Meet Uncle Sam

Uncle Sam has just reneged and defaulted on up to forty percent of its trillions dollar [$] foreign debt, and nobody has said a word except for a line in this week’s Economist. In plain English that means that Uncle Sam runs a world-wide confidence racket with his self-made $ based on the confidence that he has elicited and received from others around the world, and he is a also a deadbeat in that he does not honor and return the money he received. How much of our dollar stake we lost depends on how much we originally paid for it. He let, or rather through his deliberate political economic policies, drove his $ down by 40 percent from one Euro at $ 80 cents at its highest to now 133 cents against the Euro, Yen, Yuan and other currencies. And it is still declining, indeed apt to plummet altogether. There was also a spate of competitive devaluations in the 1930s, and it was called the “Begger Thy Neighbor Policy” of shifting the costs for the neighbor/s to bear. True, with the decline of $, so has the real value that foreigners pay decreased to service their debt to Uncle Sam. But that works only if they can themselves earn in currencies that have increased in value against $. Otherwise, foreigners earn and pay in the same devalued $, although even then also with some loss from devaluation between the time they got it and repay it to repay Uncle Sam. China and other East Asians do earn in and have pegged their currencies to $, so they have already lost a substantial portion of their world’s by far largest $ stake. And they, like all others, will also lose the rest. For Uncle Sam’s debt to the rest of the world already amounts to over a third of his annual production of NDP domestic production and is still growing. That alone already makes his debt economically and politically never repayable, even if he wanted to, which he does not. Uncle Sam’s domestic, e.g. credit card, debt is almost 100 percent of GDP and consumption, including that from China. Uncle Sam’s federal debt is now $ 7.5 trillion, of which all but $1T was built up in the last 3 decades and the last $ 2T in the last eight years, and the last $1T in the last two years. Alas, that costs over $ 300B in interest, compared to e.g. $ 15B spent on NASA. But no worries! Congress just raised the debt ceiling to $8.2 trillion. To help us visualize, only $ 1 trillion in tightly packed up $ 1,000 dollar bills would match a building 40 stories high. But nearly half is owed to foreigners. All Uncle Sam debt, including private household consumer credit card, mortgage, etc. debt of about $ 10T, plus corporate and financial, with options, derivatives and the like, and state and local government debt comes to an unvisualizable, indeed unimaginable, $ 37 trillion, which is nearly four times Uncle Sam’s GDP. Only some of that can be managed domestically, but with dangerous limitations for Uncle Sam noted below. That is only one reason I want you to meet Uncle Sam, the dead-beat confidence man, who may remind you of Meet Joe Black; for as we get to know him better below, we will find that he is also a Shylock and a corrupt one at that.

Uncle Sam is the world’s most privileged for having the monopoly privilege of printing the world’s reserve currency at will and at a cost of nothing but the paper and ink they are printed on. Moreover by doing se, he can export abroad the inflation he generates by the extra $ he prints, of which there are already at least three times as many floating around the world as at Uncle Sam’s home. Additionally, his is also the only one whose ‘foreign’ debt is mostly denominated in his own world currency $ that he can print at will; while most foreigners’ debt is also denominated in the same $, but they have to buy it from Uncle Sam with their own currency and real goods. So he simply pays the Chinese and others essentially with these $ that already to begin with have no real worth beyond its paper and ink. So especially poor China gives away for nothing at all to rich Uncle Sam $ hundreds of billions [Bs] worth of real goods produced at home and consumed by Uncle Sam. Then China turns around and trades these same Uncle Sam paper $ bills in for other Uncle Sam paper $ called Treasury Certificate bonds, which are even more worthless, except that they pay a percent of interest. For as we already noted they will never be able to be cashed in and redeemed in full or even in part, and anyway have the lost much of their value to Uncle Sam already. In an earlier essay, I argued that Uncle Sam’s power rests on two pillars only, the paper $ and the Pentagon. Each supports the other, but the vulnerability of each is also an Achilles heel that threatens the viability of the other. Since then, Iraq not to mention Afghanistan has shown confidence in the Pentagon not to be what it was cracked up to be; and with the in part consequent decline in the dollar, so has confidence in it and Uncle Sam’s ability to use it to finance his Pentagon’s foreign adventures. [See Coup d’Etat and Paper Tiger in Washington, Fiery Dragon in the Pacific [2004] which also conjures up the productive growth of China]. coup

Additionally we must realize that Uncle Sam’s numbers above and below are also all literally relative. So far the relations – in particular with China – still favor Uncle Sam, but they also help maintain an image that is deceptive. Consider the following:

” … a $2 toy leaving a Uncle Sam-owned factory in China is a $3 shipment arriving at San Diego. By the time a Uncle Sam consumer buys it for $10 at Wal-Mart, the Uncle Sam economy registers $10 in final sales, less $3 import cost, for a $7 addition to the Uncle Sam gross domestic product (GDP)” [ m [the original said US].

Moreover, ever clever Uncle Sam has arranged matters so as to earn 9 percent from his economic and financial holdings abroad, while foreigners earn only 3 percent on theirs. and among them on their Treasury Certificates only 1 percent, real return in his also therefore God’s Country. Note that this difference of 6 percent is already double what Uncle Sam pays out, and his total 9 percent take is triple the 3 percent he gives back. Therefore, although the reciprocal foreign holdings by each other with Uncle Sam and abroad are now about equal, Uncle Sam is still the BIG net interest/ed winner, just like any Shylock, but no other ever did so grand a business.

But Uncle Sam also earns quite well thank you from other holdings abroad, e.g. from service payments by mostly poor foreign debtors. The sums involved are not peanuts or even small potatoes. For from his direct investments in foreign property alone, Uncle Sam profits now equal 50 percent, and including his receipts from other holdings abroad now are a full 100 percent, of Uncle Sam profits derived from all of his own domestic activities combined! These foreign receipts add more than 4 percent to Uncle Sam’s NDP. That helps nicely to compensate for the failure of domestic profits as yet to recover even their level in 1972, because Uncle Same Uncle Sam has failed to make sufficiently more productivity boosting investments at home. The productivity hype of Clinton’s ‘new economy” 1990s was limited to computers and IT, and even that proved to be a sham when the dot com bubble burst. Also, not only the apparent increase in “profits” but also that of “productivity” was being boosted by shop-floor, office and sales floor worker speed-up and/or longer work-times at the bottom and by innovative accounting shams by Enro the likes hype at the top. And it also compensates for and permits much of the Uncle Sam $ 600B and still rising trade deficit from excess home consumption over what he himself produces [by last month it was at an annual $ 666B rate, it was announced today]. That is what has resulted in the trillions $ [three of them it is said, but Uncle Sam is understandably reluctant to make any official revelation]. But what is sure is that his debt is far the world’s largest, even as net Uncle Sam debt to foreigners, deducting theirs to him.

Why any and all this? – we may ask. The simple answer is that Uncle Sam, who is increasingly hooked on consumption not to mention harder drugs, saves no more than 0.2 percent of his own income. The Fed’s guru now you see it , now you don’t Dr. of magic, Alan Greenspan recently observed that this is so, because the richest 20 percent of Uncle Samers, who are the only ones who do save, have reduced their savings to 2 percent. Yet, even these measly savings [other and poorer countries save and even invest 20, 30, even 40 percent of their income] are more than counterbalanced by the 6 percent deficit spending of the Uncle Sam government, which does so heavily on their behalf. That is what brings the average between the two together to those 0,2 percent. To maintain that $ 400+ budget deficit [3+ percent of NDP] that is really also $ 600+ B [$ 666B in the latest published number, that is an $ 55.5B outflow last month against an only $48.8B inflow]; if we count as we should the $ 200+ B Uncle Sam ‘borrows’ from the temporary surplus in his own Federal Social Security fund , which he is also bankrupting. [But never mind, Uncle Sam President Bush just promised to privatize much if that also to let people buy their own old age ‘security’ in the ever insecure market]. So with this $ 600+B budget deficit and the already above mentioned related $600+B trade deficit , rich Uncle Sam and primarily his highest off the hog earners and consumers, as well as of course the Big Uncle himself, live off the fat of the rest of the world’s land. Uncle Sam absorbs the savings of others who themselves are – often much – lower on the hog: Particularly their central banks place many of their reserves in world currency $ in the hands of Uncle Sam in Washington and some also in $ at home. Their private investors send $ to or buy $ assets in Wall Street, all with the confidence that they are putting their where-with-all in the world’s most safe Uncle Sam haven [that of course is part of the above mentioned confidence racket]. From the central banks alone, we are looking at yearly sums of over $ 100B from Europe, over $ 100B from poor China, $ 140B from super-saver Japan, an amount of many $10sB by many others around the world. That also includes investors and banks from the poor Third World. But in addition also, Uncle Same obliges them, through the good offices to him of their own states, to send their thus literally forced savings to Uncle Sam as well in the form of their ‘service’ of their predominantly $ debt to him.

His Treasury Secretary and his IMF hand-maiden blithely continue to strut around the world insisting that the Third – and ex-Second, now also Third – World of course continue to service their foreign debts, especially to him. No matter that with interest rates multiplied several times over by Uncle Sam himself after the Fed’s Paul Volker’s coup in October 1979, most have already paid off their original borrowings three to five times over. For to pay at all at interest rates that Volker boosted to 20 percent, they had to borrow still more at still higher rates until thereby their outstanding foreign debt doubled and tripled, not to mention their domestic debt from which part of the foreign payments were raised as particularly in Brazil. Privatization is the name of the game there and elsewhere, except for the debt! Only the debt was socialized after it had been incurred mostly by private business, but only the state had enough power to squeeze the greatest bulk of back payments out of the hides of its poor and middle-class people and transfer them as ‘invisible service payments’ to Uncle Sam. When Mexicans were told to tighten their belt still further, they answered that we can’t because we already ate it yesterday. Only Argentina and for a while Russia declared an effective moratorium on debt ‘service’ and that only after political economic policies had destroyed their entire societies like in ‘peace’ time none ever before, thanks to Uncle Sam advisers and his IMF strong arm. All that, while Uncle Sam himself is blithely defaulting on the foreign debt of his own as he already had several times before in the 19th century. Speaking of that, it may be well to recall at least two pieces of advice from that time: Lord Cromer, who administered Egypt for then dominant British imperial interests sad that his most important instrument for doing so was Egypt’s debts to Britain. These had just multiplied when Egypt was obliged to sell its Suez Canal shares to Britain in order to pay of earlier debts and British Prime Minister Disraeli explained and justified his purchase of the same on the grounds that it would strengthen British Imperial interests. Today, that is called ‘debt-for-equity swaps,” which is one of Uncle Sam’s latter day favorite policies to us the debt to acquire profitable and/or strategically important real resources, as of course also was the Canal as the way to the jewel of the British Empire in India. Another piece of practical advice came from the premier military strategist Clausewitz: make the lands you conquer pay for their own conquest and administration. That is of course exactly what Britain did in and with India through the infamous ‘Home Charges” remitted to London in payment for Britain administering India, which even the British themselves recognized as “tribute” and responsible for much of “The Drain” from India to Britain. How much more efficient yet to let foreign countries’ own states administer them but by rules set and imposed by the Uncle Sam run IMF and then effect a drain of debt service anyway. Actually therein, the British also set the 19th century precedent of relying on the “imperialism of free trade’ with ‘independent’ states as far and long as possible, using gun-boat diplomacy to make it work or when it did not [which Uncle Sam already learned to copy early in the 20th century]; and if that was not enough, simply to invade, and if necessary to occupy – and then rely on the Clausewitz rule. We shall note several recent instances thereof, and especially the Iraqi one, below.

Last but not least, oil producers also put their savings in Uncle Sam. With the ‘shock” of oil that restored its real price after its dollar valuation had fallen in 1973, ever cleverer by half Henry Kissinger made a deal the world’s largest oil exporter in Saudi Arabia that it would continue to be price oil in $, and these earnings would be deposited in Uncle Sam and partly compensated by military hardware in return. That deal de facto extended to all OPEC and still stands, except that before the War against Iraq it suddenly opted out by switching to pricing its oil in Euros, and Iran threatened do so. North Korea has no oil but trades entirely in Euros. That constitutes the triple “rogue states axis of evil.” [Venezuela is a major oil supplier to Uncle Sam and also supplies some at preferential rates as non-dollar trade swaps to other poor countries like Cuba. So Uncle Sam sponsored and financed military commandos from its Plan Columbia next door, promoted illegal coup, and when that failed a legal referendum in his attempt at yet another “regime change” there as well; and now along with Brazil all three are being baptized as yet another ‘axis of evil”]. To return to the main issue and call a spade a HUGE spade, all of the above are part and parcel of the world’s biggest ever Ponzi scheme confidence racket. Like all other ones, its most essential characteristic is that it can only continue to pay off $ and be maintained at the top as long as it continues to receive new $ at the bottom, voluntarily through confidence if possible and by force if not. [Of course, the Clausewitz and Cromer formulas result in the poorest paying the most, since they are also the most defenseless: so that the ones sitting on/above them, pass as much of the cost and pain down to them]. But what if and when confidence runs out and $ it no longer comes?

Things are already getting shakier at the Uncle Sam house. The declining $ reduces the necessary $ inflows, so the Uncle Sam Dr. Greenspan needs to raise interest rates to maintain some Uncle Sam attraction for the foreign $ he needs to fill the trade gap. [As a quid pro quo for being reappointed by President Bush, he promised to do that only after the election]. That time has now arrived, but doing so threatens to collapse the housing bubble that was built on low interest and mortgage – and re-mortgage- rates. But it is in their house values that most of Uncle Sam people have their savings if any. They and this imaginary wealth effect supported over-consumption and the nearly as high as GDP household debt, and a collapse of the housing price bubble with increased interest and mortgage rates would not only drastically undercut house prices. It would thereby have falling domino effects on their owners’ enormous second and third re-mortgages and consumer credit card and other debt, their consumption, corporate debt and profit and investment. In fact, these factors would be enough to also plummet Uncle Sam into deep recession, if not depression, and another Big Bear deflation on stock and de facto on other prices, rendering debt service even more onerous. [If $ declines, even domestic $ price inflation is de facto deflationary against other currencies, that Russians and Latin Americans discovered to their peril as we observe below]. Still lower real Uncle Sam investment would reduce its industrial productivity and competitiveness even more – probably to a degree lower than can compensated by further devaluing $ and making its exports cheaper as is the confident hope of many, probably including the good Dr. Until now, the apparent inflation of prices abroad in rubles and pesos and their consequent devaluations have been a de facto deflation in terms of the $ world currency. Uncle Sam then Uncle Sam printed $ to buy up at bargain basement fire sale $ prices their natural resources in Russia [whose economy was then run on $ 100 bills], and companies and even banks, as in South Korea. True, now Dr. Greenspan and Uncle Sam are trying again to get other central banks also to raise their own interest rates and otherwise plunge their own people into even deeper depression. But even if he can, thereby also canceling out the relative attractiveness of his own interest rate hike, how could that save Uncle Sam himself? What remains the great unknown and perhaps still unknowable is how a more, let alone seriously, wounded Ponzi-less Uncle Sam would react with more “Patriot”ic acts at home and abroad with the weapons – including the now almost ready new ‘small’ nukes – he would still have, even if his foreign victims no longer pay for new ones. So, to compensate for less bread and civil rights at home, even more Uncle Sam patriotic nay chauvinist circus the cost to others abroad is the real world danger of the current policies to ‘defend Freedom and Civilization.”

So far beyond Osama bin Laden, Al Queda and all terrorists put together, the greatest real world threat to Uncle Sam is that this $ does not keep coming in. For instance, foreign central banks and private investors [it is said that “overseas Chinese” have a tidy trillion $] could any day decide to place more of their money elsewhere than in the declining $ and abandon poor ol’ Uncle Sam to his destiny. China could double its per capita income very quickly if it made real investments at home instead of financial ones with Uncle Sam. Central banks, European and others, can now put their reserves – in rising! – Euros or even soon to be revalued Chinese Yuan. Not so far down the road, there may be an East Asian currency, e.g. a basket first of ASEAN + 3 [China, Japan, Korea] – and then + 4 India. While India’s total exports in the past five years rose by 73 percent, those to ASEAN rose double that rate and six-fold to China. India has become an ASEAN summit partner, and its ambitions stretch still further to an AEC from India to Japan [EPW]. Not for nothing, in the 1997 East Asian currency and then full economic crisis, Uncle Sam strong-armed Japan not to start a proposed East Asian currency fund that would have prevented at least the worst of the economic crisis. Uncle Sam then benefited from it by buying devalued East Asian currencies and using them to buy up East Asian real resources, and in Korea also banks, at bargain basement reduced price fire sales. But now, the indeed Uncle Sam friend in need China is already taking steps toward such an arrangement, only on a much grander financial and now also economic scale.

A day after writing the above, I read in the Economist [11-17 Dec. 2004:50] a report on the previous week’s summit meeting of Asean+3 in Malaysia. Its Prime Minister announced that this summit should lay the groundwork for an East Asian Community EAC that “should build a free-trade area, co-operate on finance, and sign a security pact … that would transform East Asia into a cohesive economic block…. In fact, some of these schemes are already in motion….China, as the region’s pre-eminent economic and military power will doubtless dominate… and host the second East Asia Summit.” The report goes on to recall that in 1990, Uncle Sam shot down a previous initiative for fear of losing influence in the region. Now the report is entitled “Yankee stay home.”

Or what if already long before that comes to pass, exporters of oil simply cease to price it in ever devaluing $, and instead make a mint by switching to the rising Euro and/or a basket of East Asian currencies. For that would at one stroke, in order still to be able to buy oil, vastly diminish the world demand for and price of $ by obliging anyone who wants to buy oil to purchase and increase the demand price of the Euro or Yen/Yuan instead of $. That would crash $ and tumble Uncle Sam in one fell swoop, as foreign – and even domestic – owners of $ would also sell off as many of them as fast as they can and other countries’ central banks would switch their reserves out of $ in the no longer save haven Uncle Sam. That would drive the $ down even more, and of course halt any more $ inflow to Uncle Sam by the foreigners who have been financing the Uncle Sam consumption spree. Since selling oil for falling $ instead of rising Euro is evidently bad business, its world’s largest exporters in Russia and OPEC have been considering actually doing just that. In the meantime, they have only raised the $ price of oil so that in Euro terms it has remained about stable since 2000. So far, many oil exporters and others still place their increased amount of $ with Uncle Sam, even though he now offers an ever less attractive and less safe haven, but Russia is now buying more Euros with some of its $

So also many countries’ central banks have begun to put ever more of their reserves into the Euro and currencies other than Uncle Sam $. Now even the best friend indeed, the Central Bank of China, the greatest friend of Uncle Sam in need, has begun to buy some Euros. China itself has also begun to Uncle Same some of its $ – as long as they are still accepted by them – to buy real goods from other Asians and thousands of tons of iron ore and steel from Brazil, etc. [its President recently took a huge business delegation to China, and the Chinese one just went to Argentina. They are going after South African minerals too]. So what will happen to the rich on top of the Uncle Sam Ponzi scheme, when the confidence of poorer central banks and oil exporters in the middle runs out, and the more destitute poorest around the world, confident or not, can no longer make their in – payments at the bottom? The Uncle Sam Ponzi Scheme Confidence Racket would – or will? – come crashing down, like all other such schemes before, only this time with a world-wide bang. It would cut the world’s present Uncle Sam consumer demand of last resort down to real/istic world size and hurt many exporters and producers elsewhere in the world. In fact, it may involve a wholesale fundamental reorganization of the world political economy now run by Uncle Sam.

All Ponzi schemes build a financial pyramid. Many who pay into them also live in a financial world themselves, but others need to derive their in-payment through earnings from production in the real world. In today’s world of financial transactions that every day are one hundred fold more than all payments for real goods and services put together, the financial ones put the real ones into the shadow behind their brilliance. Moreover to over-simplify a very complex matter into more intelligible lay wo/man’s language, options, derivatives, swaps and other recent financial instruments have been ever much further compounding already compounded interest on the real properties in which their stake and debts are based, which has contributed to the spectacular growth of this financial world. Nonetheless, the financial pyramid that we see in all its splendor and brilliance, especially in its center at Uncle Sam’s home, still sits on top of a real world producer>merchant>consumer base, even if the financial one also provides credit for these real world transactions.

Now what if we look at the world as a doughnut, analogous to so many cities in Uncle Sam rust belt. The center is derelict and hollowed out as production and consumption has moved to the surrounding suburbs [in automobile Detroit, the windows of the principal department store Hudson’s have been boarded up for years, even as the city has built an expensive “Renaissance Center” to re-gentrify the center, a process that has ‘succeeded’ in some other cities]. Derelict General Motors Flint give us Michael Moore, who features it from [GM CEO} “Roger and Me” to ‘Fahrenheit 9-11.” We might look at the entire world in doughnut terms, with the whole of Uncle Sam in the empty hole in the middle that produces almost nothing it can sell abroad. The main exceptions are agricultural goods and military hardware that are heavily subsidized by the Uncle Sam government from its tax-payers and $ paper printing press, and even so he runs a $ 600 +B budged deficit.

The BIG difference in this Uncle Sam doughnut is that both the budget and the also the $ 600+B trade deficit are financed by foreigners, as we have seen. Uncle Sam would exclude most of them as persons, but gladly receives the real goods they produce. As world consumer of last resort, as already suggested, Uncle Sam performs this important function in the present world political economic division of labor: everybody else produces and needs to export, and Uncle Sam consumes and needs to import. The crash of $ would [will?] crumble this entire world-embracing and organizing political economic doughnut and throw hundreds of millions of people, not to mention zillions of $ and their owners, into turmoil with unforeseen and perhaps unforeseeable consequences. Many people, high and low on the world totem pole, have a BIG stake in avoiding that, even if it requires continuing to blow the empty Uncle Sam up like a balloon. Or to refer to a well know simile, to continue to pretend that the Emperor with no Clothes is dressed up and to send him some to boot. That still includes China, for which a financial show down with Uncle Sam would be a blessing in disguise: That would oblige China to change political economic course, and instead of giving its goods away for free to Uncle Sam, to turn production and consumption inward to its poor interior and to the near outward in East Asia, all of which it could and should be doing already; and the latter China has recently begun to do, but not yet the former.

Of course, crashing the $ would finally also in one fell swoop wipe out, that is default, the Uncle Sam debt altogether. Thereby, it would simultaneously also make all foreigners and rich Americans lose the whole of their $ asset shirt, of which they are still desperately trying to save as much as possible by not so doing. In fact, this historically necessary transition out from under the Uncle Sam run doughnut world could bring the entire world into the deepest depression ever – and in all of them the poorest suffer the most. Only East Asia could save itself with greatest ease, but also after paying a high cost for this transition – toward itself! Thus, the Uncle Sam Ponzi Scheme poses the world’s biggest and craziest Catch – 22 since MAD.

However, even that would [will?] not be historically new. Recall how much the transition to Uncle Sam cost: another 30 Year War from 1914 to 1945 with the intervening second Great Depression in a century that cost 100 million lives lost to war, more than in all previous world history combined, not to mention the litterally [hundreds?] of millions who suffered and died from unnecessary starvation and disease. Or the previous transition to Britain [WHAT IS THE BRITISH EQUIVALENT FOR UNCLE SAM- THERE IS ONE WE ALL KNOW BUT I FORGET, not just Coronel Blimp] cost the Napoleonic Wars, the Great Depression of 1873-95, colonialism and semi-colonialism, to name a few, and their human costs, especially combined with the most pronounced El Niño climatic changes in two centuries, which ravaged Indians, Chinese, and many others with famines. But these were in turn magnified by the Imperial Colonial powers and used in their own interests, e.g. increased export of wheat from India especially during years of famine.

The parallels with today, including even again taking advantage of a century later renewed stronger El Niños are too horrifying and guilt generating for hardly anybody to make with Uncle Sam’s IMF imposed ‘structural adjustment” that obliges Mexican peasants to have already eaten the belt that the IMF wants them to tighten still further. And that is not to mention 3 million dead in Rwanda and Burundi, and then some in neighboring Congo, first after IMF imposed strictures and the cancellation primarily by Uncle Sam of the Coffee Agreement that had sustained its price for these producers. And then we get the scramble for and production and sale there of gold for Uncle Sam’s Fort Knox, titanium so we can communicate by mobile cell phone, diamonds for ever, and so on.

Yet there are also others in the world who do not [yet? ] feel all that caught up in this trap, for it suddenly to spring shut anyway. Calculatedly just before this year’s 2004 Uncle Sam election, one of them said so out loud in a video broadcast to the world. It seems to have been least publicly noted by its principal addressee Uncle Sam, who should have been the most interested party: For it was none other than bin Laden himself who announced that he is ‘going to bankrupt the Uncle Sam! ‘ In view of the deliberate Uncle Sam blindness to the shakiness of his real world foundation abroad, so massive a collapse may not be more difficult to arrange than as it was only to topple its Twin Tower symbol at home.

Meantime back on the farm as the saying goes in Texas, what does Uncle Sam himself blithely do with the world’s hard earned savings and money? His consumers still over-consume it without 99. 9 percent of them knowing what they are doing, since hardly anyone tells them so. And Uncle Sam’s government uses much and all of its increase of hundreds of B$ for the Pentagon. That does not spend it to pay its poor professional soldiers who come mostly from small town rural America and took the only job they could get, and even less to its hapless reservists. No, better increasingly to privatize war also in Iraq as at home. The Military-Industrial Complex against which General Eisenhower warned in his 1958 parting Presidential address is alive and kicking, more than ever under the stewardship of “Vice” President Cheney and his De[a]fSec Rumsfeld [with their jobs disasterously well done, both are being kept on for a second term. So is Douglas Feith, with Wolfowitz “of Arabia” one of the duo at the Pentagon that went to Israel and of whom the German Der Spiegel Dec 20,2004:33 quotes the commander of the Iraq invasion Tommy Franks as calling “the greatest total idiot that there is on God’s Earth, with whom I have to battle almost every day”]. Between 1994 and mid – 2003, Uncle Sam’s Pentagon made over 3,000 contracts valued at more than $300 billion with 12 Uncle Sam private military companies [PMCs] out of the 35 estimated by the NYT, others of which are small and offer mercenary services. But more than 2,700 of those contracts were given to only two companies: to Kellogg Brown & Root (KBR), a subsidiary of Cheney’s Halliburton, and to Booz Allen Hamilton. [Center for Public Integrity’s International Consortium of Investigative Journalists, cited in Mafruza Khan e-mail, 16 Aug 2003]. In Iraq these PMCs now have as many mercenaries as Uncle Sam and UK troops combined. But of course that is still ‘small’ potatoes, since the bulk of Pentagon money is Uncle Samed to buy expensive weapons systems from the only four major Uncle Sam ‘Defense” contractors and the likes of Vice President Cheney’s Halliburton.

Uncle Sam then uses these arms unilaterally to twist others arms by blackmail, lord it over and invade the world that provided the money in the first place. After all, Uncle Sam has to do what it must to keep it coming. Uncle Sam unilateralism is not so much , as often mistakenly supposed, just going it alone. Yes, it is to proclaim fighting for ‘Freedom” [whose?- we may ask] and “saving Civilization,” as Uncle Sam President Bush and his even more eloquent UK mouth piece Tony Blair proclaim every day. The simplest way to ‘save’ civilization was by simply abolishing in a day its most precious gift of the whole body of international law to keep the peace, which the West had taken centuries to develop, admittedly also in its own imperial interests. Still, it was the best and only international law we had, and at the very least better than nothing at all. Now the only “Law of the West” that remains is indeed ‘The law of the West’: The spaghetti western vigilante law of posses that , with or without a conniving judge, take the ‘law’ into their own hands to form a lynch party and go after whom and where and when they please, alas now on a much grander scale than any spaghetti western ever imagined, and to boot also ‘out of area.” That also means disemboweling and paralyzing the UN institution that was established to guard the peace, except when Uncle Sam after its own wars always re-cycles the UN to pick up the pieces he shattered in Yugoslavia, Afghanistan and now Iraq. But in so doing, it also means, to dupe, threaten, cajole and blackmail all others – friends and foes alike – to do his bidding on every issue, big and small. He has trained a whole civilian army of officials to do that. That way, Uncle Sam can ‘unilaterally’ always throws around his still apparent weight also in all other international institutions that deal with endeavors from agriculture and aviation to zoology. But Uncle Sam extorts real unilateral favors for himself even more through his bi-lateral relations. That is why WTO was dead on arrival. Indeed Uncle Sam now prefers to Uncle Same bi-lateral relations unilaterally, as he increasingly isolates himself internationally. So, he can exercise even more military, political and economic bargaining power over one than he any longer can over all or even many in international institutions.

And when that bargaining is not enough or even if it could be, Uncle Sam simply attacks when he feels like it and invades little Grenada [population, all of 300,000], Nicaragua [with the help of arch-enemy Iran] , Panama [7,000 civilians killed in one night to capture one man only, Daddy Bush’s one-time friend and ally Noriega – there is an all smiles photo of them shaking hands], Iraq [that was even a money making venture as Uncle Sam extorted more $ from his allies to pay for the war than it actually cost him!] , Somalia [oy wehh!] , Yugoslavia [which was attacked in part to make an example out of what can happen when one is weak enough, in this case Serbia, and yet in abject defiance of Uncle Sam and his IMF, one maintains some state ownership of important means of production and social welfare state protection of the population [like still Belorus today, where Uncle Sam also tried to get ‘regime change” but military action is more difficult on the border of Russia, unless it is an accord as against Afghanistan or bought off. Moreover, Yugoslavia gave up only when Russia withdrew support after Uncle Sam successfully blackmailed political economically and partly bought it off in Berlin], Afghanistan [again with the help of Iran and Russia and, after Uncle Sam created and sponsored Taliban government had eradicated it, now with more opium than ever, which accounts for one third of Afghanistan’s GDP, as the Uncle Sam installed President announced upon taking office, and a new Uncle Sam military offensive against Taliban as I write but no more mention of bin Laden], and now again Iraq. Whos’e next, Iran?, Syria? – not Libya, it is now obediently making oil deals with Uncle Sam; and not North Korea that made nukes to protect itself against precisely that.

[Not?] incidentally, simple inspection of the facts on the ground reveals that, except for little Grenada, not a single one of these or any other Uncle Sam wars was ever won by his military force, unless it be the Pacific one against Japan [World War II was won in Europe at Stalingrad in 1943 by Russian troops who would have reached Berlin even if Uncle Sam had not arrived later]. Nonetheless, Uncle Sam has now already built 800 military bases around the world and especially China [“[iso-8859-1,Dec 12,2004 e-mail] P. Jakob Förg” Subject: FW: Pentagon to redeploy 60 percent of U.S. Submarine fleet to Western Pacific], for future reference and already present political influence, especially in the oil rich ‘heartland’ of Zbigniew Brzezinski [Ziggy’s] global ‘Chessboard.” Apart from that Uncle Sam President Bush has a new “Plan for the Middle East,” which now stretches from Morocco beyond Pakistan – to Muslim Indonesia? Just what this plan involves is not yet clear, other than clearly Israel is to remain the Uncle Sam political and military stalking horse in the region that it has always been. Only now it’s assigned and own reach may also expand further [two of the high Pentagon neo-cons even went there to make a plan for the racist chauvinist Likud party now in power]. Bush himself went to Africa, especially West Africa to look at its oil. In the Americas, his Plan “Colombia” [it has oil too] has been extended to the whole Andean region [Ecuador also exports oil], he has yet another plan for the Amazon [maybe some is to be found there and in the meantime he built a huge base there, allegedly for NASA which is not unknown to also to engage in military ventures], a plan to ‘take care of ” with World Bank help the world’s largest underground deposit of sweet water under Iguazu Falls, where Brazil, Argentina and Paraguay meet, and is already again training 40,000 Latin American military personnel at a time on Uncle Sam bases at home, of which he also has another half dozen of his own beyond his shores as well.

All this is a giant global military political economic foundation on which to maintain Uncle Sam’s financial Ponzi Scheme Confidence Racket, and cheap at twice the price for those that end up with the $ and as long as he can pay for it all with the self-made paper $ that so far also maintains the global Ponzi business. Well to be honest, it’s not only for the $. After all that is only useful if you can actually buy something with it, especially the oil that keeps the foundation running.

Not only does Uncle Sam have to buy ever more oil, today with self-printed $, but perhaps tomorrow with Euros or Yuan. He also has to try to make sure to have his hand on every spigot; so he can control who else can, and especially who can not buy it. So that is why we now find him attempting political and financial $ control of the oil spigots, wherever he still can, and going in also for military presence as in Central Asia, or Uncle Saming military power to go in as to Iraq. That is both to use it as a lever of control and/or to warn its neighbors what may happen to them if they fail to continue to play along with Uncle Sam. Fortunately for him, most of East Asia and especially China also seem to be obliged to buy foreign oil, even if tomorrow perhaps no longer with $ but with Yuan/Yen. On the other hand sad but true, the world’s biggest seller of oil is Russia, whose spigots remain beyond Uncle Sam control. But how could Uncle Sam continue to pay for and maintain all these bold Uncle Sam ventures in Defense of Freedom of and with that self made paper $ — if nobody accepts it any more? And why should anybody else?

The December 10 FT offers some additional tip of the iceberg examples of Uncle Sam Defense of Freedom in Iraq. Though poor Iraq sits on top of the world’s largest still unexploited pool of ever more precious oil, it remains in the background or only at the bottom of this story that barely mentions it and, like the present essay, focuses instead on related $ and Uncle Sam. In two different reports, it relates how three helicopters flew 14 tons of $ 100 dollar bills in to the Kurds. The money, much of the $ 1.8B Uncle Sam pay-off to the Kurds, was part of Iraq’s earnings in the UN ‘oil-for-food” earnings fund. Initially, of course, the bills simply were the product of the self-same Uncle Sam printing press, for which Iraq had exported real oil. It did not come from the $ 18B that Uncle Sam’s Congress appropriated for ‘reconstruction’ of Iraq. As an FT graph graphically shows, no more than $ 388 million – or 2.15 percent – of that Uncle Sam money had yet been spent, and only $ 5B of it have even been budgeted by Uncle Sam in Iraq by the time Uncle Sam pro-consul Brenner went home with a job well done. No, instead in his wisdom the Good Uncle had thought it best to have spent $13B of the $ 20B of Iraqi funds. That was 65 percent of the Iraqi money compared to the still only 2 percent of the nearly equivalent amount of original Uncle Sam money. By the time the new Iraqi government took over some tasks from Uncle Sam who put them there, they discovered that a full $ 20B of their funds had been spent, $ 11B from sales of oil [IHT]. How come? – we may ask. Simple is the answer of the ‘responsible’ finance officer, Uncle Sam Admiral Oliver, “I know we spent some money from [the Iraqi] fund. It was purely the matter that we’d run out of Uncle Sam money” – of which there was only another $ 17.5+B unspent. We might wonder whether the good General was schooled in Clausewitz on war and happened also to discover his good advice about making the conquered victim pay for his own military occupation, in this case by Uncle Sam,

The Iraqi representative on the funding disbursement and oversight committee attended all of one out of its 43 meetings; but then why bather with more, when most expenditures were authorized without any meeting at all. So although Uncle Sam funds were budgeted for all sorts of projects, they were nonetheless paid out of Iraqi funds. Of these, many disbursements were even made without any contract whatsoever, in one case a mere $ 1.4B. Most others occurred without any multiple competitive, nor even any previously vetted or subsequently evaluated, bids. The Uncle Sam funds, on the other hand, remained virtually unspent in Iraq. Maybe Admiral Oliver had ‘run out of Uncle Sam money” in Iraq, because it remained at the Uncle Sam home in Washington; and if disbursed at all, it simply changed hands and bank accounts right there. After all, that is much more efficient than it would be to send it back and forth, and a bit of it might not even get back. After all also. it has long since been SOP for the bulk of the $ that Uncle Sam lends or even “gives” “to” and ‘for” all Third World countries, just to leave the $ at home where it belongs and would return to anyway. No matter; Uncle Sam Congress has already appropriated another $ 30B to ‘prepare for transition to elections” in Iraq in January 2005.

All that being the case, it would of course be altogether undesirable for Iraqi, let alone Uncle Sam’s, funds to be squandered on any Iraqi service of old foreign debt to others. So it was only logical to strong-arm ‘allies’ who can’t help already losing Uncle Sam debt to them, also to forgive the Iraqi debt. That is, as we may recall from above, while Uncle Sam still insists that the rest of the Third World must continue servicing their debts to him! For God forbid that any re-payment of Iraqi debt should go instead to those un-Godly Russians, traitorous Frenchmen or even to the Chinese best friend indeed, who most invested in Iraq, a dastardly thing to do in the first place, when Uncle Sam has much more worthy causes for the Iraqi money.

And what were and still are these grander worthy Uncle Sam causes? – we may ask. The largest single payment of $ 1.4B was to whom else but the self-same Vice President Cheney’s Halliburton. Yet we now know that at the same time it was also cheating even his generous Uncle Sam benefactor out of hundreds of millions more $ on the side, buying petrol for x $ in Kuwait and selling it in Iraq for 5 -10x $ and other shenanigans. Altogether, Halliburton got Iraq contracts for a cool $ 10B – plus change. [IHT]. [Cheney also has an interest in UNILOCAL that has long wanted to build an oil pipe line from Central Asia to the Indian Ocean through Afghanistan, first with the help of Taliban whom Uncle Sam had put in charge there for precisely that purpose and then invited to Texas. Now Uncle Sam and UNILOCAL will Uncle Same instead the good offices of the new Afghani President and Uncle Sam Ambassador there, both of whom just ‘happen’ to be former [?] UNILOCAL people].

Without the shadow of a doubt, most of the other Iraqi and Uncle Sam $ went to other Uncle Sam crony, and some crumbs off the table for UK, corporations and even to private and military individuals who have their fingers in the till. But alas we will never know who they all are, since as per Uncle Sam’s Inspector-General “I was, candidly, not interested in having army auditors because I thought we had to slide into the Iraqi system as quickly as possible.” Frankly being both non and anti-military, I have not myself read Clausewitz. So I do not know what, if any, good advice he gives about relying on corruption as the first principle in cutting and dividing up the conquered pie.

All of the above ‘speculation’ of mine was written before the UN International Advisory and Monitoring Board for Development in Iraq IAMBDI just issued a report on its findings about Uncle Sam stewardship. Before we get to the Report, we should keep that in mind that the FT observes diplomatically “the UN has been reluctant to take the Uncle Sam to task publicly over its spending of Iraqi funds.” The FT quotes directly from the Report: “There were control weaknesses … inadequate accounting systems, uneven application of agreed-upon contracting procedures and inadequate record keeping.” The IHT also makes its own summary of the same report: “There had been widespread irregularities, including financial mismanagement, a failure to cut smuggling [outward of oil and other Iraqi physical property; nobody knows at what price and to whose benefit] and over dependence on no-bid contracts” [IHT]. The FT, for its part, offers a bit more specifics from the Report: “Of particular concern … were contracts with sometimes billions of dollars that were awarded to Uncle Sam companies such as Halliburton from Iraqi funds without competitive tender.” Yesterday, Uncle Sam President Bush gave Uncle Sam’s highest civilian award, The Medal of Freedom, to L. Paul Bremer III, the Uncle Sam civilian pro-consul who oversaw it all, and to General Tommy Franks, who led the invasion that made it all possible in the first place. George Tenet, the Director of the CIA that provided all the bogus Uncle Sam information to ‘legitimate’ the whole enterprise to begin with and has since been discredited and forced to resign was not forgotten either and received the third award. The IHT published a ceremonial photograph of the three all smiles with George W. who was smiling too. After all it’s all for their job well done, of course, thank you.

We may rest pretty well assured that of the Uncle Sam recipients of their beneficence and service to “Freedom” [for whom and what? – we may ask], 99.99 percent were among the ones at whom the Fed’s Dr. Greenspan had already pointed his finger as the most privileged over-consumers who are totally [ir]responsible for Uncle Sam under-saving and whom he labeled simply as the upper 20 percent of Uncle Sam income earners. It is also they, he said, who are the most [ir]responsible also for the growing trade deficit about which the Dr. recently complained in Berlin. If we examine Uncle Sam income distribution, we may well learn also that among these 20 percent, the lion’s share of this $, like most of that from the Pentagon, ended up in the pockets or accounts of the upper 2 percent most super-privileged, so they can over-consume yet still more of the fat of the whole earth. Who would deny them that this is surely a worthy cause Same for the protection of Freedom at any price, including President Bush’s [in]famous ‘let them [Iraqis] come on” against Uncle Sam. [Hu? They come? – against Uncle Sam to invade Uncle Sam?]. But as he himself told the world, it is only right that ‘we’ exclude other countries from the trough and till in Iraq. After all he explained when the Iraqis accepted his invitation, it was ‘our boys who put their lives on the line.” Alas, the personification of Uncle Sam neglected also to explain for what and whom.

+ The few numbers that are not generally available, or from the cited FT of December 10 and 15, 2004 and other sources like the International Herald Tribune [IHT] also of December 15 and EPW, Economic and Political Weekly,[ Mumbai Dec. 4,2004: 5189] are from “The Economics of Uncle Sam Imperialism at the turn of the 21st Century” by Gerard Dumenil & Dominique Levy in Review of International Political Economy 11/4/Oct. 2004:657-676. The author is thankful to them in Paris, to Jeffrey Sommers in Riga, William Engdahl in Frankfurt and Mark Weisbrot in Washington for their useful and much Uncle used comments. Barry Gills in Newcastle insisted that I refer only to Uncle Sam and proposed the world division of labor between Uncle Sam consumers ad producers everywhere else and referred me to Clausewitz. Of course none of them have any responsibility for the doughnut shaped use I have made of them

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