Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Silver Price 2021 Roadmap - 22nd Jan 21
Why Biden Wants to Win the Fight for $15 Federal Minimum Wage - 22nd Jan 21
Here’s Why Gold Recently Moved Up - 22nd Jan 21
US Dollar Decline creates New Sector Opportunities to Trade - 22nd Jan 21
Sandisk Extreme Micro SDXC Memory Card Read Write Speed Test Actual vs Sales Pitch - 22nd Jan 21
NHS Recommends Oximeter Oxygen Sensor Monitors for Everyone 10 Months Late! - 22nd Jan 21
DoorDash Has All the Makings of the “Next Amazon” - 22nd Jan 21
How to Survive a Silver-Gold Sucker Punch - 22nd Jan 21
2021: The Year of the Gripping Hand - 22nd Jan 21
Technology Minerals appoints ex-BP Petrochemicals CEO as Advisor - 22nd Jan 21
Gold Price Drops Amid Stimulus and Poor Data - 21st Jan 21
Protecting the Vulnerable 2021 - 21st Jan 21
How To Play The Next Stage Of The Marijuana Boom - 21st Jan 21
UK Schools Lockdown 2021 Covid Education Crisis - Home Learning Routine - 21st Jan 21
General Artificial Intelligence Was BORN in 2020! GPT-3, Deep Mind - 20th Jan 21
Bitcoin Price Crash: FCA Warning Was a Slap in the Face. But Not the Cause - 20th Jan 21
US Coronavirus Pandemic 2021 - We’re Going to Need More Than a Vaccine - 20th Jan 21
The Biggest Biotech Story Of 2021? - 20th Jan 21
Biden Bailout, Democrat Takeover to Drive Americans into Gold - 20th Jan 21
Pandemic 2020 Is Gone! Will 2021 Be Better for Gold? - 20th Jan 21
Trump and Coronavirus Pandemic Final US Catastrophe 2021 - 19th Jan 21
How To Find Market Momentum Trades for Explosive Gains - 19th Jan 21
Cryptos: 5 Simple Strategies to Catch the Next Opportunity - 19th Jan 21
Who Will NEXT Be Removed from the Internet? - 19th Jan 21
This Small Company Could Revolutionize The Trillion-Dollar Drug Sector - 19th Jan 21
Gold/SPX Ratio and the Gold Stock Case - 18th Jan 21
More Stock Market Speculative Signs, Energy Rebound, Commodities Breakout - 18th Jan 21
Higher Yields Hit Gold Price, But for How Long? - 18th Jan 21
Some Basic Facts About Forex Trading - 18th Jan 21
Custom Build PC 2021 - Ryzen 5950x, RTX 3080, 64gb DDR4 Specs - Scan Computers 3SX Order Day 11 - 17th Jan 21
UK Car MOT Covid-19 Lockdown Extension 2021 - 17th Jan 21
Why Nvidia Is My “Slam Dunk” Stock Investment for the Decade - 16th Jan 21
Three Financial Markets Price Drivers in a Globalized World - 16th Jan 21
Sheffield Turns Coronavirus Tide, Covid-19 Infections Half Rest of England, implies Fast Pandemic Recovery - 16th Jan 21
Covid and Democrat Blue Wave Beats Gold - 15th Jan 21
On Regime Change, Reputations, the Markets, and Gold and Silver - 15th Jan 21
US Coronavirus Pandemic Final Catastrophe 2021 - 15th Jan 21
The World’s Next Great Onshore Oil Discovery Could Be Here - 15th Jan 21
UK Coronavirus Final Pandemic Catastrophe 2021 - 14th Jan 21
Here's Why Blind Contrarianism Investing Failed in 2020 - 14th Jan 21
US Yield Curve Relentlessly Steepens, Whilst Gold Price Builds a Handle - 14th Jan 21
NEW UK MOT Extensions or has my Car Plate Been Cloned? - 14th Jan 21
How to Save Money While Decorating Your First House - 14th Jan 21
Car Number Plate Cloned Detective Work - PY16 JXV - 14th Jan 21
Big Oil Missed This, Now It Could Be Worth Billions - 14th Jan 21
Are you a Forex trader who needs a bank account? We have the solution! - 14th Jan 21
Finetero Review – Accurate and Efficient Stock Trading Services? - 14th Jan 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Who's Behind the Budget Deficit Crisis

Politics / Global Debt Crisis Nov 22, 2010 - 09:01 AM GMT

By: Shamus_Cooke

Politics

From the U.S. to Europe media and politicians are singing the same tune: "budget deficits must be drastically reduced -- by cutting social programs -- so that global bond investors do not threaten the economy."


Not since the "war on terror" was announced has government policy been so shrouded in confusion and unanswered questions. In the same way we are not to ask how U.S. foreign policy has angered millions in the Middle East, we must remain equally silent about questioning the recent history behind the current "deficit crisis.”   

When speaking about the U.S. deficit crisis, the media and politicians focus exclusively on Social Security and Medicare, while ignoring the far more important causes resulting from engaging in multiple wars, running a huge defense budget, bestowing extremely generous tax breaks on the rich and allowing corporate taxes to steadily decline. Then, in addition to these factors, the corporate-based Economist broke ranks and told the truth about how the debt exploded as a result of the expensive bank bailouts near the start of the recession:

"Having spent a fortune bailing out their banks, Western governments [U.S. and Europe] will have to pay a price in terms of higher taxes to meet the interest on that debt. In the case of countries (like Britain and America) that have trade as well as budget deficits, those higher taxes will be needed to meet the claims of foreign creditors." (May 23, 2009).

But who exactly are the bondholders that working people must sacrifice their social programs for? The media would like us to focus exclusive attention on China, and other "foreign" investors. But, as usual, the enemy is closer to home. 

The biggest holder of U.S. debt is the U.S. Federal Reserve. The amount of money the Federal Reserve "loaned" to the U.S. government has skyrocketed during the Great Recession, due in no small part to the multiple bank/corporate bailouts of AIG, Bear Stearns, and other entities.  To this day, the amount of money the Fed has squandered on guaranteeing the bad loans of Wall Street banks remains a state secret, although rumored to be in the trillions of dollars. 

The second largest holder of U.S. debt is a mixed group of U.S. corporate entities, super rich individuals, and other forms of rich investor groups. This group has grown in size since the start of the recession, when they fled from the risky stock market for safer investments in U.S. Treasury debt. The New York Times explains:

"Bond traders surfed the global liquidity wave, buying up government debt all over the world in the view that, just as most big banks were too big to fail, so were sovereign economies, no matter how crushing their fiscal picture." (December 14, 2009).

In short, the wealthy people who owned the banks and were bailed out by the U.S. government, used much of their bailout money to buy U.S. Treasury bills (U.S. debt), and are now demanding that their taxpayer-funded investment be made safe by slashing social programs.   

To accomplish this, Social Security and Medicare are being targeted by President Obama's Deficit Commission. Former Federal Reserve chairman Alan Greenspan recently said that the recommendations from Obama's deficit commission were inevitable:

"The only question is, is it before or after a bond market crisis? Because there's no alternative.” (Rueters, November 14, 2010).

There is indeed an alternative; many in fact. The most obvious one is that taxes be drastically raised on the wealthy bond holders and other rich individuals. It is extremely revealing that no one in the federal government is discussing this option, as President Obama has quickly surrendered on his promise to undo the Bush tax cuts for the wealthy. 

The entire discussion over the U.S. deficit reveals that the priorities of President Obama and the Democrats are the same as those of President Bush and the Republicans: the very wealthy first and working people last. 

Unless labor and community groups massively mobilize working people in fighting for a pro-worker solution to the deficit crisis, austerity measures-- like reducing Social Security and Medicare -- will be forced upon us. 
Shamus Cooke is a social service worker, trade unionist, and writer for Workers Action (www.workerscompass.org).  He can be reached at shamuscook@yahoo.com Shamus Cooke is a frequent contributor to Global Research.  Global Research Articles by Shamus Cooke

© Copyright Shamus Cooke , Global Research, 2010

Disclaimer: The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of the Centre for Research on Globalization. The contents of this article are of sole responsibility of the author(s). The Centre for Research on Globalization will not be responsible or liable for any inaccurate or incorrect statements contained in this article.


© 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

6 Critical Money Making Rules