Founder Of Reaganomics Says That "Without A Revolution, Americans Are History"

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By Paul Craig Roberts, First Published at InfoWars

The Ecstasy of Empire

The United States is running out of time to get its
budget and trade deficits under control.  Despite the urgency of the
situation, 2010 has been wasted in hype about a non-existent
recovery. As recently as August 2 Treasury Secretary Timothy F.
Geithner penned a New York Times column, “Welcome to the Recovery.”

As John Williams (
has made clear on many occasions, an appearance of recovery was
created by over-counting employment and undercounting inflation.
Warnings by Williams, Gerald Celente, and myself have gone unheeded,
but our warnings recently had echoes from Boston University professor
Laurence Kotlikoff and from David Stockman, who excoriated the
Republican Party for becoming big-spending Democrats.

It is encouraging to see some realization that, this time,
Washington cannot spend the economy out of recession. The deficits are
already too large for the dollar to survive as reserve currency, and
deficit spending cannot put Americans back to work in jobs that have
been moved offshore. 

However, the solutions offered by those who are beginning to
recognize that there is a problem are discouraging. Kotlikoff thinks
the solution is savage Social Security and Medicare cuts or equally
savage tax increases or hyperinflation to destroy the vast debts. 

Perhaps economists lack imagination, or perhaps they don’t want to
be cut off from Wall Street and corporate subsidies, but Social
Security and Medicare are insufficient at their present levels,
especially considering the erosion of private pensions by the dot com,
derivative and real estate bubbles. Cuts in Social Security and
Medicare, for which people have paid 15 per cent of their earnings all
their lives, would result in starvation and deaths from curable

Tax increases make even less sense. It is widely acknowledged that
the majority of households cannot survive on one job. Both husband and
wife work and often one of the partners has two jobs in order to make
ends meet. Raising taxes makes it harder to make ends meet–thus more
foreclosures, more food stamps, more homelessness. What kind of
economist or humane person thinks this is a solution?

Ah, but we will tax the rich. The rich have enough money. They will simply stop earning.

Let’s get real.  Here is what the government is likely to do.  Once
 Washington realize that the dollar is at risk and that they can no
longer finance their wars by borrowing abroad, the government will
either levy a tax on private pensions on the grounds that the pensions
have accumulated tax-deferred, or the government will require pension
fund managers to purchase Treasury debt with our pensions. This will
buy the government a bit more time while pension accounts are loaded
up with worthless paper. 

The last Bush budget deficit (2008) was in the $400-500 billion
range, about the size of the Chinese, Japanese, and OPEC trade
surpluses with the US. Traditionally, these trade surpluses have been
recycled to the US and finance the federal budget deficit. In 2009 and
2010 the federal deficit jumped to $1,400 billion, a back-to-back
trillion dollar increase. There are not sufficient trade surpluses to
finance a deficit this large. From where comes the money?

The answer is from individuals fleeing the stock market into “safe”
Treasury bonds and from the bankster bailout, not so much the TARP
money as the Federal Reserve’s exchange of bank reserves for
questionable financial paper such as subprime derivatives. The banks
used their excess reserves to purchase Treasury debt.

These financing maneuvers are one-time tricks. Once people have
fled stocks, that movement into Treasuries is over. The opposition to
the bankster bailout likely precludes another. So where does the money
come from the next time?

The Treasury was able to unload a lot of debt thanks to “the Greek
crisis,” which the New York banksters and hedge funds multiplied into
“the euro crisis.” The financial press served as a financing arm for
the US Treasury by creating panic about European debt and the euro.
Central banks and individuals who had taken refuge from the dollar in
euros were panicked out of their euros, and they rushed into dollars
by purchasing US Treasury debt.

This movement from euros to dollars weakened the alternative
reserve currency to the dollar, halted the dollar’s decline, and
financed the US budget deficit a while longer.

Possibly the game can be replayed with Spanish debt, Irish debt,
and whatever unlucky country is eswept in by the thoughtless expansion
of the European Union.

But when no countries remain that can be destabilized by Wall
Street investment banksters and hedge funds, what then finances the US
budget deficit?

The only remaining financier is the Federal Reserve. When Treasury
bonds brought to auction do not sell, the Federal Reserve must
purchase them. The Federal Reserve purchases the bonds by creating new
demand deposits, or checking accounts, for the Treasury. As the
Treasury spends the proceeds of the new debt sales, the US money
supply expands by the amount of the Federal Reserve’s purchase of
Treasury debt.

Do goods and services expand by the same amount?  Imports will
increase as US jobs have been offshored and given to foreigners, thus
worsening the trade deficit.  When the Federal Reserve purchases the
Treasury’s new debt issues, the money supply will increase by more
than the supply of domestically produced goods and services. Prices
are likely to rise.

How high will they rise? The longer money is created in order that
government can pay its bills, the more likely hyperinflation will be
the result.

The economy has not recovered. By the end of this year it will be
obvious that the collapsing economy means a larger than $1.4 trillion
budget deficit to finance. Will it be $2 trillion? Higher? 

Whatever the size, the rest of the world will see that the dollar
is being printed in such quantities that it cannot serve as reserve
currency. At that point wholesale dumping of dollars will result as
foreign central banks try to unload a worthless currency. 

The collapse of the dollar will drive up the prices of imports and
offshored goods on which Americans are dependent. Wal-Mart shoppers
will think they have mistakenly gone into Neiman Marcus. 

Domestic prices will also explode as a growing money supply chases
the supply of goods and services still made in America by Americans.

The dollar as reserve currency cannot survive the conflagration.
When the dollar goes the US cannot finance its trade deficit.
Therefore, imports will fall sharply, thus adding to domestic
inflation and, as the US is energy import-dependent, there will be
transportation disruptions that will disrupt work and grocery store

Panic will be the order of the day.

Will farms will be raided? Will those trapped in cities resort to riots and looting?

Is this the likely future that “our” government and “our patriotic” corporations have created for us?

To borrow from Lenin, “What can be done?”

Here is what can be done. The wars, which benefit no one but the
military-security complex and Israel’s territorial expansion, can be
immediately ended. This would reduce the US budget deficit by hundreds
of billions of dollars per year.  More hundreds of billions of
dollars could be saved by cutting the rest of the military budget
which, in its present size, exceeds the budgets of all the serious
military powers on earth combined. 

US military spending reflects the unaffordable and unattainable
crazed neoconservative  goal of US Empire and world hegemony. What
fool in Washington thinks that China is going to finance US hegemony
over China? 

The only way that the US will again have an economy is by bringing
back the offshored jobs. The loss of these jobs impoverished Americans
while producing oversized gains for Wall Street, shareholders, and
corporate executives. These jobs can be brought home where they belong
by taxing corporations according to where value is added to their
product. If value is added to their goods and services in China,
corporations would have a high tax rate. If value is added to their
goods and services in the US, corporations would have a low tax rate.

This change in corporate taxation would offset the cheap foreign
labor that has sucked jobs out of America, and it would rebuild the
ladders of upward mobility that made America an opportunity society. 

If the wars are not immediately stopped and the jobs brought back to America, the US is relegated to the trash bin of history.

Obviously, the corporations and Wall Street would use their
financial power and campaign contributions to block any legislation
that would reduce short-term earnings and bonuses by bringing jobs
back to America. Americans have no greater enemies than Wall Street
and the corporations and their prostitutes in Congress and the White

The neocons allied with Israel, who control both parties and much of the media, are strung out on the ecstasy of Empire. 

The United States and the welfare of its 300 million people cannot
be restored unless the neocons, Wall Street, the corporations, and
their servile slaves in Congress and the White House can be defeated.

Without a revolution, Americans are history.

Dr. Paul Craig Roberts is the father of Reaganomics and the
former head of policy at the Department of Treasury. He is a columnist
and was previously the editor of the Wall Street Journal. His latest
book, “How the Economy Was Lost: The War of the Worlds,” details why America is disintegrating.