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Tuesday, March 01, 2005

Paul Craig Roberts on the dollar

From today's Counterpunch:
The US economy is headed toward crisis, and the political leadership of the country--if it can be called leadership--is preoccupied with nonexistent weapons of mass destruction in the Middle East.

The US economy is failing. The afflictions are serious. They could be fatal even if diagnosed and treated. America is losing the purchasing power of its currency and its ability to create middle class jobs.

The dollar's sharp decline and projections of continuing trade and budgetary red ink are undermining the dollar's role as reserve currency. A number of central banks have announced that they will be diversifying their currency holdings and will not be buying dollars at the same rate as in the past.
Overnight those cheap goods in Wal-Mart, which are the no-think economist's facile justification for Wal-Mart's decimation of communities, small businesses and employment, shoot up in price. [I think he's talking about you, Robert Reich, for defending the beast of Bentonville yesterday. Reich was one of the main architects of Clinton's disastrous "free trade" policies. -- ed.]
The dollars' decline will drive up the price of all inputs except US labor which is being substituted out of production functions and replaced with foreign labor.

Oblivious to reality, the Bush administration has proposed a Social Security privatization that will cost $4.5 trillion in borrowing over the next 10 years alone! America has no domestic savings to absorb this debt, and foreigners will not lend such enormous sums to a country with a collapsing currency--especially a country mired in a Middle East war running up hundreds of billions of dollars in war debt.

A venal and self-important Washington establishment combined with a globalized corporate mentality have brought an end to America's rising living standards. America's days as a superpower are rapidly coming to an end. Isolated by the nationalistic unilateralism of the neoconservatives who control the Bush administration, the US can expect no sympathy or help from former allies and rising new powers.