War Threat Rises As Economy Declines, Warns Paul Craig Roberts

Tyler Durden's picture

Authored by Paul Craig Roberts,

Keynote Address to the Annual Conference of the Financial West Group, New Orleans, May 7, 2015

The defining events of our time are the collapse of the Soviet Union, 9/11, jobs offshoring, and financial deregulation. In these events we find the basis of our foreign policy problems and our economic problems.

The United States has always had a good opinion of itself, but with the Soviet collapse self-satisfaction reached new heights. We became the exceptional people, the indispensable people, the country chosen by history to exercise hegemony over the world. This neoconservative doctrine releases the US government from constraints of international law and allows Washington to use coercion against sovereign states in order to remake the world in its own image.

To protect Washington’s unique Uni-power status that resulted from the Soviet collapse, Paul Wolfowitz in 1992 penned what is known as the Wolfowitz Doctrine. This doctrine is the basis for Washington’s foreign policy. The doctrine states:

“Our first objective is to prevent the re-emergence of a new rival, either on the territory of the former Soviet Union or elsewhere, that poses a threat on the order of that posed formerly by the Soviet Union. This is a dominant consideration underlying the new regional defense strategy and requires that we endeavor to prevent any hostile power from dominating a region whose resources would, under consolidated control, be sufficient to generate global power.”

In March of this year the Council on Foreign Relations extended this doctrine to China.

Washington is now committed to blocking the rise of two large nuclear-armed countries. This commitment is the reason for the crisis that Washington has created in Ukraine and for its use as anti-Russian propaganda. China is now confronted with the Pivot to Asia and the construction of new US naval and air bases to ensure Washington’s control of the South China Sea, now defined as an area of American National Interests.

9/11 served to launch the neoconservatives’ war for hegemony in the Middle East. 9/11 also served to launch the domestic police state. While civil liberties have shriveled at home, the US has been at war for almost the entirety of the 21st century, wars that have cost us, according to Joseph Stiglitz and Linda Bilmes, at least $6 trillion dollars. These wars have gone very badly. They have destabilized governments in an important energy producing area. And the wars have vastly multiplied the “terrorists,” the quelling of which was the official reason for the wars.

Just as the Soviet collapse unleashed US hegemony, it gave rise to jobs offshoring. The Soviet collapse convinced China and India to open their massive underutilized labor markets to US capital. US corporations, with any reluctant ones pushed by large retailers and Wall Street’s threat of financing takeovers, moved manufacturing, industrial, and tradable professional service jobs, such as software engineering, abroad.

This decimated the American middle class and removed ladders of upward mobility. US GDP and tax base moved with the jobs to China and India. US real median family incomes ceased to grow and declined. Without income growth to drive the economy, Alan Greenspan resorted to an expansion of consumer debt, which has run its course. Currently there is nothing to drive the economy.

When the goods and services produced by offshored jobs are brought to the US to be sold, they enter as imports, thus worsening the trade balance. Foreigners use their trade surpluses to acquire US bonds, equities, companies, and real estate. Consequently, interests, dividends, capital gains, and rents are redirected from Americans to foreigners. This worsens the current account deficit.

In order to protect the dollar’s exchange value in the face of large current account deficits and money creation in support of the balance sheets of “banks too big to fail,” Washington has the Japanese and European central banks printing money hand over fist. The printing of yen and euros offsets the printing of dollars and thus protects the dollar’s exchange value.

The Glass-Steagall Act that separated commercial and investment banking had been somewhat eroded prior to the total repeal during the second term of the Clinton regime. This repeal, together with the failure to regulate over the counter derivatives, the removal of position limits on speculators, and the enormous financial concentration that resulted from the dead letter status of anti-trust laws, produced not free market utopia but a serious and ongoing financial crisis. The liquidity issued in behalf of this crisis has resulted in stock and bond market bubbles.

Implications, consequences, solutions:

When Russia blocked the Obama regime’s planned invasion of Syria and intended bombing of Iran, the neoconservatives realized that while they had been preoccupied with their wars in the Middle East and Africa for a decade, Putin had restored the Russian economy and military.

The first objective of the Wolfowitz doctrine–to prevent the re-emergence of a new rival–had been breached. Here was Russia telling the US “No.” The British Parliament joined in by vetoing UK participation in a US invasion of Syria. The Uni-Power status was shaken.

This redirected the attention of the neoconservatives from the Middle East to Russia. Over the previous decade Washington had invested $5 billion in financing up-and-coming politicians in Ukraine and non-governmental organizations that could be sent into the streets in protests.

When the president of Ukraine did a cost-benefit analysis of the proposed association of Ukraine with the EU, he saw that it didn’t pay and rejected it. At that point Washington called the NGOs into the streets. The neo-nazis added the violence and the government unprepared for violence collapsed.

Victoria Nuland and Geoffrey Pyatt chose the new Ukrainian government and established a vassal regime in Ukraine.

Washington hoped to use the coup to evict Russia from its Black Sea naval base, Russia’s only warm water port. However, Crimea, for centuries a part of Russia, elected to return to Russia. Washington was frustrated, but recovered from disappointment and described Crimean self-determination as Russian invasion and annexation. Washington used this propaganda to break up Europe’s economic and political relationships with Russia by pressuring Europe into sanctions against Russia.

The sanctions have had adverse impacts on Europe. Additionally, Europeans are concerned with Washington’s growing belligerence. Europe has nothing to gain from conflict with Russia and fears being pushed into war. There are indications that some European governments are considering a foreign policy independent of Washington’s.

The virulent anti-Russian propaganda and demonization of Putin has destroyed Russian confidence in the West. With the NATO commander Breedlove demanding more money, more troops, more bases on Russia’s borders, the situation is dangerous. In a direct military challenge to Moscow, Washington is seeking to incorporate both Ukraine and Georgia, two former Russian provinces, into NATO.

On the economic scene the dollar as reserve currency is a problem for the entire world. Sanctions and other forms of American financial imperialism are causing countries, including very large ones, to leave the dollar payments system. As foreign trade is increasingly conducted without recourse to the US dollar, the demand for dollars drops, but the supply has been greatly expanded as a result of Quantitative Easing. Because of offshored production and US dependence on imports, a drop in the dollar’s exchange value would result in domestic inflation, further lowering US living standards and threatening the rigged, stock, bond, and precious metal markets.

The real reason for Quantitative Easing is to support the banks’ balance sheets. However, the official reason is to stimulate the economy and sustain economic recovery. The only sign of recovery is real GDP which shows up as positive only because the deflator is understated.

The evidence is clear that there has been no economic recovery. With the first quarter GDP negative and the second quarter likely to be negative as well, the second-leg of the long downturn could begin this summer.

Moreover, the current high unemployment (23 percent) is different from previous unemployment. In the postwar 20th century, the Federal Reserve dealt with inflation by cooling down the economy. Sales would decline, inventories would build up, and layoffs would occur. As unemployment rose, the Fed would reverse course and workers would be called back to their jobs. Today the jobs are no longer there. They have been moved offshore. The factories are gone. There are no jobs to which to call workers back.

To restore the economy requires that offshoring be reversed and the jobs brought back to the US. This could be done by changing the way corporations are taxed. The tax rate on corporate profit could be determined by the geographic location at which corporations add value to the products that they market in the US. If the goods and services are produced offshore, the tax rate would be high. If the goods and services are produced domestically, the tax rate could be low. The tax rates could be set to offset the lower costs of producing abroad.

Considering the lobbying power of transnational corporations and Wall Street, this is an unlikely reform. My conclusion is that the US economy will continue its decline.

On the foreign policy front, the hubris and arrogance of America’s self-image as the “exceptional, indispensable” country with hegemonic rights over other countries means that the world is primed for war. Neither Russia nor China will accept the vassalage status accepted by the UK, Germany, France and the rest of Europe, Canada, Japan and Australia. The Wolfowitz Doctrine makes it clear that the price of world peace is the world’s acceptance of Washington’s hegemony.

Therefore, unless the dollar and with it US power collapses or Europe finds the courage to break with Washington and to pursue an independent foreign policy, saying good-bye to NATO, nuclear war is our likely future.

Washington’s aggression and blatant propaganda have convinced Russia and China that Washington intends war, and this realization has drawn the two countries into a strategic alliance. Russia’s May 9 Victory Day celebration of the defeat of Hitler is a historical turning point. Western governments boycotted the celebration, and the Chinese were there in their place. For the first time Chinese soldiers marched in the parade with Russian soldiers, and the president of China sat next to the president of Russia.

The Saker’s report on the Moscow celebration is interesting
. Especially note the chart of World War II casualties. Russian casualties compared to the combined casualties of the US, UK, and France make it completely clear that it was Russia that defeated Hitler. In the Orwellian West, the latest rewriting of history leaves out of the story the Red Army’s destruction of the Wehrmacht. In line with the rewritten history, Obama’s remarks on the 70th anniversary of Germany’s surrender mentioned only US forces. In contrast Putin expressed gratitude to “the peoples of Great Britain, France and the United States of America for their contribution to the victory.”

For many years now the President of Russia has made the point publicly that the West does not listen to Russia. Washington and its vassal states in Europe, Canada, Australia, and Japan do not hear when Russia says “don’t push us this hard, we are not
your enemy. We want to be your partners.”

As the years have passed without Washington hearing, Russia and China have finally realized that their choice is vassalage or war. Had there been any intelligent, qualified people in the National Security Council, the State Department, or the Pentagon, Washington would have been warned away from the neocon policy of sowing distrust. But with only neocon hubris present in the government, Washington made the mistake that could be fateful for humanity.

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AustrianJim's picture

Relax, we all know wars create jobs and revive economies.

MonetaryApostate's picture

It's how the elite turn lead into gold....

 

Seriously though, I truly hope that we don't enter a war, nuclear subs sinking to the bottom of the ocean just doesn't sit well with me AT ALL...

(Unless the whole world wants to be drinking radioactive water, you might wanna speak the hell up at this time...)

j reuter's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... www.jobs-review.com

Macchendra's picture

Then add this to the mix: the "new poor" from the economic collapse creates fertile breeding ground for mass movements in America.  These mass movements are seeded in all of the following directions:  "The liberals did it!", "The conservatives did it!", "White people are out of control and murdering us!", "Black people are out of control and murdering us!"  Then Bosnia all over again, but as if every Yugoslavian were armed to the teeth.  From the blood emerges a fascist military dictatorship and a never ending anarchist insurgency that becomes the new justification for the war on terror.  The anarchists are supported by almost every other nation causing the US to eventually declare war on just about everyone.  Escalations, more escalations, then:

The missiles are flying. 

jdtexas's picture

Blah Blah Blah another tired PCR article......amazing how these losers stay around....that's right they're paid for this kind of crap

 

Who’s Paying the War Pundits?

saltoafronteira's picture

Well, with all the risks involved, better go to war against a crazed beast, than bending to its diktats. If you think PCR is a looser, wait to see how a looser is, when stinking amerika goes down the sewer it rightufully deserves and is much too longo due.

usednabused's picture

Blah Blah Blah, fuck you texasass

Weaponized Innocense's picture

Yea right like lover pâténted, the passion assassin warlords, Kiki Moore McLean would stop Armageddon from between my bedsheets if I ask them too or better yet begged......
Roll eyes!

Weaponized Innocense's picture

My rattlesnake portfolio of hedged shorts etc seems to have changed the gnashing teethers attitudes for the life's a sick video game magic carpet ride for yoyo hearts on strings by passion assassins for the time being but too much damage has been done for far too long by those who prefer death than competition.

fascismlover's picture

It's how the elite turn lead into gold....

 

It's how they turn lead, blood, depleted uranium, taxpayer money and personal freedom at home into gold.  And really not that much gold - seems to dissapear as soon as it arrives.  

Weaponized Innocense's picture

Also kill off the unneeded economic & spiritual competition of those who can't be destroyed via the legal system and weaponized economics in the ghettos. The one percent can't afford to jail us all ....all the time just to let out crowded prisons of the most murderous kind to house the non violent ones.

TruthInSunshine's picture

We're entering a period now that will be eerily similar to the follow on events of the initial 1929 crash (of markets and the economy), when the temporary hemorrhaging had stopped until 1933, and now heavily indebted developed and emerging nations have no ability to stop the coming onslaught.

Speculators can cheat death, and some can even get rich over short term periods (assuming they cash out in time & quit gambling), but the basic and inarguably correct arithmetic points to the fact that a 2nd wave (similar to 1933) crash that will be massive in deflationary impact is coming, and it will be worse than 1933 due to interconnectedness of global economies, automation, high household debt and low household formation, wage suppression, slack aggregate demand, the paradox of ample choice/supply, and massive inequality born of political/banking/government connections in large part, that all act to depress the middle class (that used to comprise maybe 40% of the population but consume 80% of the goods/services produced)...

Brad DeLong isn't always (or maybe even often) correct (no economists participating in the most dismal of "sciences" is, horrible prognostication track record in tow), and I even fervently disagree with his prescription for what may be a barely analgesic treatment of our condition (even he acknowledges that neither said Rx or any other policies can help much due to the complexity of our problems/crises) but he nails what will be the follow on impacts of what is currently an ongoing, real economic depression, happy talk from politicians, media and manipulators notwithstanding:

http://equitablegrowth.org/2015/05/04/great-depression-great-recession-n...

Cityzerosix's picture

I've noticed the rapid collapse of circulating money in the smallish British town here. A number of factors have contributed such as purchase taxes, reduction of government spending, zero hours jobs,pay effectively frozen, etc. One of the interesting factors is internet shopping.....people try for a good deal and you can't blame them but the rest of the money drains away into the hands of remote entities.

The diversity and number of locally based busnesses steadily disintegrates exacerbating parochial decline.

Ham-bone's picture

China, Russia, and OPEC net collectively stopped buying US Treasury debt as of July '11...and since it's all about The Fed's Backdoor QE - QE via Central Bank Currency Swaps.

Article details those nations with Fed swap lines vs those without...and guess which group of foreigners is buying all the US Treasury debt...

http://econimica.blogspot.com/2015/05/the-feds-backdoor-qe-central-bank.html

Perseus son of Zeus's picture

Tighten up on the grammar Chris or you goin be in troubles.

Al Tinfoil's picture

To those puzzled, as I was, by the EU leaders meekly following Washington's directive to impose sanctions against Russia even though the economy of the EU would suffer serious harm: The swap lines between the Federal Reserve and the central banks of the EU indicate the extent of their financial interdependence.  In light of the perilous bank stability situation in the EU and poor economic growth, the EU leaders can be understood to fear any move by the Fed or Washington to cut off EU bank access to Fed funding.

  The prospects of Greek default, possible default by others of the PIIGS nations, and contagion in the German banking sector from the Austrian Hypo/Heta bond default show some of the perils faced by the EU financial sector.  The IMF is now backing away from further Greek bail-outs, demanding that the EU and ECB take further write-downs of Greek debts.  Further write-downs will have direct impact on EU taxpayers. 

 

  Under the Fiscal Stability Treaty, all the Euro-zone nations undertook to guarantee the debts of each other - any default forces the other nations to shoulder the burden.  If there is a cascade of defaults in the PIIGS, the non-defaulting Euro nations may be swamped by the added debt obligations.

junction's picture

History repeating itself.  In 1980, the United States did not attend the Summer Olympics because the Russians invaded Afghanistan.  The jihadists the Russians fought were the ones who murdered the U.S ambassador Adolph Dubs on February 14, 1979 after he was kidnapped in Kabul and held hostage before his death in a botched rescue attempt.  The New World Order types at the State Department then twisted the facts in the Dubs murder around to blame the Russains and not Muslim terrorists working as Afghan police.  The State Department, then and now, has been a tool of NWO satanists.  Now, America is providing material support for ISIS, for Ukraine militants who burn people alive on crosses and for the heroin druglords in Afghanistan.  What happened to this country, that it allows a monster like Obama to have a "kill list?"     

Anusocracy's picture

A couple centuries of immigrating a third world mindset.

AlaricBalth's picture

I guess if they wanted to prevent the rise of China, they should not have shipped the US's manufacturing base across the Pacific.

Chief Wonder Bread's picture

Who was in charge of that anyway? Makes you wonder what 'they' are up to.

AlaricBalth's picture

The author cites the CFR as the source of the "China Doctrine". IMHO the CFR is a globalist organization with an agenda that has been, and will continue to be, anathema to the best interests of US. The CFR has one mandate and that is to expand the interests of the global corporate elite.

Chief Wonder Bread's picture

CFR founded by "Colonel" House. Opus Magnus 'Philip Dru: Administrator.'

TeethVillage88s's picture

CFR created the UN during WW II at the charter of FDR I think. Someone said CFR might have been a British Invention in order to get USA into World War II... and Secure British Support for an Israeli State in Palestine?

Maybe I got that mixed up.

Kissinger was the First to Go to china under Richard M. Nixon, so I always thought it was a Kissinger initiative.

Of Course Brzezinski founded one of those clubs. Kissinger and Brzezinski seem interchangeable.

Anusocracy's picture

@AlaricBalth

Manufacturing plants did the same thing biological plants would do if they were able.

http://en.wikipedia.org/wiki/Liebig%27s_law_of_the_minimum

Liebig's law of the minimum, often simply called Liebig's law or the law of the minimum, is a principle developed in agricultural science by Carl Sprengel (1828) and later popularized by Justus von Liebig. It states that growth is controlled not by the total amount of resources available, but by the scarcest resource (limiting factor).

This concept was originally applied to plant or crop growth, where it was found that increasing the amount of plentiful nutrients did not increase plant growth. Only by increasing the amount of the limiting nutrient (the one most scarce in relation to "need") was the growth of a plant or crop improved. This principle can be summed up in the aphorism, "The availability of the most abundant nutrient in the soil is only as good as the availability of the least abundant nutrient in the soil." Or, to put it more plainly, "A chain is only as strong as its weakest link."

Perseus son of Zeus's picture

Stinks like rothschild lizard waste to me.

CapnJackDaniel's picture

And that's it right there. The story of the end of America.

silver_stacker's picture

Some believe that the sociopaths running this country are like sore losers at a poker game...if they can't win...they'll just kick the table over...let's hope they are wrong...

Cityzerosix's picture

".....the country chosen by history to exercise hegemoney over the world."

          History does not choose but is invented at the time, and usually re-invented later.

Intelligence_Insulter's picture

Paul Craig Roberts doesn't know shit.

Weaponized Innocense's picture

Certainly not that isis made direct threats in USA via video that they had some 70 peeps here ready to hit us immentately this afternoon.

Weaponized Innocense's picture

Forgot North Korea too and their little nuclear missile sub technology their gonna sell around world.

stewie's picture

lol and what do you know?!?!  He's one of the best out there dude.

TruthInSunshine's picture

People in both developed nations and emerging ones, the biggest of the BRICS included, have not a remote clue as to how badly an economic depression will reassert itself, and will be shocked at their devastated living standards and governments' ineffective responses (never mind their naive trust in governmental efficacy in resolving crises this complex) to what they will experience and see and live through.

willwork4food's picture

Precisely.  I always laugh when the morons on this site are gun-ho for destruction. I understand where they are coming from, but they have NO IDEA what will happen.

People will cry out for anything after that, one world gov? digital currency? Labor camps for food?

No problem.

TeethVillage88s's picture

TruthInSunshine is right I think.

I have a list of like 25 major things that came out of FED & VICHY DC & TBTJ Banks over a period of like 20 or more years.

Everyone of them is a Coup against the Federal Govt or the US Voter/Citizen and Cost us all our Future Tax Security (larger Taxes), from False Flags and Fake Wars, or Deregulation of Utilities and Banks,... TARP, QE, ZIRP.

But I can't come up with a Single good change that has come down in all that time... except for maybe expanding EBT Cards to keep people from killing each other.

** Doesn't look like FEDERAL Govt did anything to correct anything even in a US Caused Global Crisis **

You can't expect Infrastructure Investment or anything other than Social Engineering.

Anusocracy's picture

Seriously now.

A collapse is coming. It should have happened years ago - it didn't. Now it will be worse and even more so by putting it off again.

datura's picture

Yes, people in developed nations will cry, but not those in emerging ones. People in countries like Russia are much more self-sufficient and not connected to the grid as much as Westerners. They are also able to cope with much more suffering that Westerners. Russians went through much worse things, including 1990s when they were literally freezing to death or literally dying from hunger, as the Russian-Jewish oligarchs pillaged Russia. Russians remember that and will accept no NWO, because they already tasted it in 1990s and they know it means death anyway. I watched the V-Day celebrations in Russia, I watched how all those hundreds of thousands (at least half a million only in Moscow) people marched together with Putin with that proud glow in their eyes. And as the South-African president said: "We watched the celebrations and realized that Russia is still the Russia we know. We admire Russians, because Russians will always be themselves." And I also watched the video, when the Chinese people talked about Russia and Putin and they said that they admire Putin and Russians and they need to stand together. These two nations will not bow down. These two nations will eventually be leaders in this new century, whether you like it or not. If that takes a world war that won't be first time for any of them. Both Russia and China had the highest losses in WWII and it never broke them. Why should it now? But if the USA and EU are hit by the war, their people will not be able to cope. They are already too soft and too much connected to the grid.

Chief Wonder Bread's picture

I'm ready to be enlightened, Schopenhauer.

assistedliving's picture

and you do?  Unfortunately PCR's prognosis dovetails nicely with many ZHers.  U better find another board

Winston of Oceania's picture

They disagree with you and they have to leave? You must be one of those socialist cockbites at University...

tbd108's picture

Dear Peckerwood, I notice you didn't argue any facts because of course you don't have any that would strengthen your case, Seig Heil you half-wit neo con/nazi prick.

Salah's picture

He really doesn't, he's crazy as a loon.  But he's discovered he can make a bundle $$$ pandering to the paranoid.

bunnyswanson's picture

There are many crazy people on the stage but their fine suits, fat wallets and that dick up their ass is the first thing I see.  PCR is not a fool, has little to gain (donations here and there) and at his age, could remain silent and watch as foreign interest group called AIPAC guts his country in the name of globalization (The scam of th 21st Century). 

Dragon HAwk's picture

And when those assholes crawl out of their bunkers to look around, ..some real pissed off people will be waiting for them. or maybe none either way they Loose

One of these is not like the others..'s picture

 

 

And when those very well armed and organised, well fed, assholes crawl out of their bunkers to look around, ..some real pissed off, hungry, weak, irradiated people will be waiting for them. or maybe none, but either way, as per usual, they'll do whatever the fuck they want.

There - it was a bit of a task, but I fixed it for you.

 

 

heisenberg991's picture

Please nuke Ann Arbor. I hate the fucking Walverines.