Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

US Economic Crisis: The US Political Leadership Has Failed

Economics / US Economy Sep 13, 2007 - 12:27 PM GMT

By: Richard_C_Cook

Economics

As the 2007 economic collapse picks up speed, it's time to take a hard look at the performance of the U.S. national political leadership in meeting some of their most fundamental responsibilities. It's time to face the fact of serious failure over the last quarter century.

During this time, the leaders of both political parties and of major institutions such as the Federal Reserve have presided over the abandonment of some of the most solemn obligations of constitutional government. They have done this in order to embrace an agenda favorable mainly to the financial, corporate, and government elites.


On January 20, 1981, a full generation ago, President Ronald Reagan said in his first inaugural address, "Government is not a solution to our problem, government is the problem."

Reagan was both right and wrong.

The problem the U.S. was facing then was the collapse of the nation's manufacturing base through a recession that happened when the Federal Reserve raised interest rates to over the twenty percent level. It did so almost a decade after President Richard Nixon removed the gold peg for the dollar, leading to the inflation of the 1970s when our currency flooded world markets through the oil trade.

Reagan's statement that "government is the problem" was correct to the extent that failed financial policies and the out-of-control actions of a Federal Reserve beholden to private financial interests combined in the worse economic downturn since the Great Depression to wreck the world's greatest industrial powerhouse.

But he was wrong in thinking that the solution was deregulation of the economy, particularly deregulation of financial and investment institutions which took place during his two terms. The result was enormous growth in the power and influence of Wall Street and the big banks over the rest of the economy. The era of leveraged mergers, acquisitions, and buyouts was the predecessor of the disaster of today with the unfolding fiasco of equity, hedge, and derivative funds in the process of collapse.

After Reagan came President George H.W. Bush. By the end of his term, the loss of manufacturing jobs had produced another recession. Within a couple of years of Bill Clinton's election in 1992, action by Secretary of the Treasury Robert Rubin to strengthen the dollar attracted enough foreign investment to create the dot.com bubble.

Clinton then cut the federal budget enough by reducing federal employment that he was able to achieve a budget surplus. This lessened the drag on the economy from the national debt which Reagan had left behind from his tax cuts and trillion dollar military build-up. But the over-leveraged dot.com bubble burst with the stock market collapse of 2000, leaving us in recession again.

Enter President George W. Bush. Despite the "achievement" of Federal Reserve Chairman Alan Greenspan in creating another bubble—the housing one—big enough to float the U.S. economy for four consecutive years—2002 to 2005—the economic fundamentals today are horrendous. We are living in an economy that has begun to crash, with the Federal Reserve, the Treasury Department, and Congress cobbling together bail-outs of various descriptions which they hope will right what is obviously a sinking ship.

We can only hope they will succeed to some extent, because it would be heartless to wish disaster on the ones who suffer the most from the consequences of the greed and stupidity of people in power—namely the ordinary people who work for a living and who honestly try to raise their families and hold to a decent standard of living. But life is becoming very hard for the vast majority of Americans who have been bearing the brunt of our failed economic and monetary polices of the last three decades.

Our political leadership has let us down in the following critical respects:

  • Going back to the 1930s, President Franklin D. Roosevelt established an economic system—the New Deal—that pulled the U.S. out of the Great Depression, enabled us to fight World War II, and created the world's greatest industrial democracy. He did this largely through programs that, taken together, were based on the principle of low-cost credit treated as a public utility. This persisted into the 1960s and 70s, when it was replaced with the system of monetarism, whereby the economy is now regulated by the Federal Reserve through raising and lowering of interest rates. This system, with interest rates much higher, on average, than during previous decades, has been catastrophic for the U.S. economy. It has enriched the financial industry at the expense of everyone else through what can only be called institutionalized usury. Under this system, every period of economic growth since 1983 has been a bank-created bubble, while the general population has become steadily poorer. The Federal Reserve claims that it raises interest rates to reduce inflation, when in fact higher interest rates cause inflation by making every transaction more expensive. Under the reign of monetarism, the U.S. dollar has lost over eighty percent of its value. In fact, government policies are designed to generate inflation, because this makes it cheaper to pay down the national debt and while augmenting tax revenues.
  • It has been well-documented that since the early 1980s the federal government has acquiesced in every respect to economic policies that have resulted in the steady erosion of our manufacturing base, elimination of millions of skilled industrial jobs, creation of a crushing burden of household and individual debt, crumbling of our physical infrastructure, privatization or elimination of public services, failure to meet such crises as the Katrina disaster, export of jobs to low-cost foreign labor markets, unfair distribution of taxation, and toleration of the influx of millions of illegal aliens who keep wages low within the domestic economy.
  • Since the Clinton administration, the government has misled the public through distortion of economic indicators. Calculations of the GDP are too high and exaggerate the growth of the economy. The consumer price index on which government cost-of-living adjustments are based has eliminated such items as food, fuel, and home buying. Actual inflation is running at a rate of three times what the government estimates; i.e. closer to ten percent than the three percent which is claimed. Regarding the money supply, the Federal Reserve has stopped reporting one of the most important indicators, which is M3—the amount of money available to the largest institutional investors. Data which are available today show without question that the producing economy—that is, the everyday world of people who work for a living—has been in recession for over a year. Meanwhile, the financial economy that lives off the producers as a parasite continues to float on rollovers of mega-loans originating with the Federal Reserve and its policy of allowing banks to capitalize the massive amounts of repurchase agreements generated by electronic funds transfer.
  • Insufficient attention has been paid to the disastrous effects of NAFTA in destroying family farming in the U.S., Canada, and Mexico. On top of this has been the diversion of agricultural products into bio-fuel production with the attendant inflationary effects. Meanwhile, our food supply has been taken over by agribusiness and the financial markets at the same time that two-thirds of the nation has been in the grip of long-term drought. The high interest rates of the monetarist regime have worked to make farming at the local level impossible and have destroyed the production of entire regions, such as the once-great Idaho potato industry. Unless local farming can be revived, there is a real-danger of massive food shortages breaking out under a prolonged economic crisis.
  • Finally, there are our failed foreign and military policies. After the U.S. lost the Vietnam War, we had reason to believe that our political leaders might have learned a lesson about military adventures abroad, particularly land wars on the continent of Asia. Instead, starting in earnest with the "Reagan doctrine" of endless proxy conflicts on every continent, the U.S. has embarked on a policy of world military conquest. The Iraq War, the planned permanent occupation of that country, and the designs being formulated against Iran, are part of a policy of military control of the Middle East that has been ongoing for almost twenty years. The dual objectives of this policy are to control Middle Eastern oil and advance the interests of Israel. Talk of the "surge," troop drawdown, etc., are nonsense, because the U.S. plans to occupy permanent bases and control the remaining oil reserves in the region. These wars are being paid for by sale of Treasury bonds to possible future adversaries such as China, while the U.S. bubble economy that is backing up our military forces overseas is deflating. Clearly something has to give, either through exhaustion of our military capability abroad, economic collapse at home, or the catastrophe of a world war. The denouement seems to be drawing closer as foreign governments dump their U.S. dollars which are declining in value due to the twin trade and fiscal deficits. What our leaders should now be doing is recognize the fact that we live in a multilateral world where conflicts can only be resolved by nations acting as equals under the umbrella of the U.N.

So many mistakes have been made over the last several decades that it is difficult to see how real change could take place without a revolutionary transformation of American society. Those who worked for change in the 1960s through opposition to the Vietnam War hoped for such a transformation, but the opposite has happened.

The cause has been the assertion of influence by the corporate-financial-government elites, who have essentially negated the ability of the people through their elected representatives to manage affairs for the sake of the general welfare as stated in the preamble to our Constitution.

The government under the leadership of both political parties has even violated some of its basic constitutional mandates.

Congress, for instance, has failed to exercise its duties with respect to oversight and control of the monetary system, having ceded its authority to the private banking industry through the Federal Reserve Act of 1913. Congress has also failed to provide effective regulation of the financial industry under the interstate commerce clause of Article One, as the subprime mortgage debacle and other abuses have clearly demonstrated.

The government as a whole has failed to provide for equal protection of the laws as specified in the Fourteenth Amendment by allowing so much of the wealth of the nation to be transferred to the upper income brackets who manipulate the corporate and financial systems to their advantage. It could also be argued that the passivity of the government in standing by while millions of people have lost their homes, jobs, or pensions due to fraudulent financial practices or speculative bubbles violates the Fifth Amendment provision which specifies that "no person shall be…deprived of life, liberty, or property, without due process of law."

Finally, it could be argued that many of our economic and tax policies violate the Thirteenth Amendment which states that, "Neither slavery nor involuntary servitude, except as a punishment for crime whereof the party shall have been duly convicted, shall exist within the United States, or any place subject to their jurisdiction."

We're used to interpreting the Thirteenth Amendment as applying only to chattel slavery, but economic servitude can be almost as onerous. Certainly the provision of the 2005 bankruptcy reform legislation which makes student loan debt and unpaid taxes a lifetime obligation, not subject to bankruptcy write-off, constitutes "involuntary servitude." So too may a cumulative tax burden where up to fifty percent of an individual's income goes for taxes at the federal, state, and local levels.

It is obvious that the elite intend to make every effort to ride out the current crisis. This is what the so-called "soft landing" is about.

At the point in time when it may become possible to have real change, it can only be done effectively as it was accomplished during the New Deal—through control of credit as a public utility. This is because the causes of social distress are economic, and the economy is controlled through the monetary system. The essence of monetary policy is who controls credit and for what ends.

It would not be difficult to create programs, institutions, and systems to develop an updated New Deal to meet present conditions. The knowledge is there, as is the technology. What is lacking is political recognition and will. Today most individuals are passive spectators to the ongoing train wreck, and none of the leading presidential candidates is addressing basic policy issues. Ninety-five percent of what they are saying is media fluff.

As an example of what could be done, it would be possible immediately to place all pubic infrastructure programs within the U.S. under a funding mechanism whereby a federal infrastructure bank could be self-capitalized by special Treasury infrastructure bonds with lending at zero percent interest for a multitude of long-term projects.

A new money supply would thereby come into being that would completely by-pass the Federal Reserve System. This could be supplemented by a citizens' basic income guarantee and a National Dividend, similar to the Alaska Permanent Fund, which would reduce poverty and inject purchasing power at the grassroots level. The denial of purchasing power except through more debt in a country where the wage and salary base has stagnated is an economic crime. One purpose is doubtless to create an impoverished underclass as a source of military recruitment.

Such measures would revolutionize local economies and restore the ability of the general population to participate in the economic life of the nation. But until enough people wake up to what is going on and the fact that they have the power within themselves to make a difference, nothing will change. They will continue to be fleeced by the rich and powerful as they have been throughout most of history.

By Richard C. Cook
http:// www.richardccook.com

Copyright 2007 Richard C. Cook
Richard C. Cook is a former federal government analyst who was one of the key figures in the investigation of the space shuttle Challenger disaster. He is author of the book - Challenger Revealed: An Insider's Account of How the Reagan Administration Caused the Greatest Tragedy of the Space Age is Richard C. Cook's personal story of how he disrupted the cover-ups surrounding the Challenger disaster.

Richard C. Cook Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in