Dr. Paul Craig Roberts
The US
economy is a house of cards. Every aspect of it is fraudulent, and the
illusion of recovery is created with fraudulent statistics.
American
capitalism itself is an illusion. All financial markets are rigged.
Massive liquidity poured into financial markets by the Federal Reserve’s
Quantitative Easing inflates stock and bond prices and drives interest
rates, which are supposed to be a measure of the cost of capital, to
zero or negative, with the implication that capital is so abundant that
its cost is zero and can be had for free. Large enterprises, such as
mega-banks and auto manufacturers, that go bankrupt are not permitted to
fail. Instead, public debt and money creation are used to cover private
losses and keep corporations “too big to fail” afloat at the expense
not of shareholders but of people who do not own the shares of the
corporations.
Profits are no longer a measure that social
welfare is being served by capitalism’s efficient use of resources when
profits are achieved by substituting cheaper foreign labor for domestic
labor, with resultant decline in consumer purchasing power and rise in
income and wealth inequality. In the 21st century, the era of jobs
offshoring, the US has experienced an unprecedented explosion in income
and wealth inequality. I have made reference to this hard evidence of
the failure of capitalism to provide for the social welfare in the
traditional economic sense in my book, The Failure of Laissez Faire Capitalism, and Thomas Piketty’s just published book, Capital in the 21st Century, has brought an alarming picture of reality to insouciant economists, such as Paul Krugman.
As worrisome as Piketty’s picture is of
inequality, I agree with Michael Hudson that the situation is worse than
Piketty describes. http://michael-hudson.com/2014/04/pikettys-wealth-gap-wake-up/
Capitalism has been transformed by powerful
private interests whose control over governments, courts, and regulatory
agencies has turned capitalism into a looting mechanism. Wall Street no longer performs any positive function.
Wall Street is a looting mechanism, a deadweight loss to society. Wall
Street makes profits by front-running trades with fast computers, by
selling fraudulent financial instruments that it is betting against as
investment grade securities, by leveraging equity to unprecedented
heights, making bets that cannot be covered, and by rigging all
commodity markets.
The Federal Reserve
and the US Treasury’s “Plunge Protection Team” aid the looting by
supporting the stock market with purchases of stock futures, and protect
the dollar from the extraordinary money-printing by selling naked
shorts into the Comex gold futures market.
The US economy no longer is based on education,
hard work, free market prices and the accountability that real free
markets impose. Instead, the US economy is based on manipulation of
prices, speculative control of commodities, support of the dollar by
Washington’s puppet states, manipulated and falsified official
statistics, propaganda
from the financial media, and inertia by countries, such as Russia and
China, who are directly harmed, both economically and politically, by
the dollar payments system.
As the governments in most of the rest of the
world are incompetent, Washington’s incompetence doesn’t stand out, and
this is Washington’s salvation.
But it is not a salvation for Americans who
live under Washington’s rule. As all statistical evidence makes
completely clear, the share of income and wealth going to the bulk of
the US population is declining. This decline means the end of the
consumer market that has been the mainstay of the US economy. Now that
the mega-rich have even more disproportionate shares of the income and
wealth, what happens to an economy based on selling imports and
off-shored production of goods and services to a domestic consumer
market? How do the vast majority of Americans purchase more when their
incomes have not grown for years and have even declined and they are too
impoverished to borrow more from banks that won’t lend?
The America
in which I grew up was self-sufficient. Foreign trade was a small part
of the economy. When I was Assistant Secretary of the Treasury, the US
still had a trade surplus except for oil. Offshoring of America’s jobs had not begun, and US earnings on its foreign investments exceeded foreign earnings on US investments. Therefore, America’s earnings abroad covered its energy deficit in its balance of trade.
The economic stability achieved during the
Reagan administration was shattered by Wall Street greed. Wall Street
threatened corporations with takeovers if the corporations did not
produce higher profits by relocating their production of goods and
services for American markets abroad. The lower labor costs boosted
earnings and stock prices and satisfied Wall Street’s cravings for ever
more earnings, but brought an end to the rise in US living standards
except for the mega-rich. Financial deregulation loaded the economy with
the risks of asset bubbles.
Americans are an amazingly insouciant people. By now any other people would have burnt Wall Street to the ground.
