The Coming Economic Cold War Will Be President Obama’s Challenge

For anyone to believe the United States will soon return to a state of economic stability, I am afraid you have not been reading your herbal tea leaves correctly. Not only is there a new American paradigm emerging, but there is a new world paradigm on the horizon. For many Americans it is unlikely that they will ever return to a state of economic stability. And, for others, they may get closer to where they were before the big collapse, but not close enough.

The powerful economic forces in the world are all fighting for recognition as dominant players, while strategizing to become master players through their political maneuvers in order to position themselves in such a way so their currencies will evolve as the major trading reserve currencies above all others. It has become more visible and apparent that the United States has not been fully included in the current Eurasia summit conferences. As a matter-of-fact, we are being excluded, at this time. It not only has to do with the instability of the United States dollar and economy, but equally as much as it involves U.S. dollar hegemony, it is also about how other world powers are now realizing they can finally subdue its domination, without firing a shot, as well as reducing the sphere of influence by the world’s largest debtor nation—the U.S.

This overwhelming paradigm shift will be jettisoned by Russia and China supplanting the U.S. dollar as the world’s major reserve currency with, instead, other sovereign currencies. This dramatic change will be initiated as foreign central banks pull back their purchases of U.S. treasurys, especially those that are considered longer term investments—anything beyond a 10 year maturation.

The days of China and Russia subsidizing U.S. military expansion (approximately half of the U.S. budget) through the purchase of U.S Treasurys is coming to an end. Another way that the U.S redirects it currency back into the budget is by circulating it through the host nation’s central bank via the 737 military bases and installations established around the world. This, too, may be coming to an end. The U.S. may be finding Russia, China, Brazil, Pakistan, India, Iran, and Malaysia removing its pawns, knights and bishops from the world’s chessboard. The nations with budgetary surpluses now have greater control over the one country, which was so willing to destroy its real economy, and replace it with a phony financial-monopoly based economy full of fake securitized debt instruments, which were given fake high AAA ratings, and insured against their failures through Ponzi-style credit default swaps; and, as a result of such foolhardy willingness shown by Reagan, Bush, Clinton, Bush, and now, Obama, the U.S. will more than likely find itself in a continuous decline as it throws more of its economic resources into the burn-barrel of financial institutions.

For President Obama to even think of giving Federal Reserve Chairman, Ben Bernanke any oversight powers, is to give a pyromaniac oversight control of the burn-barrel. And, to allow his voice to structure new regulatory rules over the financial sector would be like letting a bank’s personnel director hire professional bank robbers as night janitors!

Bernanke is culpable in this economic collapse. He has been deeply embedded in the plot by the top 20 banks to take over the Treasury, and the Federal Reserve’s resources.

We have now learned that 10 financial banks want to pay back $68 billion of the $700 billion allocated TARP funds. Now Kevin Hall of McClatchy News has spun propaganda by stating that “the TARP bailout turns out to have been good business for the U.S” in his article of the same name. He says that out of the $68 billion, the U.S government received $1.8 billion in dividends. “That translates to an annualized rate of return of about 4.64 percent on the $68 billion.”

Out of the $700 billion allocated for TARP, there still remains $134 billion still remaining in the program’s account. Subtract the $68 billion, and there still remains $498 billion still outstanding by the remaining 9 financial banks. $566 billion was actually lent out. Only around 15% is now planning to be paid back.

The question is what kind of impact did this $1.8 billion have on the GDP? Or, on the productivity of the country, for that matter? The answer is zero! Did it improve the plight of the suffering working American? NO! I am sorry Kevin, but I don’t see how the bank bailout was good business for the U.S.

Had the banks been allowed to fail, and all the funds that were handed over to the zombie financial banks, including the measly $566 billion out of the $11 trillion total amount of money made available to the zombie financial banks, the U.S. government might have been able to gather a return by investing nothing, but instead, taking control of the bank’s assets, and once taken over through receivership, then the toxic mortgage debt could have been auctioned off for around 22 cents on the dollar. Bank receivership would have been better business for the U.S. in the long run. And, better for working people. In spite of all the party favors given to the financial banks, credit is still frozen because the banks are hoarding the money for their own protection.

Now, had the government made available the $11 trillion to those companies in the real economy, as loans, to, once again, build up a Green and vibrant manufacturing sector, workers would have been hired, who would be paying income taxes, and stimulating the economy through spending. Foreclosures would have slowed months ago. The peripheral economy that surrounds the manufacturing economy, such as services, would hire workers and the nation’s productivity would grow, as well. And, the businesses would be paying back the government in taxes. Such a plan would have been a real stimulus improving the GDP far better than lending money to the hoarding financial banks that were responsible for the economic collapse in the first place!

Another weak aspect of President Obama’s regulatory plan would allow credit default swaps to go unregulated only if they were considered to be “custom” by the insurer—our government protected financial crime syndicate. And, of course, “custom” swaps would be the majority issued. Credit default swaps continue to amount to $30 trillion, and were a major player in the collapse of our economy because they went unregulated. So, for the most part, President Obama wants to continue walking the path toward the Gates of Hell!

The path President Obama has chosen will very likely embolden the neo-fascist Right wing hate-talk media voices doing what they can to bring about a sea change of civil unrest the likes of which many of us have never seen. He will deliver it to them because his decisions allowed for it to evolve. For a person as smart as he seems, he lacks the ability to see the cause and affect, 3 or 4 moves ahead, of his decisions. Some believe the opposite, that he sees moves forward, but I must differ with that observation.

The foreign countries mentioned above are sick and tired of being forced to buy Treasurys through the cycling of dollars they receive from U.S. corporate business sectors buying up their cheap goods and services, and foreign corporations, as well as having dollars circulated into their banks as a result of U.S. military installations situated in their countries, which is then used to further support these same U.S. military bases and facilities they would like to see closed up and moved out.

Foreign central banks don’t have very much they can buy with dollars except Treasurys and American corporations, only when the U.S government permits it.

This change will likely happen. China and Russia have seriously created a plan during their BRIC (Brazil, Russia, India, and China) summit in Katerinburg, Russia. The U.S. was told “No” you are not invited, even as a passive observer.

President Obama’s actions have advanced the Economic Cold War. [Read Dr. Michael Hudson’s enlightening article, “Appointment in Yekaterinburg: The Ending of America’s Financial-Military Empire”, Counterpunch.org, 6-20-09.]

The result of the U.S.’s possible loss of the dollar as the world’s central reserve currency will be hyper-inflation because the Federal Reserve will print much more money. It is likely that there will be more job losses, significant rollbacks with state and local budgets and a shake-up in the way President Obama has been doing business, as well a Republican uprising inside Congress.

In the June 17, 2009 Wall Street Journal, there was an article about how hedge funds are foreseeing inflation with regard to commodity prices in the nation’s future and investors are betting on it happening. Such news materializing would be bad for the average working person. I have my doubts that commodity prices could inflate much more without higher wages being realized. Consumers would just cut back on spending forcing commodity prices to fall. It is a hedge fund gamble.

China, Russia and the other foreign nations realize they cannot kill their consumer export market in the U.S., but will be able to bring it to its knees as they begin to dictate new rules. They will capitulate and continue to buy U.S. Treasurys, but it will be on their terms, as they “negotiate” a reduction in U.S. military expenditures reducing our dominant influence in Eurasia.

Without the U.S government’s ability to borrow from the world’s budget surplus nations, it will not be able to spend and expand its own budget deficits. Government spending reductions will squeeze the economy, and shrink government programs, services, and entitlements, along with contributions to the states. But rest assured, the Bush-Obama bail-out/rescue plan delivered to the financial banking sector occurred as a result of demands they made to be protected from the coming squeezes, such as with luxurious wages, once the economy begins to further fold in on itself. These oligarchs have demanded they be insulated from any of the financial suffering the rest of the population will experience.

Thanks for reading, jerry

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