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US Economic Crisis


Mark Stapleton
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It's a strange sight watching the US Federal Reserve slicing official interest rates like this. Three quarters of 1% yesterday and the promise of more to come. Here in Australia, the Reserve Bank is moving in the opposite direction, indicating that official rates might need to be lifted again in order to combat inflation.

It will be interesting to see if these rate cuts, combined with the Bush Government's fiscal rescue package, can stave off a precipitous economic collapse in the US.

This article from Robert Reich suggests 2008 will be difficult for the US. The predictions include house prices falling by 20-40% and consumer spending falling by an incredible $360 billion in 2008:

http://www.salon.com/opinion/feature/2008/.../reich_economy/

Most of the major global markets fell sharply yesterday and have since partially recovered. Some commentators are warning of the possible snowball effect, with panic as the catalyst. Will the European banks keep bailing America out?

The most powerful military in the world might be facing economic disaster. They need a big war badly.

Edited by Mark Stapleton
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The author Chalmers Johnson makes a good case for military Keynesianism being the underlying problem of the US economy:

http://www.alternet.org/story/74620/?page=entire

The term refers to decades of profligate military spending by successive Governments (strongly ramped up by the current administration), with little benefit to the domestic economy, except to create jobs in the vast military sector.

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No es una problema! There are lots of places to start a way...ennie, meenie, minie, moo....I think I'll invent a false-flag fight with....Persia....poof!....

Iran would be the preferred choice. But the problem for them is that the public, and sections of the US military, are looking pretty war weary. It would be a hard sell. On the other hand, the elites running America are unpredictable and one doesn't know how they will react to the economic crisis they are facing.

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  • 2 weeks later...

This piece by Michael Klaire nominates oil as the main factor behind America's looming economic crisis:

http://www.alternet.org/story/75649/?page=entire

In 1998, when the bubble was taking shape, crude oil cost about $11 a barrel and the United States produced half of the petroleum it consumed; but that was the last year in which the fundamentals were so positive. American reliance on imported petroleum crossed the 50% threshold that very year and has been rising ever since, while the cost of imported oil hit the $100 per barrel mark this January 2 for the first time, an all-time record (though the price was once briefly higher, as measured in older, less inflated dollars).

It's the reason America will struggle to avoid an economic meltdown, imo. The massive overconsumption of oil, mostly imported and skyrocketing in price, renders America economically helpless. Since the election of George Bush, the US has been so preoccupied with military interventions it has failed to notice that the era of cheap energy is over. The realignment of the world order is under way, and the US has been left at the starting gate by the most irresponsible and reckless administration in its history.

Here in Australia, the Rudd Government is moving quickly to reposition its regional alliances. The US is taking a back seat as Rudd moves closer to China. Today he criticised the Taiwanese independence movement as a further show of support for China. By the time Bush leaves office, will America have any friends at all?

Edited by Mark Stapleton
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Guest David Guyatt

I'm not so sure Mark. The damage of higher oil to the using pubic hurts -- obviously. But surely the US oil & gas community are like pigs in muck. And governments benefit from higher revenue. I always ask the question why, in times of war, does the oil price tend to rise? An answer that strikes me as being sensible is that the hike in price is a covert tax imposed on the rest of the world to offset the UKUSA camp's cost of the war. Harming China and Russia in the wallet is also, I think, an added motive, to see the price increase.

My take, overall, is that it's all about transferring wealth from the many to the few -- it's always about transferring wealth from the many to the few...

Everything else is an elaborate illusion.

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I'm not so sure Mark. The damage of higher oil to the using pubic hurts -- obviously. But surely the US oil & gas community are like pigs in muck. And governments benefit from higher revenue. I always ask the question why, in times of war, does the oil price tend to rise? An answer that strikes me as being sensible is that the hike in price is a covert tax imposed on the rest of the world to offset the UKUSA camp's cost of the war. Harming China and Russia in the wallet is also, I think, an added motive, to see the price increase.

My take, overall, is that it's all about transferring wealth from the many to the few -- it's always about transferring wealth from the many to the few...

Everything else is an elaborate illusion.

David,

While the rising oil price is a windfall for the oil industry, it causes too much damage to the rest of the economy. Inflation will skyrocket and there'll be less disposable income remaining to spend on other, more fragile sectors of the US economy--like the car industry, for example. Many countries might satisfactorily accomodate the reality of steadily rising oil prices but this isn't just any country. At 20 million barrels a day, the US dwarfs all others in consumption so the shock waves hit their economy with much more intensity than any other country. Not only that, they also can't afford it. I heard George Bush was begging the oil producers to increase production the other day.

The US oil consumption level is an albatross around their neck. It's going to take them too long to turn it around. The oil producers control America's fate already, imo.

China and India are getting richer and hoping to emulate America's golden era but unfortunately for them they will never fully copy America's prosperity because the US flourished mostly during the era of cheap energy. That's now over.

That said, maybe you're right. The oil companies might just bleed the US dry.

Despite the unpopularity of Iraq, war over oil must still be a tempting option for the US, especially if their economy gets close to collapse. That would be the Texan solution.

Edited by Mark Stapleton
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Guest David Guyatt

Peter, I've been mighty impressed with Hudson following your earlier post of an interview he gave. My (perhaps impressionable) view is that he gets it right more often than he gets it wrong. Some of his insights are deep and important and highly informative.

Thanks for posting that earlier link.

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