“I don't know whether change will come with a bang or a whimper, whether sooner or later. But as things stand, it is more likely than not that it will be financial crises rather than policy foresight that will force the change”
-- Former Federal Reserve Chairman, Paul Volker
Ex-Fed Chairman Paul Volker is just the latest of the political heavyweights to signal that the American economy is headed for the rocks. Volker’s views appeared this week in the Washington Post and are consistent with the other predictions of doom now circulating in the media. In an article titled “On Thin Ice” the former Fed master pointed to the “huge imbalances” that are creating “circumstances as dangerous and intractable as any I can remember.”
Volker is a steadfast class warrior like his protégé Alan Greenspan and is not easily disposed to lofty rhetoric or hyperbole. If he says we’re in for trouble, you can bet he knows what he’s talking about.
Of course, in typical patrician style, Volker wagged his finger at middle class workers, moaning, (Baby) “Boomers are spending like there’s no tomorrow.”
True, but is that the source of the America’s financial dilemma, diminished personal savings? Not likely.
Volker continued, “And, we are buying a lot of houses at rising prices, but home ownership has become a vehicle for borrowing as much as a source of financial security.”
True again, but this isn’t the cause of the problem and it’s actually guys like Paul Volker who’ve cultivated this ethos of credit spending. The basic raison d’etre of the Federal Reserve is to keep the nation languishing helplessly in debt. Is it surprising that a culture of indebtedness has grown up around this precedent? How often do we open our mail to find that we’ve been cleared for another five credit cards, or cajoled into believing that we can have whatever we want on 0% financing? Are Americans to be blamed for being duped by the most sophisticated advertising mechanism the world has ever seen?
Volker is simply railing against the world he and his ilk have created. Is Volker denying his role in this grander schema? The average American had no part in generating this vision of “democracy-as-debtors-prison.” That was slapped together by the legions of marketing gurus who transformed “the land of the free” into a consumer Valhalla. Now, Volker wants to blame the victims of that system, the poor slobs who’ll be the first to get tossed out of the leaky lifeboat once we hit the inevitable economic downturn.
Volker seems to think he’s doing his patriotic duty by pointing out the gravity of the huge federal deficits as well as the “unsustainable” trade imbalance that requires a whopping $2 billion of borrowed capital “every working day,” but he cautiously tip-toes around the central issue of the Bush tax cuts that have sent the country reeling towards disaster.
Why not step up to the plate and do the right thing: issue a straight forward statement condemning the tax cuts themselves. Think of the positive effects it might have if an establishment figure like Volker flatly rejected the cuts and called for fiscal sanity and restraint. But it will never happen, because, like Greenspan, Volker’s world view is entirely shaped by a commitment to the interests of the upper 1% of the population. So, we’ll all have to pay the price for their uncontrollable rapacity.
The Deficit Time-Bomb
Just days ago the Commerce Department reported that the trade deficit in February ballooned to a record $61 billion, threatening to beat last year’s $666 billion dollar total by a third. So far, the “declining dollar” (that Volker warns of) hasn’t helped to turn things around for American manufacturers as Fed chief Greenspan predicted. Instead, the nation’s future is increasingly tenuous as American assets are being delivered by the boatload to foreign creditors.
Don’t kid yourself, both Greenspan and Volker know exactly what this means, and the havoc it will wreak on the lives of average Americans.
Congress has made their contribution too, tossing bucket loads of gas on the economic bonfire. Three weeks ago the Congress passed legislation that would provide another $106 billion in tax cuts for their wealthy constituents.
What? With deficits already in the $450 billion rage?
Yes, and just yesterday they voted overwhelmingly to permanently repeal the federal estate tax at a cost of $290 billion in revenue in the first four years. This will only add to the already gargantuan $8 trillion debt and hasten the inexorable economic collapse. The efforts of the Republican Congress to bankrupt the country are nothing less than stunning.
So, Americans are facing a “lose-lose” situation; revenue streams are drying up, personal debt is at a historic high, good paying jobs are being outsourced overseas, the dollar is plummeting, the trade deficits are at an unsustainable level, energy costs are on the rise, bankruptcies are up, the housing bubble is about to burst, and the political system has been transformed into a Medieval fiefdom where material rewards are handed out to party loyalists and campaign contributors.
It’s a bad situation, and it’s about to get a whole lot worse.
Volker’s feeble warnings shouldn’t disguise the critical role that the Federal Reserve has played in America’s demise. Greenspan has never spoken out or taken positive action to encourage a rollback of the disastrous Bush tax cuts. Instead, he defends them as the “necessary stimulus” for a robust economy. What nonsense. Even a schoolchild can see that the tax cuts have taken the country from a position of strength and solvency to the brink of ruin. How can we explain Greenspan’s recalcitrance except by calling it by its real name: class loyalty.
The same goes for Volker. Volker doesn’t mind lashing out against the wasteful spending of middle class American wage slaves. He even takes aim at Old Europe, which he blames for their “structural obstacles to growth.” (In layman’s terms that means workers benefits, health care and retirement; all those “obstacles” to greater profits) But, he cautiously avoids mentioning the catastrophic Bush tax cuts -- the single greatest cause of our present troubles. Like Greenspan, Volker believes that every last copper farthing of America’s material wealth should be transferred into the pockets of the parasitic aristocrats on the top of the social ant hill. This seems to be the guiding principle regardless of the consequences.
So, spare us your caveats, Sir Paul, and your longwinded palavering about fiscal discipline and personal frugality. The country is headed over the cliff, and most of us know who gave us the shove.
Yes, the country is facing an economic Armageddon, due in large part to the ravenous appetites of ideologues, political cronies and self-serving patricians, like yourself. The impending tragedy could have been avoided if men like you had spoken out against the tax cuts and shown the world that we were serious about setting the ship-of-state aright. Instead, you threw your lot with the damned; your class before your country. Now, our collective futures are being buried beneath a knee-deep ocean of red ink “from sea to shining sea.” Those gluttonous tax cuts got the nod from you and the entire gaggle of bandits at the Federal Reserve. They’ve put this country on the path to ruin.
Screw you, Volker.
Mike Whitney lives in Washington state, and can be reached at: firstname.lastname@example.org.
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