street’s Zionist parasites would have ended world hunger for 23 years.

    Capitalism is so out of control it’s no longer possible to bring it under control. Blood transfusions cannot revive a dead body, nor can infusions of make believe money reanimate a dead system. As Capitalist system is dying – world leaders have to fashion a new monetary system which could serve humanity and respect nature, rather than simply use and abuse them to generate wealth for a minority of parasite crooks.

    It should be clear to any sensible person that to base an economy on interest (Usury) is a pretty stupid way of servicing a nation’s need to produce, consume and trade. It results in the evils of inflation, unemployment, decline of services, trading war, and finally, shooting-wars. Using interest rates as a means to control the problems of a nation’s economy is futile, as these problems were created by interest in the first place. Only when a government creates its own money supply free of charge to the nation to facilitate production, consumption and trade, instead of authorising private banks to create the nation’s money and then holding the nation at ransom by breaking its back under the ensuing interest debt, only when we get back to a system where the usurer is not being rewarded for taking advantage of others’ difficulties, will we achieve real prosperity.

    Islam, often laughed at for sticking to its principles and not “moving with the times”, has never given in to the demands of the money-lenders to change its tough stance on interest. While Islam has increasingly been attacked by the western/Zionists’ financial interests behind today’s media and politics – these Islam-bashers hate to admit that Ursury was also forbidden in the original teachings of Moses (as) and Jesus (as).

    Islamic law (Shari’ah) regulates both methods by which money may be earned and also the ways it may be spent. Acquisition of wealth is permissible only in ways which are just to all parties concerned; exploitation, arbitrary taxation, and individual profit resulting in social harm is not permissible in Islamic law. This puts numerous restrictions on business practices utilized to make profits. For example, polluting the environment, or selling products which lead to moral corruption would not be permissible in Islamic law. Wealth which has been acquired becomes private property, which is both a trust and a test according to Islamic concepts. The “trust” aspect means that property must be used in ways beneficial to the individual and society. The “test” aspect means that those who have more than they need should take care of those who are in need. Ways in which acquired wealth can be spent is also subject to Islamic law. People are expected to strive to be self-sufficient and not ask from others. Thus striving to acquire wealth and spending it on personal and family needs is encouraged by Islamic law. Islam does not preach austerity and encourages a comfortable standard of living. At the same time, it strongly discourages spending on idle desires, luxuries, and ostentation. There is also a strong encouragement to spend what is beyond ones needs on social welfare. These fundamental principles for acquiring wealth, using property (acquired wealth), and spending it impact on all realms of economic activity.

    The primary objective of an Islamic state is to provide justice, and Islamic public finance is concerned with tracing the concrete implications of this abstraction in the economic realm. Western financial institutions have the acquisition and multiplication of wealth as their prime objective. Since acquisition of wealth can only be a means to an end, these institutions require modification in an Islamic society. Similarly, Islamic imperatives for social welfare require construction of certain uniquely Islamic types of institutions which do not have counterparts in the West.

    Looking at the evidence with an open mind, however, it should not take one long to realize that Islam makes sense, and Capitalism doesn’t.

    Sayyid Abul Ala Maududi (d. 1979), with his deep understanding and first-hand knowledge of the Capitalists, Socialists and Fascists idealogies – he highlighted his thoughts on Islamic political, economics and social dimension of Islam in his book entitled: Tafhimat, al-Jihad fi al-Islam and Tanqihat.

    http://rehmat1.wordpress.com/2008/12/28/capitalism-parasites-golden-calf/

  2. Atheo on the 08. Dec, 2010 remarked #

    The notion that WWII ended the depression is a warmonger’s myth.

    In actual fact the depression ended, for America, only after it defeated the axis powers and destroyed their productive capacity. This forced them to buy American for over a decade while they rebuilt.

    The lesson is that wars can possibly create economic growth for the victor but only in the event of total victory in which they destroy most of the productive capacity of the entire world.

    In general war is a lose/lose proposition that those who value economic growth should want to avoid at all costs.

    Examples that prove my point are plentiful. During the endless Cold War era wars (Vietnam and Afghanistan) the USSR and the US saw economic malaise while Germany and Japan prospered due to investment in productivity rather than destructive capacity.

  3. Ross on the 08. Dec, 2010 remarked #

    Under normal conditions about $8000 for every working person is added to the US economy by the The Federal Reserve to equal inflation and increases in GDP.By virtue of creating this money in their computers the Fed owns the increases in GDP belonging to all the US people.To add insult to injury this money is then loaned at interest back to the US people who end up paying 3 times this amount.

    Inflation dilutes the value of a currency and this is what Ron Pul means when he calls the Fed counterfeiters.

    New money should be created as a tax credit rather than as debt.In the USA,the amount of money in the economy is equal to the amount of debt.It cannot ever be repaid.The derivative bubble is said to worth $1000 trillion.This is almost 67 times the GDP of the USA.How many good stocks are tied up in this scam?Many people have already lost half the values of their pension funds.The money did not disappear.It was condensed into fewer hands.

    To escape their treachery the kleptocracy are pushing for war and make more profits from more human misery.

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