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Empire versus Democracy: Why Nemesis is at the door of the USA

Last night I went to bed comparatively early. Having switched off the light, on went the radio – very softly – when I’m too tired to read I like to be talked to sleep. The time was 10:05pm, the program Late Night Live, a repeat of the program originally broadcast on 15 October 2007. In that program, Is America engaged in imperial over-reach?, Phillip Adams and Chalmers Johnson talked about Johnson’s latest book Nemesis: The Last Days of the American Republic, in which he compares the US’s present military behaviour with that of the Roman Empire, and warns that financial bankruptcy could herald the breakdown of constitutional government in America. Part of the conversation included a discussion of possible implications for Australia.

For anyone unfamiliar with Chalmers Johnson, he is a retired professor of Asian Studies at the University of California, San Diego. From 1968 until 1972 he served as a consultant to the Office of National Estimates of the Central Intelligence Agency. Nemesis is the final volume in his Blowback trilogy.

I have not yet read Nemesis, but Johnson’s The Sorrows of Empire (the second in the Blowback trilogy) has pride of place in my bookshelves. I would recommend anyone who didn’t hear LNL, either when it was originally broadcast or yesterday/today, to download the podcast and listen at leisure. Somewhat to my surprise, my partner, whose politics differ markedly from mine, heard the rebroadcast this afternoon and seemed to find some of the points made by Johnson compelling. In the meantime, here is Chalmers Johnson’s summary of his main arguments:

Empire v. Democracy

Why Nemesis Is at Our Door

By Chalmers Johnson

History tells us that one of the most unstable political combinations is a country -- like the United States today -- that tries to be a domestic democracy and a foreign imperialist. Why this is so can be a very abstract subject. Perhaps the best way to offer my thoughts on this is to say a few words about my new book, Nemesis, and explain why I gave it the subtitle, "The Last Days of the American Republic." Nemesis is the third book to have grown out of my research over the past eight years. I never set out to write a trilogy on our increasingly endangered democracy, but as I kept stumbling on ever more evidence of the legacy of the imperialist pressures we put on many other countries as well as the nature and size of our military empire, one book led to another.

Professionally, I am a specialist in the history and politics of East Asia. In 2000, I published Blowback: The Costs and Consequences of American Empire, because my research on China, Japan, and the two Koreas persuaded me that our policies there would have serious future consequences. The book was noticed at the time, but only after 9/11 did the CIA term I adapted for the title -- "blowback" -- become a household word and my volume a bestseller.

I had set out to explain how exactly our government came to be so hated around the world. As a CIA term of tradecraft, "blowback" does not just mean retaliation for things our government has done to, and in, foreign countries. It refers specifically to retaliation for illegal operations carried out abroad that were kept totally secret from the American public. These operations have included the clandestine overthrow of governments various administrations did not like, the training of foreign militaries in the techniques of state terrorism, the rigging of elections in foreign countries, interference with the economic viability of countries that seemed to threaten the interests of influential American corporations, as well as the torture or assassination of selected foreigners. The fact that these actions were, at least originally, secret meant that when retaliation does come -- as it did so spectacularly on September 11, 2001 -- the American public is incapable of putting the events in context. Not surprisingly, then, Americans tend to support speedy acts of revenge intended to punish the actual, or alleged, perpetrators. These moments of lashing out, of course, only prepare the ground for yet another cycle of blowback.

A World of Bases

As a continuation of my own analytical odyssey, I then began doing research on the network of 737 American military bases we maintained around the world (according to the Pentagon's own 2005 official inventory). Not including the Iraq and Afghanistan conflicts, we now station over half a million U.S. troops, spies, contractors, dependents, and others on military bases located in more than 130 countries, many of them presided over by dictatorial regimes that have given their citizens no say in the decision to let us in.

As but one striking example of imperial basing policy: For the past sixty-one years, the U.S. military has garrisoned the small Japanese island of Okinawa with 37 bases. Smaller than Kauai in the Hawaiian Islands, Okinawa is home to 1.3 million people who live cheek-by-jowl with 17,000 Marines of the 3rd Marine Division and the largest U.S. installation in East Asia -- Kadena Air Force Base. There have been many Okinawan protests against the rapes, crimes, accidents, and pollution caused by this sort of concentration of American troops and weaponry, but so far the U. S. military -- in collusion with the Japanese government -- has ignored them. My research into our base world resulted in The Sorrows of Empire: Militarism, Secrecy, and the End of the Republic, written during the run-up to the Iraq invasion.

As our occupations of Afghanistan and Iraq turned into major fiascoes, discrediting our military leadership, ruining our public finances, and bringing death and destruction to hundreds of thousands of civilians in those countries, I continued to ponder the issue of empire. In these years, it became ever clearer that George W. Bush, Dick Cheney, and their supporters were claiming, and actively assuming, powers specifically denied to a president by our Constitution. It became no less clear that Congress had almost completely abdicated its responsibilities to balance the power of the executive branch. Despite the Democratic sweep in the 2006 election, it remains to be seen whether these tendencies can, in the long run, be controlled, let alone reversed.

Until the 2004 presidential election, ordinary citizens of the United States could at least claim that our foreign policy, including our illegal invasion of Iraq, was the work of George Bush's administration and that we had not put him in office. After all, in 2000, Bush lost the popular vote and was appointed president thanks to the intervention of the Supreme Court in a 5-4 decision. But in November 2004, regardless of claims about voter fraud, Bush actually won the popular vote by over 3.5 million ballots, making his regime and his wars ours.

Whether Americans intended it or not, we are now seen around the world as approving the torture of captives at Abu Ghraib prison in Iraq, at Bagram Air Base in Kabul, at Guantánamo Bay, Cuba, and at a global network of secret CIA prisons, as well as having endorsed Bush's claim that, as commander-in-chief in "wartime," he is beyond all constraints of the Constitution or international law. We are now saddled with a rigged economy based on record-setting trade and fiscal deficits, the most secretive and intrusive government in our country's memory, and the pursuit of "preventive" war as a basis for foreign policy. Don't forget as well the potential epidemic of nuclear proliferation as other nations attempt to adjust to and defend themselves against Bush's preventive wars, while our own already staggering nuclear arsenal expands toward first-strike primacy and we expend unimaginable billions on futuristic ideas for warfare in outer space.

The Choice Ahead

By the time I came to write Nemesis, I no longer doubted that maintaining our empire abroad required resources and commitments that would inevitably undercut, or simply skirt, what was left of our domestic democracy and that might, in the end, produce a military dictatorship or -- far more likely -- its civilian equivalent. The combination of huge standing armies, almost continuous wars, an ever growing economic dependence on the military-industrial complex and the making of weaponry, and ruinous military expenses as well as a vast, bloated "defense" budget, not to speak of the creation of a whole second Defense Department (known as the Department of Homeland Security) has been destroying our republican structure of governing in favor of an imperial presidency. By republican structure, of course, I mean the separation of powers and the elaborate checks and balances that the founders of our country wrote into the Constitution as the main bulwarks against dictatorship and tyranny, which they greatly feared.

We are on the brink of losing our democracy for the sake of keeping our empire. Once a nation starts down that path, the dynamics that apply to all empires come into play -- isolation, overstretch, the uniting of local and global forces opposed to imperialism, and in the end bankruptcy.

History is instructive on this dilemma. If we choose to keep our empire, as the Roman republic did, we will certainly lose our democracy and grimly await the eventual blowback that imperialism generates. There is an alternative, however. We could, like the British Empire after World War II, keep our democracy by giving up our empire. The British did not do a particularly brilliant job of liquidating their empire and there were several clear cases where British imperialists defied their nation's commitment to democracy in order to hang on to foreign privileges. The war against the Kikuyu in Kenya in the 1950s and the Anglo-French-Israeli invasion of Egypt in 1956 are particularly savage examples of that. But the overall thrust of postwar British history is clear: the people of the British Isles chose democracy over imperialism.

In her book The Origins of Totalitarianism, the political philosopher Hannah Arendt offered the following summary of British imperialism and its fate:

"On the whole it was a failure because of the dichotomy between the nation-state's legal principles and the methods needed to oppress other people permanently. This failure was neither necessary nor due to ignorance or incompetence. British imperialists knew very well that 'administrative massacres' could keep India in bondage, but they also knew that public opinion at home would not stand for such measures. Imperialism could have been a success if the nation-state had been willing to pay the price, to commit suicide and transform itself into a tyranny. It is one of the glories of Europe, and especially of Great Britain, that she preferred to liquidate the empire."

I agree with this judgment. When one looks at Prime Minister Tony Blair's unnecessary and futile support of Bush's invasion and occupation of Iraq, one can only conclude that it was an atavistic response, that it represented a British longing to relive the glories -- and cruelties -- of a past that should have been ancient history.

As a form of government, imperialism does not seek or require the consent of the governed. It is a pure form of tyranny. The American attempt to combine domestic democracy with such tyrannical control over foreigners is hopelessly contradictory and hypocritical. A country can be democratic or it can be imperialistic, but it cannot be both.

The Road to Imperial Bankruptcy

The American political system failed to prevent this combination from developing -- and may now be incapable of correcting it. The evidence strongly suggests that the legislative and judicial branches of our government have become so servile in the presence of the imperial Presidency that they have largely lost the ability to respond in a principled and independent manner. Even in the present moment of congressional stirring, there seems to be a deep sense of helplessness. Various members of Congress have already attempted to explain how the one clear power they retain -- to cut off funds for a disastrous program -- is not one they are currently prepared to use.

So the question becomes, if not Congress, could the people themselves restore Constitutional government? A grass-roots movement to abolish secret government, to bring the CIA and other illegal spying operations and private armies out of the closet of imperial power and into the light, to break the hold of the military-industrial complex, and to establish genuine public financing of elections may be at least theoretically conceivable. But given the conglomerate control of our mass media and the difficulties of mobilizing our large and diverse population, such an opting for popular democracy, as we remember it from our past, seems unlikely.

It is possible that, at some future moment, the U.S. military could actually take over the government and declare a dictatorship (though its commanders would undoubtedly find a gentler, more user-friendly name for it). That is, after all, how the Roman republic ended -- by being turned over to a populist general, Julius Caesar, who had just been declared dictator for life. After his assassination and a short interregnum, it was his grandnephew Octavian who succeeded him and became the first Roman emperor, Augustus Caesar. The American military is unlikely to go that route. But one cannot ignore the fact that professional military officers seem to have played a considerable role in getting rid of their civilian overlord, Secretary of Defense Donald Rumsfeld. The new directors of the CIA, its main internal branches, the National Security Agency, and many other key organs of the "defense establishment" are now military (or ex-military) officers, strongly suggesting that the military does not need to take over the government in order to control it. Meanwhile, the all-volunteer army has emerged as an ever more separate institution in our society, its profile less and less like that of the general populace.

Nonetheless, military coups, however decorous, are not part of the American tradition, nor that of the officer corps, which might well worry about how the citizenry would react to a move toward open military dictatorship. Moreover, prosecutions of low-level military torturers from Abu Ghraib prison and killers of civilians in Iraq have demonstrated to enlisted troops that obedience to illegal orders can result in dire punishment in a situation where those of higher rank go free. No one knows whether ordinary soldiers, even from what is no longer in any normal sense a citizen army, would obey clearly illegal orders to oust an elected government or whether the officer corps would ever have sufficient confidence to issue such orders. In addition, the present system already offers the military high command so much -- in funds, prestige, and future employment via the famed "revolving door" of the military-industrial complex -- that a perilous transition to anything like direct military rule would make little sense under reasonably normal conditions.

Whatever future developments may prove to be, my best guess is that the U.S. will continue to maintain a façade of Constitutional government and drift along until financial bankruptcy overtakes it. Of course, bankruptcy will not mean the literal end of the U.S. any more than it did for Germany in 1923, China in 1948, or Argentina in 2001-2002. It might, in fact, open the way for an unexpected restoration of the American system -- or for military rule, revolution, or simply some new development we cannot yet imagine.

Certainly, such a bankruptcy would mean a drastic lowering of our standard of living, a further loss of control over international affairs, a sudden need to adjust to the rise of other powers, including China and India, and a further discrediting of the notion that the United States is somehow exceptional compared to other nations. We will have to learn what it means to be a far poorer country -- and the attitudes and manners that go with it. As Anatol Lieven, author of America Right or Wrong: An Anatomy of American Nationalism, observes:

"U.S. global power, as presently conceived by the overwhelming majority of the U.S. establishment, is unsustainable. . . The empire can no longer raise enough taxes or soldiers, it is increasingly indebted, and key vassal states are no longer reliable. . . The result is that the empire can no longer pay for enough of the professional troops it needs to fulfill its self-assumed imperial tasks."

In February 2006, the Bush administration submitted to Congress a $439 billion defense appropriation budget for fiscal year 2007. As the country enters 2007, the administration is about to present a nearly $100 billion supplementary request to Congress just for the Iraq and Afghan wars. At the same time, the deficit in the country's current account -- the imbalance in the trading of goods and services as well as the shortfall in all other cross-border payments from interest income and rents to dividends and profits on direct investments -- underwent its fastest ever quarterly deterioration. For 2005, the current account deficit was $805 billion, 6.4% of national income. In 2005, the U.S. trade deficit, the largest component of the current account deficit, soared to an all-time high of $725.8 billion, the fourth consecutive year that America's trade debts set records. The trade deficit with China alone rose to $201.6 billion, the highest imbalance ever recorded with any country. Meanwhile, since mid-2000, the country has lost nearly three million manufacturing jobs.

To try to cope with these imbalances, on March 16, 2006, Congress raised the national debt limit from $8.2 trillion to $8.96 trillion. This was the fourth time since George W. Bush took office that it had to be raised. The national debt is the total amount owed by the government and should not be confused with the federal budget deficit, the annual amount by which federal spending exceeds revenue. Had Congress not raised the debt limit, the U.S. government would not have been able to borrow more money and would have had to default on its massive debts.

Among the creditors that finance these unprecedented sums, the two largest are the central banks of China (with $853.7 billion in reserves) and Japan (with $831.58 billion in reserves), both of which are the managers of the huge trade surpluses these countries enjoy with the United States. This helps explain why our debt burden has not yet triggered what standard economic theory would dictate: a steep decline in the value of the U.S. dollar followed by a severe contraction of the American economy when we found we could no longer afford the foreign goods we like so much. So far, both the Chinese and Japanese governments continue to be willing to be paid in dollars in order to sustain American purchases of their exports.

For the sake of their own domestic employment, both countries lend huge amounts to the American treasury, but there is no guarantee of how long they will want to, or be able to do so. Marshall Auerback, an international financial strategist, says we have become a "Blanche Dubois economy" (so named after the leading character in the Tennessee Williams play A Streetcar Named Desire) heavily dependent on "the kindness of strangers." Unfortunately, in our case, as in Blanche's, there are ever fewer strangers willing to support our illusions.

So my own hope is that -- if the American people do not find a way to choose democracy over empire -- at least our imperial venture will end not with a nuclear bang but a financial whimper. From the present vantage point, it certainly seems a daunting challenge for any President (or Congress) from either party even to begin the task of dismantling the military-industrial complex, ending the pall of "national security" secrecy and the "black budgets" that make public oversight of what our government does impossible, and bringing the president's secret army, the CIA, under democratic control. It's evident that Nemesis -- in Greek mythology the goddess of vengeance, the punisher of hubris and arrogance -- is already a visitor in our country, simply biding her time before she makes her presence known.

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Inflation Of Hysteria

John Pratt: " Australia has inflation of 3.8 percent and we have a problem if the US rate is higher than Australia then surely they have a problem."

The examples I used were China, and India - not Australia. Inflation for both (China, India) is around 9%, and 11% respectively. The end of the year inflation forecasts for the United States is around 3.5%, within the reasonable band of 2% - 4% - very decent figures considering the current turmoil. If you are going to compare Australia just don't mention the interest rates -  and it's nice to see that you followed the rule.

Australia is close to parity with the US dollar. Australia is also a primary producing nation - take note of record prices. Australia very well (and probably will) be importing Chinese inflation in the very near term. Mess the next budget up, and Australia does indeed face difficulty.

Self-regulation has failed and the world is crying out for better financial governance.

Investors drive the regulatory environment, not governments - as Mr Greenspan made clear yesterday during an interview. The opinion of governments isn't material in this present situation. Investors have made it clear they are seeking better regulated instruments.

 David Roffey: "If any substantial proportion of the 2.4 trillion dollars in external claims on US treasuries were to be withdrawn, then the US would be unable to fund current expenditure from that day on. What do you think are the chances that troops will be out there doing their best if told that actually they aren't going to get paid this week/month/year?"

 Debt financing is carried out through the issuance of bonds. The funds cannot be withdrawn from the US Government - the bond is sold on the secondary market. The worst that can happen is that future bond issues are under-subscribed. There is also no small thing called fiscal policy - that is the ability to raise taxes, and cut government spending - so as to direct funds into things deemed priority. I suspect paying serving soldiers (bring them home and such lol); would fall into the priority category.

Geoff Pahoff: " That vast vigorous wealth producing machine called the US economy will boom again soon even while some sub-prime mortgage lenders, and their lenders, cop a well deserved almighty kick in the mouth.

Unlike Paul Craig Roberts, I'm guessing you don't quote Noam Chomsky? The above comment is just way too sensible. It should be an instant dismissal offence for any economist to quote Noam Chomsky - and probably; in the small print somewhere, it already is!

The System Is Working As It Should

When the Australian financial markets were deregulated in the eighties there was a kind of greed stampede. Foreign and domestic banks threw money around like drunken sailors and smart alecs in sharp suits could be seen tossing down fad foods and booze like nouveau cuisine and flaming sambucas all over town. They thought they were on a roll but in the end the run was shorter than pastel shirts and braces.

And the banks? They copped a well deserved almighty kick in the teeth. And Australia and its economy? We are enormously more prosperous for having gone through the deregulation.

And so it goes on. There have been urgent reports of the imminent demise of the US, the banks, the global economy, the international trade and monetary systems, the West, democracy, civil liberties, capitalism and so on for well over a century. Much of this is wishful thinking of course. It must leave a foul and bitter taste to see how resilient these things prove to be.

And so it will be with the US. The lower dollar will be of huge benefit to US manufacturers, producers and service providers as exports become more competitive and the domestic market buys at home in favour of abroad. That vast vigorous wealth producing machine called the US economy will boom again soon even while some sub-prime mortgage lenders, and their lenders, cop a well deserved almighty kick in the mouth.

The Party is over. We have high inflation and high interest rate

The central banking and governmental response to the crisis - showering unlimited liquidity and huge tax cuts onto the markets - is no solution if, quite apart from exacerbating moral hazard, it leads to higher inflation, a falling dollar and higher long-term interest rates. On the other hand, for the authorities to be blackmailed into saving the current international financial structure at any price is simply to invite the next crisis, only sooner and worse. If we are to escape this situation being repeated again and again, what is needed is a frank recognition, however painful, that self-regulation has failed spectacularly and that a new system of international financial governance is now urgently needed in which the re-regulation of banking must be the least requirement if government and taxpayers are to be expected to guarantee deposits.
Self-regulation has failed and the world is crying out for better financial governance.

Swan song

John Pratt, as I write this I am watching that idiot Wayne Swan on TV saying he is in step with with the Reserve Bank. He is prattling on about the "Genie is out of the bottle" and Kerry O'Brien is looking at him in disbelief. Swan is a twit.

Roberts The Ultra Clown

John Pratt

"Eliot, you may think this bloke is a joke but which part of his assertion that  the US is bankrupt do you disagree with?"

Personally I think Paul Craig Roberts is sadly now a joke. Sad because this person didn't start out this way, and he seems hell-bent on shredding any credibility, he once had.

Roberts proves the dangers of not only seeing, actively encouraging, views of the world through a hobby horse (truthful or not); his particular horse being he hates Bush - and it wouldn't surprise me if it goes all the way back to Bush Snr. Unfortunately Roberts does have some interesting things to say about economics, and his lunatic assertions, are not only destroying him, they are hurting people that may agree with some of these economic theories.

One look at one of the posted articles is enough to prove Roberts is not only mentally unsound; he uses selective figures, and percentages, and at times, outright misleading information to help along his bias. In simple terms; he uses figures that help his case, and he disputes figures from the same sources, that don't.

http://www.counterpunch.org/roberts03182008.html

A troubled currency and financial system and large budget and trade deficits do not present an attractive face to creditors. Yet Washington in its hubris seems to believe that the US can forever rely on the Chinese, Japanese and Saudis to finance America's life beyond its means. Imagine the shock when the day arrives that a US Treasury auction of new debt instruments is not fully subscribed.

Absolute misleading rot! Most US debt is internal debt - owed to American citizens, and entities (about 77% in fact), along with future spending promises (Roberts would know this). The entire debt to GDP is around 24%. In the fifties (the Roberts golden age) it was around 80%. Note also in that article Roberts does not use the percentage to GDP - and there's a good reason - it doesn't help his case. When in doubt baffle the plebs with numbers, eh, Paul Craig Roberts?

When the dollar ceases to be the reserve currency, the US will no longer be able to pay its bills by borrowing more from foreigners.

Most funds borrowed, aren't from foreigners, as I've already shown. Also take note: If the reserve currency were the reason for being able to pay debts; it would logically follow, that every single nation in the world (apart from the USA), must be in debt - without hope of repayment. Can people see how plainly idiotic, and cynical his above quote is?

The dollar has even collapsed in value against the euro, the currency of a make-believe country that does not exist: the European Union. France, Germany, Italy, England and the other members of the EU still exist as sovereign nations. England even retains its own currency. Yet the euro hits new highs daily against the dollar.

Not only does this clown have the USA bankrupt; he doesn't even believe the EU exists - and people are linking this idiot!

I sometimes wonder if the bankrupt "superpower" will be able to scrape together the resources to bring home the troops stationed in its hundreds of bases overseas, or whether they will just be abandoned.

No wonder this goose is writing for counterpunch (lol)!

A sliver of a takedown ...

Paul "Most funds borrowed, aren't from foreigners, as I've already shown"

You seem to be assuming that it would only be a problem if "most" funds were in doubt. But as bank and broker failures over the last few weeks have shown, you don't have to lose all of your funds for a takedown, you only have to lose more in withdrawals than you can cover from new income or new loans. If any substantial proportion of the 2.4 trillion dollars in external claims on US treasuries were to be withdrawn, then the US would be unable to fund current expenditure from that day on. What do you think are the chances that troops will be out there doing their best if told that actually they aren't going to get paid this week/month/year?

Sensible Investors Should Be Doing Their Book Work

John Pratt, there is no such thing as the perfect economic conditions - and the mistake (common) you're making is attempting to read said conditions in isolation. Conditions have changed markedly since the ending of the Cold War, and the emergence of globalization. The myth of de-coupling; is just that, a myth. The USA is still the main driver of the world economy, and it will continue as the main driver, for at least some time to come.

Eliot, if your thoughts on the US economy were right the Zimbabwean economy must be booming.

The USA doesn't at this point have an inflation problem. The inflation problem is in nation such as China, and India - in fact in most of Asia. If this situation continues over the long term; a reversal of roles is indeed a major possibility. If I were involved with the Chinese Fed I'd be most anxious for a floating currency - and the sooner the better.

Eliot, another example of why the US is in trouble.

The phrase "in trouble" presumes (wrongly) that the USA was in a solid situation. In fact far from being "in trouble" this is a perfect time for re-adjustment. Re-adjustment won't be without pain (it never is); however, it is a necessary feature of a stronger future economy.

I haven't been this excited about United Stocks for some time. I wouldn't be putting a buy recommendation on anything just yet, though, buying is a lot closer then it's further away.

 

 

Australia inflation 3.8% US inflation 4.3 % who has a problem?

Paul, "The USA doesn't at this point have an inflation problem."

The US has an inflation rate of over 4 percent.

The annual inflation rate for the 12 months preceding February was 4.03% down slightly from January's 4.28% and virtually identical to December's 4.08%.

For the last four months now, (beginning in November) we seem to be bouncing from just above 4% to around 4.3%. November was 4.31%which was up sharply from 3.54% in October and more than double Augusts' low of 1.97% .

If we look at the table (below right) we can see that September through November 2006 were all extremely low (negative) numbers which as they fell out of the calculation have been replaced by a fairly high numbers for 2007 culminating in November's negative -0.15% being replaced by a huge o.59%. In December we had a very slightly negative number to help bring down inflation. But in January we replaced a .31% with a .5% increasing the inflation rate slightly.

Australia has inflation of 3.8 percent and we have a problem if the US rate is higher than Australia then surely they have a problem.

Take off those rose coloured glasses.

That’s how Stephen Roach put it. The Morgan Stanley (NYSE:MS) economist is in today’s paper, explaining why the fall of the dollar is bad news. In its simplest form, a weaker dollar means it takes more dollars to buy things on the open market. This year, for example, Americans will probably buy about US$2.5 trillion worth of goods from overseas. They would get a lot more for their money if the dollar were stronger. Specifically, if the dollar were still worth what it was in 2002, they’d get 20% more. In other words, the dollar has lost 20% of its value – against most foreign currencies – in the last five years.

Against other things, also imported from overseas, the dollar has lost even more value. Zinc has gone up 60% in the last year alone. Nickel is up 125%. Over the last five years, oil has risen 158%. Wheat is 126% more expensive. And the aforementioned nickel has zoomed up 415%.

The dollar fell again yesterday – to another record low against the euro. You now have to pony up US$1.41 to buy a single euro.

Americans who think Bernanke’s easy money policy is going to save the economy need to think harder. Lower interest rates are supposed to make credit more abundant. But more credit, we argue, is just what the US economy doesn't need.

The Yankee dollar just ain't what it used to be.

First, developing countries now produce nearly half of all American imports. Second, inflation in these countries is coming at the same time that many of their currencies are rising against the dollar.

That puts American consumers in a double bind, paying at least some of producers’ higher costs for making their goods, and higher prices on top of that because the dollar buys less in those countries.

Eliot, another example of why the US is in trouble. 

Terms of trade

John Pratt: "The US dollar has fallen 17.2% since 2002."

Scott Dunmore, there's your answer as to how the Americans have shaved $100 billion off their current account deficit in the last couple of years.

Because while the American economy has continued to grow at about 4 per cent per annum, the cost of buying Americans goods and services on the international market has been reduced by 17.2 per cent.

That's why you can buy a new Dodge Nitro here in Australia for just a tad over $36,000 - less than a basic Holden Commodore Omega.

 That's why California and Hawaii are holiday bargains for Australians, but Americans are holidaying at home.

They are producing more - and they can export them for less. What John sees as some kind of setback - a declining US dollar - is a boon for American exporters.

Zimbabwe is doing just fine as the value of its currency falls

Eliot, if your thoughts on the US economy were right the Zimbabwean economy must be booming.

Zimbabwe's inflation - already the highest in the world - hit 7,634.8 per cent in July, reminding Zimbabweans there is no relief in sight from daily hardships including chronic food, fuel and foreign currency shortages.

Although the Government says the inflation figure is correct, many analysts and critics say it is likely much higher. The International Monetary Fund said last month inflation may reach 100,000 per cent by year-end.

The US economy

Scott Dunmore: "If you can bring yourself to accept the possibility then you might be able to broaden your perspective and assess the situation with an open mind."

John Pratt: "Eliot, you may think this bloke is a joke but which part of his assertion that  the US is bankrupt do you disagree with?"

Well, I'm laughing at the bit where he predicts the USA is so "broke" it won't be able to withdraw its forces from Iraq.

Might I just point out that the USA has the world's largest economy - and it's still growing.

 In fact, the USA's current underlying rate of economic growth is greater than it had in the 1950s and almost as high as during the 1960s.

For example, US  gross domestic product (GDP) growth, adjusted by Reuters for international comparisons, was seen at 4.5 percent in 2004 before slipping to 3.9 percent in 2005.

Throughout the whole of the 1950s and 1960s, US growth in GDP averaged 2.9 per cent and  4.6 per cent respectively. Over a much smaller base than the current US economy, too.

(Source: Kevin Allen and Andrew Stevenson, ‘An introduction to the Italian economy’, 1974, p49, Barnes & Noble Imports. The 10 digit ISBN is 0064901564 and the 13 digit ISBN is 9780064901567).

 I want you to think about that for a moment - the US economy, which is now much bigger than it was in the 1950s - is actually growing at a faster rate than during America's emergence as the world's leading superpower.

How do you think they managed to claw $100 billion off their current account deficit in just the last two years alone?

The US dollar has fallen 17.2% since 2002.

The global current account deficit of the United States is now larger than it has ever been—nearing $800 billion, almost 7 percent of US GDP. To finance both the current account deficit and its own sizable foreign investments, the United States must import about $1 trillion of foreign capital every year or more than $4 billion every working day. The situation is unsustainable in both international financial and domestic political (i.e., trade policy) terms. Correcting it must be the highest priority for US foreign economic policy. The most constructive remedy in the short term is a three-part package that includes credible, sizable reductions in the US budget deficit, expansion of domestic demand in major economies outside the United States, and a gradual but substantial realignment of exchange rates.

The goods trade deficit fell to $199.7 billion, improving sharply in the third quarter. Exports rose 5.3% in the quarter (up 17% over the past year), while imports only increased 2.8% (4.5% over the year). The slowdown in imports was responsible for most of the improvement in the trade balance. The decline in the real, broad, trade-weighted U.S. dollar, which has fallen 17.2% since 2002, explains much of the improvement in the trade deficit since late 2005. But for the cost of oil imports, which increased by more than $180 billion per year since 2002, the improvement in the trade deficit would have been much greater.

The U.S. trade deficit with Canada and Europe has improved significantly this year, but it has continued to grow with China and with oil producing states. In the long run, a significant reduction in the current account deficit will only be possible with a further, substantial drop in the dollar against the currencies of these latter countries. The decline in the broad dollar since 2002 masks sharp differences in exchange rate trends across countries. The dollar has fallen 36% against the Euro in particular (in inflation-adjusted terms) since the first quarter of 2002 (see Chart). However, the dollar has lost only 9% against the Chinese yuan since 2002, and the dollar has actually risen slightly in value against the Japanese yen. These countries intervene heavily in currency markets to prevent the dollar from falling against their currencies, boosting their competitiveness against U.S.-based production.

Eliot, the reason the US current account deficit has fallen is because the US dollar has fallen 17.5 percent in the last 5 years. The US just can't afford to buy goods and services from the global economy any more. Its all part of going bankrupt. Eventually their import levels will plummet even further as the value of the US dollar tumbles.

A combination of strong U.S. GDP growth, rising energy prices and relatively slow growth in major trading partners, at least until the past year or so, have pushed up the U.S. current account deficit to unprecedented levels. Because the current account deficit must be financed by capital inflows from abroad, it subjects the U.S. economy to the risk of a financial shock. Foreign investors could liquidate U.S. assets if something happened to bring the creditworthiness of those holdings into question. In that event, long-term interest rates could spike, which could in turn bring about recession. Although the probability of such a scenario is rather low, it clearly is not zero either.

However, the underlying structure of the trade deficit shows how difficult it will be to bring about a meaningful adjustment. Petroleum accounts for about one third of the widening in the U.S. current account deficit that has occurred over the past decade. Unless oil prices come down significantly, which does not seem very likely in the foreseeable future, there will be very little relief on the current account deficit from petroleum products. And as long as overall U.S. GDP growth remains rather solid, imports of consumer goods and automotive products, which also have contributed significantly to the widening current account deficit, should remain elevated.

The US is now experiencing a financial shock.

 

An excellent question

"How do you think they managed to claw $100 billion off their current account deficit in just the last two years alone?"

An excellent question Eliot and one that I cannot answer. You have to marvel at the US that while simultaneously owing billions and earning less than it spends it can do that; it has an almost mystical air about.

I'm sure that you will be able to enlighten me but please keep it simple. I used to be a fair sort of mathematician but my knowledge of economics doesn't extend much beyond Adam Smith.

Easy As ABC

The "USA" isn't bankrupt nor are most of its citizens. Nothing more needs to be said on the matter.

I remember 32 cents for a gallon of Gasoline.

I've been watching the dollar die all my life. I sometimes think I will outlast it.

When I was a young man, gold was $35 an ounce. Today one ounce gold bullion coins, such as the Canadian Maple Leaf, cost more than $1,000.

Our coinage was silver. Our dimes, quarters, and half dollars had purchasing power. Even the nickel could purchase a candy bar, ice cream cone or soft drink, and a penny could purchase bubble gum or hard candy. If a kid could collect 5 discarded soft drink bottles from a construction site, the 2 cents deposit on the returnable bottles was enough for the Saturday afternoon movie. Gasoline was 32 cents a gallon. A dollar's worth was enough for a Saturday night date.

The US inflation rate is about twice as high as the government's inflation measures report. In order to hold down Social Security payments, the government changed the way it measures inflation. In the old measure, inflation measured the nominal cost of a defined standard of living. If the price of steak rose, up went the inflation rate. Today if the price of steak rises, the government assumes that people switch to hamburger. Inflation doesn't go up. Instead, the standard of living it measures goes down.

This is just one of the many ways that the government pulls the wool over our eyes.

Eliot, I wish it was a practical joke. This is from Paul Craig Roberts, the same Paul Craig Roberts who was Assistant Secretary of the Treasury in the Reagan administration. He was Associate Editor of the Wall Street Journal editorial page and Contributing Editor of National Review.

Americans worry about their dependency on imported energy, but the $145,368,000,000 paid to OPEC in 2006 is a small part of the total import bill. Americans imported $602,539,000,000 in industrial supplies and materials; $418,271,000,000 in capital goods; $256,660,000,000 in automotive vehicles, parts and engines; $423,973,000,000 in manufactured consumer goods; and $74,937,000,000 in foods, feeds and beverages.

The Keynesian policy of driving the economy through consumer demand was applied to a different economy than the one we have today. In those days the goods Americans purchased, such as cars and appliances, were mainly made in America. Construction workers were not illegals sending their wages back to Mexico. The US had a robust manufacturing workforce. When consumer demand weakened, companies would reduce their output and lay off workers. Government policymakers would respond to the decline in employment and output with monetary and fiscal policies that boosted consumer demand. As consumer spending picked up, companies would call back the laid off workers in order to increase output to meet the rising demand.

Today Americans are losing jobs for reasons that have nothing to do with recession. They are losing their jobs to offshoring and to foreigners brought in on work visas. Today many American brands are produced offshore in whole or part with foreign labor and imported to the US for sale in the American market. In 2007, prior to the onset of the 2008 recession, 217,000 manufacturing jobs were lost. The US now has fewer manufacturing jobs than it had in 1950 when the population was half the current size.

 

 

Resources

John Pratt: "Bankrupt US may not have the resources to bring home troops"

John, is this a practical joke?

No joke

Eliot, it's a metaphor for the problems the US will have to face in the mid future; some time in coming, (starting with Reagan's administration) and predicted by some very astute and intelligent Americans. If you can bring yourself to accept the possibility then you might be able to broaden your perspective and assess the situation with an open mind.

Paul Craig Roberts Who's who.

Hon. Paul Craig Roberts has had careers in scholarship and academia, public service, and journalism.  From 1971 until 2004, he was associated with the Hoover Institution, Stanford University as National Fellow, Research Fellow and Senior Research Fellow. A former editor and columnist for The Wall Street Journal and columnist for Business Week and the Scripps Howard News Service, he is a nationally syndicated columnist for Creators Syndicate in Los Angeles. In 1992, he received the Warren Brookes Award for Excellence in Journalism. In 1993, the Forbes Media Guide ranked him as one of the top seven journalists in the United States.

He was Distinguished Fellow at the Cato Institute from 1993 to 1996. From 1982 through 1993, he held the William E. Simon Chair in Political Economy at the Center for Strategic and International Studies. During 1981-82, he served as assistant secretary of the Treasury for Economic Policy. President Reagan and Treasury Secretary Regan credited him with a major role in the Economic Recovery Tax Act of 1981, and he was awarded the Treasury Department’s Meritorious Service Award for "his outstanding contributions to the formulation of United States economic policy." From 1975 to 1978, Dr. Roberts served on the congressional staff, where he drafted the Kemp-Roth bill and played a leading role in developing bipartisan support for a supply-side economic policy.

In 1987, the French government recognized him as "the artisan of a renewal in economic science and policy after half a century of state interventionism" and inducted him into the Legion of Honor.

Dr. Roberts’ latest books are The Tyranny of Good Intentions, co-authored with IPE Fellow Lawrence Stratton, and published by Prima Publishing in May 2000, and Chile: Two Visions -- The Allende-Pinochet Era, co-authored with IPE Fellow Karen Araujo, and published in Spanish by Universidad Nacional Andres Bello in Santiago, Chile, in November 2000. Harvard University Press published his book, The Supply-Side Revolution, in 1984. Widely reviewed and favorably received, the book was praised by Forbes as "a timely masterpiece that will have real impact on economic thinking in the years ahead."

Dr. Roberts has held numerous academic appointments. He has contributed chapters to numerous books and published many articles in journals of scholarship. He has testified before committees of Congress on 30 occasions.

Dr. Roberts was educated at the Georgia Institute of Technology (B.S.), the University of Virginia (Ph.D.), the University of California at Berkeley and Oxford University, where he was a member of Merton College.

He is listed in Who’s Who in America, Who’s Who in the World, and The Dictionary of International Biography.

"When America's creditors consider our behavior they see total fiscal irresponsibility. They see a deluded country that acts as if it is a privilege for foreigners to lend to it, and a deluded country that believes that foreigners will continue to accumulate US debt until the end of time.

The fact of the matter is that the US is bankrupt.

Eliott, you may think this bloke is a joke but which part of his assertion that  the US is bankrupt do you disagree with?  Are you, or  any of your sources, more credible?

Bankrupt US may not have the resources to bring home troops

The American economy has been devastated by offshoring, by foreign competition, and by the importation of foreigners on work visas, while it holds to a free trade ideology that benefits corporate fat cats and shareholders at the expense of American labor. The dollar is failing in its role as reserve currency and will soon be abandoned.

When the dollar ceases to be the reserve currency, the US will no longer be able to pay its bills by borrowing more from foreigners.

I sometimes wonder if the bankrupt "superpower" will be able to scrape together the resources to bring home the troops stationed in its hundreds of bases overseas, or whether they will just be abandoned.

Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration. He was Associate Editor of the Wall Street Journal editorial page and Contributing Editor of National Review. So, Paul Craig Roberts is worried that a bankrupt US may not have the resources to bring home its troops. But hey, don't worry, Paul and Eliot say all is ok.

Paul and Eliot, you might also be interested in this:

Ever since the official signing of the Flat Earth Society's charter, one of our most difficult goals was to understand the mindset of those we were trying to save. The complexities of Efimovich's theory, that theory's convoluted nature and dependence on flawed logic and the omission of obstructions make it nearly impossible to understand at all, let alone understand why anyone would believe such dribble.

Although we have, through the years, made significant progress towards understanding the viewpoint of Efimovich's followers, we still recognize the holes in the intricate web Efimovich wove. Ours is the truth, the truth of the world's flatness, and ours is also the burden of proof. We are the minority, the followers of lies being the majority, and we gladly accept our burden, if in the end that acceptance means ridding the world of the foul half-truths spread by Grigori Efimovich and his brood of vipers. We present the following five arguments, each completely logical and to some degree building off of the arguments before it. We hope that, after carefully considering what we say here, you will look a with a little less ridicule on the Flat Earth Society and its members.

Comptroller General says the US is bankrupt.

Paul, "Why bother with thing like facts? The USA is going broke - apparently already bankrupt."

The fact of the matter is that the US is bankrupt. David M. Walker, Comptroller General of the US and head of the Government Accountability Office, in his December 17, 2007, report to the US Congress on the financial statements of the US government noted that "the federal government did not maintain effective internal control over financial reporting (including safeguarding assets) and compliance with significant laws and regulations as of September 30, 2007." In everyday language, the US government cannot pass an audit.

 

You're right Paul, you and your mate Eliot are not bothered by facts.

We're All Doomed, Doomed I Say

Eliot Ramsey, Why bother with thing like facts? The USA is going broke - apparently already bankrupt. As the USA is the leader in world capitalism this could only be expected - Karl Marx told the world this over hundred years ago. And he did have that Christ like apparence about him.

Since 2005 the US foreign deficit has decreased $100 billion.

John Pratt: "Another pointer to the decline of the US is the huge trade deficit and the number of foreign companies buying up US firms."

Since 2005 the US foreign deficit has decreased $100 billion. In the last fiscal year, the US budget deficit has declined around 1.2 percent.

With imports $700 billion greater than exports. US for sale

The United States is living on borrowed money, with the value of imports exceeding exports by more than $700 billion last year. Selling companies to foreigners is one step toward squaring the accounts.

It is a business climate that creates all kinds of cross-border deals, like Ford’s sale last month of Jaguar, the pride of Britain, to Tata of India.

“To the extent that the United States continues to have low levels of savings, well, the rest of the world, they are not going to give us that excess for free,” said Matthew J. Slaughter, an economics professor at Dartmouth. “We have to sell them something. There’s no metaphorical free lunch for the United States.”

Between 1998 and 2007, foreign companies paid more than $1.7 trillion for major stakes in American firms or to set up operations in the United States, according to the Commerce Department. More than five million Americans work for domestic affiliates of foreign companies.

Another pointer to the decline of the US is the huge trade deficit and the number of foreign companies buying up US firms. The long term result - profits flowing out of America.

And then there's oil

Another Tom Dispatch featuring Michael T. Klare - The Bad News at the Pump.

On Monday March 3, the price of crude oil reached $103.95 per barrel on the New York Mercantile Exchange, surpassing the record set nearly 30 years ago during another moment of chaos in the Middle East. Will that new mark prove distinctive in the annals of world history or will it be forgotten as energy prices drop, just as they did following their April 1980 peak?

When oil costs are plotted over time, the 1980 oil crisis -- prompted by Ayatollah Khomeini's Iranian revolution -- stands out as a sharp spike on that price curve. Both before and after that moment, however, oil supplies proved largely sufficient to meet rising global demand, in part because the Saudis and other major producers were capable of compensating for declining Iranian production. They simply increased their output substantially, dumping a surplus of oil onto the global market. Aided by the development of new fields in Alaska and the North Sea, prices dropped precipitously and stayed low through the 1990s (except for a brief spike following the Iraqi invasion of Kuwait in August 1990).

Nothing similar is likely to happen now. For the present surge in prices -- crude oil costs have risen by 74% over the past year -- no such easy solution is in sight. To begin with, we face not a sudden spike, but the results of a steady, relentless climb that began in 2002 and shows no signs of abating; nor can this rise be attributed to a single, chaos-causing factor in the energy business or in global politics. It is instead the product of multiple factors endemic to energy production and characteristic of the current era. There is no prospect of their vanishing any time soon.

 Hard times coming?

Star wars has cost over $120 billion.

In his opening statement, Rep. Tierney pointed out that we have spent over $120 billion on missile defense in the past 25 years; that the annual budget is expected to double by 2013 to $19 billion; and that the current $10 billion per year is equal to one-third of the Homeland Security budget, roughly equal to the State Department budget, greater than the FEMA budget, 20 times greater than public diplomacy expenditures, and 30 times greater than Peace Corps.

Cirincione, who organized the last serious hearings on the program as a staff member of the Government Operations Committee, pointed out that there are fewer ballistic missiles today than 10-20 years ago; fewer hostile missiles potentially threatening the US; there are five more countries that have started medium-range missile programs but they are poorer and less technologically advanced than the countries that had long-range ballistic missile programs some 20 years ago, and the total number of medium-range missiles has decreased by 80 percent.

“The vast majority of nations with ballistic missiles have only short-range missiles with ranges under 1000 kilometers, basically Scuds,” Cirincione said. “This is often ignored when officials or experts cite the ‘30 countries with ballistic missile capability.’ That’s true, there are approximately 28. But of these, 17 have only Scud-B missiles or similar. Most of these are friends or allies.”

The US now suffering with massive debt problems and a failing economy needs to think again about how it squanders billions of dollars. Every dollar wasted could have been spent helping solve the problems of peak oil and climate change. Economic collapse is the main threat to the US and the rest of the world.  

$120B = 0.003%

John, assuming that Rep. Tierney is on the button when he says that $120 billion has been spent on missile defence in last 25 years, the cost to the US taxpayer has not been all that high.

What proportion of the US Federal Budget over 25 years is $120 billion? 0.003%.

Three-thousandths of one percent of US government spending over 25 years seems a small price to pay for a program that should it ever work (and lots of people doubt it will) would offer the US a real strategic advantage.

$120B on diplomacy could = no need for Star Wars

$120B over 25 years is a small price to pay for a diplomacy program that could have promoted disarmament rather than militarisation of space, don't you agree Dylan?

How great civilizations self destruct

David Walker has made it his mission to warn Americans about the perils of the national debt for future generations. He talked with Steve Seel and an audience of Citizen's League members and listeners to The Current about moral values, how great civilizations self-destruct

US comptroller (chief accountant) David Walker talking on the financial problems facing the US economy.

The total fiscal exposure is $52.7 trillion or $410.000 per US worker.

Australia (and America) for Sale: Sovereign wealth funds

One of the more interesting moves as ABC Learning Centres Ltd started - publicly - falling apart over the past week and a half was that Temasek Holdings Pty Ltd raised its stake in the company from 12.33% (acquired May 2007) to 14.66%, despite having incurred losses on its original investment. Temasek is one of the Singapore government's investment vehicles, and its portfolio includes companies of interest to Australia like Optus.

In a serendipitous analysis, the topic of today's Background Briefing on Radio National is sovereign wealth funds, particularly those based in the Middle East and Asia (predominantly China and Singapore). This is the flier for the program:

As the effects of the sub-prime credit crunch continue to be felt around the world, the new global investors bailing out Wall Street banks are the sovereign wealth funds. These are the investment vehicles of cashed up Arab and Asian governments which are also buying into the mining boom in Australia. While their money is welcomed, are there political motivations behind the investments?

and I shall put up a link to the transcript as soon as it becomes available.

Home of the free?

Nationwide, the prison population grew by 25,000 last year, bringing it to almost 1.6 million. Another 723,000 people are in local jails. The number of American adults is about 230 million, meaning that one in every 99.1 adults is behind bars.

Incarceration rates are even higher for some groups. One in 36 Hispanic adults is behind bars, based on Justice Department figures for 2006. One in 15 black adults is, too, as is one in nine black men between the ages of 20 and 34.

The report, from the Pew Center on the States, also found that only one in 355 white women between the ages of 35 and 39 are behind bars but that one in 100 black women are.

For a country that goes to war for freedom and calls itself the home of the free an awful lot of Americans are in Jail.

In 2007, according to the National Association of State Budgeting Officers, states spent $44 billion in tax dollars on corrections. That is up from $10.6 billion in 1987, a 127 increase once adjusted for inflation. With money from bonds and the federal government included, total state spending on corrections last year was $49 billion. By 2011, the report said, states are on track to spend an additional $25 billion.

With the cost of the prison system soaring, transportation may be on the cards, other empires have tried it.

Investors Needed Urgently: Preferably Send Cash

Bob Wall

That was a prospect which, to quote Slartibartfast, scares the willies out of me. But then I calmed myself with the thought that perhaps the suggestion was a cunning plan to frighten people off voting for McCain.

If they aren't frightened yet, wait until my master film is released (let us pray). A quick synopsis:

McCain; a man struggling with the notion of being a North Vietnamese prisoner of war begins having disturbing flashbacks about North Tel Aviv. This in turn leads to a failure to understand an unhealthy love for bagels, an aversion to shellfish, and terrible, terrible memories of his mother never letting him finish a sentence. From this point the film gets dark, real dark, even darker. My Sundance classic the "Mossad Candidate" has been described in some circles as darker than even the most darkest place on earth; the place that is so dark, that if we could see there, we would understand how dark it really is.

I doubt it will ever get wide release though; we all know who controls Hollywood. And obviously these people (the whole industry media included) will do EVERYTHING and ANYTHING in their power to get the Dems defeated at the next election! Even going as far as black listing my brilliantly original epic! Will somebody please think of the children!

 

Mossad Finds Them Here There And Everywhere

Bob Wall

Not so surprising if one had seen the allegation that Sarkozy had been a Mossad asset.

Widely reported was it? Mossad must really be anti the rather lax French thirty five hour week. The higher than average unemployment in France must also cause them untold trauma. Mooted tax cuts - positively Mossad. The allegation is that they call the German chick: Miss Mossad.

Button pushers ...

They are indeed a worry, Craig and are still pushing the 'have to attack' button - see the Monkey thread yesterday for an item I posted on the Herzliya Conference. Unfortunately, as I have explored elsewhere (Lest we forget Iraq) there is not much comfort to be drawn from the advisers of any of the major candidates. They seem so locked in to a particular approach. But they've had that approach for a long time and must find it difficult to think of a new one.

One of the comments in your Podhoretz article struck me:

To the surprise of many who had ceased thinking of France as an ally because of Jacques Chirac's relentless opposition to the policies of the Bush administration, Nicholas Sarkozy, Mr. Chirac's successor as president, echoed Mr. Bush's warning in equally unequivocal terms.

Not so surprising if one had seen the allegation that Sarkozy had been a Mossad asset. Yes, I have previously posted that material on another thread. Under that alleged circumstance Sarkozy's stance would not be a surprise but rather one to be expected.

I see from your Bush link that he's sticking with the bit about Iran he used in the SOTU:

"We have no problems with your history, (your) tradition."

As was dealt with on the SOTU thread, they have quite a hand in Iran's history - 1953, the Shah, and all that entailed. Perhaps when Bush mentions history he is hoping noone remembers it.

The Rise of the Imperial Class.

The header is the title of this latest piece by Justin Raimondo.

Matt Welch, the new editor of Reason, gave a talk at the Cato Institute about his new book, John McCain: The Myth of a Maverick, in which he sums up the grave danger to the republic represented by the McCain campaign. Welch remarked that McCain is part of the "imperial class," pointing to the politico-military legacy of his father, an admiral, to underscore the point that the putative GOP nominee is revving up his motor to become the most militaristic American president since at least Teddy Roosevelt – perhaps the most belligerent ever.

I agree with him about McCain, but what I want to focus on is the rise of this "imperial class," which seems like a good moniker: certainly it captures the essence of what this phenomenon is all about – a development made possible by and intimately bound up with our "progress" on the road to empire.

The evidence for the rise of this new class – and its exponentially increasing power – is all around us. U.S. arms exports have hit a new high. Since 9/11, the United States has stood astride the global arms market and shows no signs of slacking off. In 2006, Washington wrapped up the biggest number of new arms deals, to the tune of some $16.9 billion, over 40 percent of the worldwide total. Russia came in second, with a mere $8.7 billion. More than half of the global arms deliveries were made by the U.S.

Just last week, on Feb. 8, 18 "defense"-related contracts were announced totaling $326,664,244. That makes 58 publicly-reported defense contracts for the week, totaling $1,584,635,220. Last month, there were 223 publicly-reported defense contracts, totaling $19,625,989,716. While the civilian economy is shrinking, the military sector is expanding – and, if either of the eventual major party candidates have their way, the military expenditures will balloon. The Democrats, like the Republicans, are pledged to an even bigger U.S. military. It's good for business, if your business is war or war-related, and it's good for votes – especially the votes, active support, and political contributions of the growing group of Americans whose livelihoods, and claim to some sort of social status, depends on the continuation of our foreign policy of perpetual war.

I saw an article a few days ago on McCain and the warmongers. It suggested that John Bolton might be McCain's Secretary of State should McCain win the presidency. That was a prospect which, to quote Slartibartfast, scares the willies out of me. But then I calmed myself with the thought that perhaps the suggestion was a cunning plan to frighten people off voting for McCain. Surely no one would seriously think of such an appointment. Would they?

Bonkers vs Nutter Norm

G'day Bob, so McCain's considering Bonkers Bolton as Secretary of State. 

And the other neocon candidate, Fred Thompson, had neocon nutter Norm Podhoretz as his foreign policy point man. 

I'm not sure which would be a worse thing for United States ... and the world.

As I noted back on 24 January, both Bonker and Nutter are still banging the war drums on Iran. 

The neocons must want some of their number inside any Republican White House to see through the current plan and pull out the plans "on the table" at the right moment.

The Madness of John McCain

Thanks for links to articles Craig.

However, also note that there is a sizable group within the GOP that do not support neo-con state policy, and hence McCain's embrace of it.

For example, this article. (also worth reading through back issues of the American Conservative in order to gauge the depth of their long-standing rejection of Bush's militarism).

McCain and the "defense" of the American empire

Hugh Baran writing for Yale Daily News suggests John McCain is seeing and seizing an opportunity:

There’s a growing sense among many Democrats, regardless of whom they voted for Tuesday, that John McCain will be incredibly tough to beat in the general election. Admittedly, some shrug him off, pointing to the country’s overwhelming opposition to Bush and the war in Iraq as definite signs pointing to the impossibility of a Republican victory. Others see McCain as having shot himself in the foot with his alarmingly pro-war position on Iraq.

Yet McCain’s oft-cited strengths — his perceived independence and Vietnam veteran status — have allowed him the unquestioned credibility to draw on two dominant beliefs that haunt the current discourse on the war. For one, the media’s failure to question or critically examine the efficacy of the troop surge has let the misconception of its success stand as fact. Second is the right wing’s post-Vietnam narrative that if America had stayed tough in Vietnam, been stronger and more determined, it could have won the war and triumphed over Communism. That narrative has assumed the mantle of legitimate historical interpretation in popular discourse and is embedded in the country’s collective consciousness. McCain, because of the torture he endured as a Vietnam POW, can present himself as a kind of martyr for an ungrateful and weak country and is thus uniquely poised to mobilize that narrative in a national campaign for the presidency — especially in this moment where the surge’s success is so acclaimed.

McCain is not foolish — I think he really sees the opportunity here. Otherwise, why would he be volunteering the idea of a 100-year occupation of Iraq? If he or his campaign really saw the war as a political liability, then he wouldn’t be spouting that kind of rhetoric.

Baran sees this at the heart of McCain's campaign:

These statements [that McCain made at a Jan. 27 event in Florida] are the clearest signs yet that McCain is not going to run from the war, but rather will make it the focus of his message, even taking it to another level.

McCain is arguing not just for a longer occupation in Iraq but more broadly for a more formal American empire.

McCain Boot Steyn

Hugh Baran's idea that "McCain is arguing not just for a longer occupation in Iraq but more broadly for a more formal American empire", had me remembering what neocon Max Boot had to say in 2003:

If we want Iraq to avoid becoming a Somalia on steroids, we'd better get used to U.S. troops being deployed there for years, possibly decades, to come. If that raises hackles about American imperialism, so be it. We're going to be called an empire whatever we do. We might as well be a successful empire.

Steyn too.

No wonder the neocons are making McCain their candidate.

 

How long is a piece of string

"How long before the Chinese Communist Party has to surrender its monopoly on power?"

Don't hold your breath.

Huge drop in foreign investment in China

"Foreign direct investment from the European Union into China fell 29.4% last year, Japanese investment fell 24.6% and US investment fell 12.8%, according to the website of the Department for Foreign Investment Administration, part of China's Ministry of Commerce."

Here's why...

"A survey last year by the Japan External Trade Organisation showed Japanese companies were more worried by intellectual property theft, tax risks and problems with legal systems in China than any other country. It showed nine companies shifting factories in China to Vietnam and two companies shifting to Thailand. But the organisation's president, Tadashi Izawa, said China's many problems were still outweighed by its benefits."

This sort of thing drives political reform. How long before the Chinese Communist Party has to surrender its monopoly on power?

Blue collar opportunities

Richard Tonkin: "Mitsubishi in Adelaide looks set to close in a month. Will Rann unveil his plan for an Abrams tank refurbishment plant? Will defence work provide the missing blue-collar jobs? "

A new Mitsubishi factory will likely be opened in China. Mitsubishi used slave labour during the war, so it's not entirely without precedent.

Good call, Eliot

China and Russia appear to be the hot favourites for a new site.  Oh, and it's not called slave labour anymore.. it's called globalistion.

Another Mitsubishi

Chalmers Johnson says "we now station over half a million U.S. troops, spies, contractors, dependents, and others on military bases located in more than 130 countries, many of them presided over by dictatorial regimes that have given their citizens no say in the decision to let us in."

Mitsubishi in Adelaide looks set to close in a month.    Will Rann unveil his plan for an Abrams tank refurbishment plant? Will defence work provide the missing blue-collar jobs? 

Certainly the US satellite based military communications (MUOS.. what that new US  base in Geraldton is for)   project that SA Treasurer Foley was signing off on in Los Angeles last month isn't going to feed a thousand Adelaide families. 

The road from the Mitsubishi plant to Port Adelaide has commenced reconstruction, though it won't be finished for a couple of years, around the time when Mitsubishi's government funding runs out.  Had the auto giant stayed on the transition of Adelaide from automotive to defence would have been much smoother.  Now it's going to be a scramble.

Sadly, this will mean that South Australia will be extremely grateful for the military takeover.

A book review and there's something about oil.

Seems the appropriate place to post Chalmers Johnson's review of Ha-Joon Chang's Bad Samaritans.

His new book is a discursive, well-written account of what he calls the
“Bad Samaritans,” “people in the rich countries who preach free markets
and free trade to the poor countries in order to capture larger shares
of the latter’s markets and preempt the emergence of possible
competitors. They are saying ‘do as we say, not as we did’ and act as
Bad Samaritans, taking advantage of others who are in trouble.” “Bad
Samaritans” is intended for a literate audience of generalists and
eschews the sort of exotica that peppers most economic writing these
days—there is not a single simultaneous equation in the book and many
of Chang’s examples are taken from his own experiences as a South
Korean born in 1963.

And from Tom Engelhardt - Michael T. Klare on how oil burst the American bubble.

Talking about tipping points...here come the dominos

The US Federal Reserve cut interest rates again overnight...

The reduction to three per cent, matching market expectations, brings the key Fed rate to its lowest level since May 2005, and underscores the gravity of US concerns about the state of the economy.

This is effectively a negative interest rate because inflation in the USA is greater than three percent.

And looky here as long ago as September...

Interest rates on Chinese one-year bank deposits are capped at 3.6 per cent - which means investors receive an after-inflation, before-tax return of minus 2.9 per cent."

Here come the dominos!

Why they got black snow in Romania

Evan Hadkins: "There is no guarantee efficiency will deliver ecology - until some way is found to come up with the 'real price' of goods and services. "

There's no way inefficiency can deliver ecology. Ceteris paribus or otherwise...

China spreads its wings....

John Pratt says:

"Eliot I hope you are a patient man, I think Kevin will be around for a bit longer yet. Pity about the greenhouse gas levels."

Not if he bases his hopes on China's economy, obviously.

If what that article says is any indication, it could be Kevin (or his replacement) will eventually thank his/her lucky stars for the North American Free Trade Agreement. At least they'll still have an economy.

 

Official: China heads toward recession...

John Pratt says:

"The eight years of the Bush presidency has left the US in serious financial trouble, with the wolves  of  China, Russia, Japan, Europe and the Middle East at the door."

You'd better have a look at this...

"THE rampant Chinese economy that Kevin Rudd and Wayne Swan are confident will help insulate Australia from the worst of the global financial meltdown is starting to falter, with Chinese leaders warning of a "most difficult" year ahead."

Told you so.

"Access Economics also remains confident that China's strength should carry Australia's economic growth, underwriting a notable lift in coal and iron ore prices. But the consultancy group has warned in its latest assessment this month that the risk of China "turning from a benefactor to basket case is rising".

"If and when China finally stumbles - perhaps in 2009 rather than 2008, with the Beijing Olympics safely out of the way - Australia could see what has been a long-delayed downturn," it says.

"And it has been so long since we've had one that the next downturn will hurt."

So, bye, bye Kevin...

Kevin is around for a while yet look for Kevin17

JP Morgan has forecast 2008 thermal coal contract prices between Australian miners and Japanese utilities will jump by over 60 percent,

JP Morgan raised its contract price forecast to $90 a tonne, a 61.7 percent increase from last year's agreed price of $55.65 and a 28.5 percent increase from its earlier forecast of $70.

"Given the strong growth in demand for seaborne coal with limited new supply, we see overall strength for the international coal market," JP Morgan's commodities analyst David George said in a research report issued on Tuesday.

"We believe it is the growing demand for imported coal into India that could have the greatest impact on the industry," George said.

George said India's plans to bring on 40-50 gigawatts of thermal coal capacity, to add to the existing 60 gigawatts of generation, could result in additional imports of about 80 million tonnes per year.

He added that a developing drought in China could reduce the country's hydro power generation and raise its coal import demand in 2008.

Iron Ore price set to soar.

SPOT prices for iron ore in China, the world's biggest buyer of the steelmaking raw material, may test a record after Cia Vale do Rio Doce said one of its Brazilian ports would halt shipments until February, mills and traders said.

Eliot I hope you are a patient man, I think Kevin will be around for a bit longer yet. Pity about the greenhouse gas levels.


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