Wednesday, November 24, 2004

Economic `Armageddon' predicted: "Roach's argument is that America's record trade deficit means the dollar will keep falling. To keep foreigners buying T-bills and prevent a resulting rise in inflation, Federal Reserve Chairman Alan Greenspan will be forced to raise interest rates further and faster than he wants.

"The result: U.S. consumers, who are in debt up to their eyeballs, will get pounded. Less a case of ``Armageddon,'' maybe, than of a ``Perfect Storm.''

"Roach marshalled alarming facts to support his argument. To finance its current account deficit with the rest of the world, he said, America has to import $2.6 billion in cash. Every working day. That is an amazing 80 percent of the entire world's net savings. Sustainable? Hardly.

"Meanwhile, he notes that household debt is at record levels. Twenty years ago the total debt of U.S. households was equal to half the size of the economy. Today the figure is 85 percent. Nearly half of new mortgage borrowing is at flexible interest rates, leaving borrowers much more vulnerable to rate hikes. Americans are already spending a record share of disposable income paying their interest bills. And interest rates haven't even risen much yet."

Harldy a day passes now without dire warnings about the unsustainable US financial situation. Do the Bushies know, or care? To look at it pessimistically, its all part of the plan. The fiscal train wreck will make possible the abolition of practically all parts of the federal government except the Pentagon. Economic collapse will hasten the trend to fascism. According to Chomsky, the basic plan of the US elite is to convert the country to the Latin American model: extreme disparity in wealth, combined with a military-oligarchic ruling class. The long term focus is a grim hold on both the wealth and power of the country, and a military totally committed to holding the world's energy reserves under its domination. Everything else can go to hell.

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