- It is difficult to know where Bush has accomplished the
most destruction, the Iraqi economy or the US economy.
-
- In the current issue of Manufacturing & Technology
News, Washington economist Charles McMillion observes that seven years
of Bush has seen the federal debt increase by two-thirds while US household
debt doubled.
-
- This massive Keynesian stimulus produced pitiful economic
results. Median real income has declined. The labor force participation
rate has declined. Job growth has been pathetic, with 28% of the new jobs
being in the government sector. All the new private sector jobs are accounted
for by private education and health care bureaucracies, bars and restaurants.
Three and a quarter million manufacturing jobs and a half million supervisory
jobs were lost. The number of manufacturing jobs has fallen to the level
of 65 years ago.
-
- This is the profile of a third world economy.
-
- The "new economy" has been running a trade
deficit in advanced technology products since 2002. The US trade deficit
in manufactured goods dwarfs the US trade deficit in oil. The US does not
earn enough to pay its import bill, and it doesn't save enough to finance
the government's budget deficit.
-
- To finance its deficits, America looks to the kindness
of foreigners to continue to accept the outpouring of dollars and dollar-denominated
debt.
-
- The dollars are accepted, because the dollar is the world's
reserve currency.
-
- At the meeting of the World Economic Forum at Davos,
Switzerland, this week, billionaire currency trader George Soros warned
that the dollar's reserve currency role was drawing to an end: "The
current crisis is not only the bust that follows the housing boom, it's
basically the end of a 60-year period of continuing credit expansion based
on the dollar as the reserve currency. Now the rest of the world is increasingly
unwilling to accumulate dollars."
-
- www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/01/23/bcndollar123.xml
-
- If the world is unwilling to continue to accumulate dollars,
the US will not be able to finance its trade deficit or its budget deficit.
As both are seriously out of balance, the implication is for yet more decline
in the dollar's exchange value and a sharp rise in prices.
-
- Economists have romanticized globalism, taking delight
in the myriad of foreign components in US brand name products. This is
fine for a country whose trade is in balance or whose currency has the
reserve currency role. It is a terrible dependency for a country such
as the US that has been busy at work offshoring its economy while destroying
the exchange value of its currency.
-
- As the dollar sheds value and loses its privileged position
as reserve currency, US living standards will take a serious knock.
-
- If the US government cannot balance its budget by cutting
its spending or by raising taxes, the day when it can no longer borrow
will see the government paying its bills by printing money like a third
world banana republic. Inflation and more exchange rate depreciation will
be the order of the day.
-
- 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. He is
coauthor of The Tyranny of Good Intentions.He can be reached at: <mailto:PaulCraigRoberts@yahoo.com>PaulCraigRoberts@yahoo.com
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