Tighten Your Seat Belts; Worse Is On Its Way

Unless you were very rich and a rightist, the last ten years have been very hard to take. The Clintons’ hypocrisies and corruption were bad enough; but they were our guardian angels compared to the scurvy brutes now ruling over us: arrogant, cocky, insipid, brutish; hellbent to push an already precarious world over the edge into potentially bottomless economic and military disaster.

What’s threatening in either respect is not the entire fault of the U.S., of course. But with power goes responsibility; and though our power today is not what it was, say, 20 years ago, we still have more power than any other; for a while. The focal points for the two looming crises are 1) financial fragility and 2) Iraq, with China coming up fast in both respects. Worse, both are as closely linked with all else in their respective realms as they are to each other; a “spark” could become an inferno. The wotthehell economy.

First, the ABC’s of the world economy: A) The U.S. and the global economy are now driven principally by finance, dominated by the U.S. B) Global finance is dominated by speculation in currencies, itself dominated by U.S. foreign indebtedness. C) U.S. foreign indebtedness must continue to rise for the world economy’s “health.” If it ceases to do so, it will produce an immediate selling panic in dollars, accompanied by global recession.

However, if and as our foreign debt continues to rise, the down-turning point will merely be postponed; having been postponed, the ultimate collapse will be more severe. Conceivably, there could be a safe way out of this awful tangle; if there is, the Bush gang would be loathe to even consider it. For the past several years our foreign debt has gone up at an accelerating rate; and economic disaster has thus been postponed. A key element in that process has been the White House; it views the processes with approval – as well they might. Why?

Because, 1) the U.S. economy has long been and remains “the consumer of last resort” for the rest of the world’s exports; but, 2) as we borrow to buy them (and also spend abroad on war and investments) the dollar has fallen in value, and our exports have been stimulated; however, 3) that weakens foreigners’ exports to us; they now cost us much more.

Item: Since 2002, the dollar has fallen 38 percent against the euro; 23 percent against the yen; 25 percent against the Canadian dollar. In 198O we were owed over one trillion; today our net debt to others is over three trillion. (Our largest creditors, in order, are Japan, China, Taiwan, and South Korea; we them over one trillion.)

Can that bubble last forever? Speculators know the answer to that; for them, it is merely a question of “when,” not “whether.” A recent report by Central Banks Publication reports that of 65 central banks surveyed, two-thirds have “begun to move away from dollars to euros.” (“Bottom Dollar,” Newsweek, 3-15-05). Today they “replace” dollars; tomorrow?

That’s foreign debt; add to that our always rising set of mountainous domestic debt(s) – household, corporate, and national. Taken together, both sets of debts are the key to both U.S. and global economic “well being” – and, as well to speculation in all the related paper.

The levels of domestic debt are as nerve-wracking as they are ominous: a general decline in the take-home-pay and benefits for most means a softness in consumer demand that can only be offset by an ongoing increase in already painfully high household debt (average monthly debt exceeds average monthly income); the number of corporations in deep debt trouble is already high – symbolized by GM, until recently THE U.S. company, now losing billions yearly while having to borrow for its pensions; and our national debt is now soaring at about half a trillion annually, aided and abetted by Bush’s tax cuts for the rich and the corporations; plus record-breaking military expenditures. Speaking of which: war shivers.

There is an enlarging clump of existing and potential wars, first and ongoing in the Middle East. The election in Iraq, hailed by so many earlier doubters both in the U.S. and abroad, has yet to show its full meaning. Now forgotten, there was also a lovely “free election” in Vietnam some ten years before we got out of there, years which killed more than 3 million. It seems to be forgotten that the probabilities are strong for enduring civil war within Iraq (as regards the Kurds and the Shiites, and the Sunni against both).

Meanwhile, hopes have risen for a decent resolution of the half-century occupation of Palestine by the Israelis; but the presumed departure of a few thousand Israelis from Gaza is seen as momentous only by those Israelis who bitterly oppose it — as, meanwhile, illegal construction goes on in the West Bank, at Sharon’s instructions.

Saying nothing about Lebanon/Syria, there is too much reason to be concerned about how riskily the U.S. is acting toward Iran – with, of course, little or no understanding in the White House (or the U.S.) as to why the Iranians despise us. For what? For the critical part played by the CIA in overthrowing the democratically elected government of Mossadegh (1951) and our subsequent “partnership” with the “Shah of Shah’s” ruthless dictatorship – until its overthrow by Khomeini in 1979.

In the Far East, Bush seems determined to make impossible what was a difficult situation. North Korea could have been persuaded to cease its dangerous nuclear developments in exchange for economic benefits (proposed in the Clinton years); but the U.S. is hellbent in the opposite direction – despite that South Korea is resisting. The entirely unjustified Korean war killed millions of Korean civilians and destroyed their cities; most harshly, Pyongyang. We seem to have forgotten that; the Koreans have not.

Now add China and Taiwan and the U.S. to the mess. Once pacifist Japan and we seem determined to encourage the “independent” Taiwanese to step up their efforts, despite that a majority of the Taiwanese are opposed. As Chalmers Johnson has recently written, “If the United States and Japan – which made Taiwan its colony from 1895 to 1945 – left China and Taiwan to their own devices, it seems possible that they would work out a modus vivendi. Taiwan has already invested some $150 billion in the mainland, and the two economies are becoming more closely integrated every day….” (see TOMDispatch.com)

The U.S.-written postwar constitution for Japan demilitarized it; that of course allowed the innumerable U.S. bases all through Japan (and Okinawa); now there is Japan’s U.S.-encouraged rearmament: they rearm, buy arms from us, and send 550 Japanese soldiers to Iraq. Cozy. Put the economic and political/military tensions together, add in the emerging crisis of vanishing oil – which brings economic and military tensions together in a deadly embrace – and we are looking at a fearsome world; more fearsome, it should be understood, than that which immediately preceded World War I.

But none of the foregoing can be complete without a serious look at China. Having grown at an average rate of over 9 percent since the 1980s, its economy now ranks among the top 5 in the world; within a decade or two, it is expected to rank just behind the U.S., and Japan — at least.

Both despite and because of its totalitarian ways and means, it stands as the sole capitalist economy in the world with anything even approximating the ability to guide its economy. Except, perhaps, Japan; if so how explain its inability to go beyond a flat economy for 15 years? The U.S.? It is to laugh and to weep. Only China has any degree of independence from the U.S. in policy making; a country where Alan Greenspan, a fan of Ayn Rand’s rightist fantasies for half a century, is seen as a sage.

The Bush administration acts toward China as though these are the “Open Door” and gunboat days of 1899. Now China has us by the short hairs on matters of trade and, most pointedly, finance: they not only have giant holdings of dollars, but they have great influence over both North and South Korea as well as Japan: they are Japan’s biggest customer (remember when we were?). Yet Japan – its prime minister, not its people – is acting toward China (as regards Taiwan) as though this were 1895.

The world economy is sustained by insane and unsustainable debt. China is beyond bullying; as is, probably, Iran. Iraq is beyond control. If our leadership were the best in our history, we would be in deep doo-doo (as Bush I put it); but it is the worst. We must work more broadly, more deeply, and more often. Now.

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