No Escape from War and Unemployment

New Hampshire voters have chosen warmonger clones of
Bush/Cheney for their party`s presidential candidates.
The only candidates not in Israel`s pocket are Kucinich,
Paul, and Gravel, who have no chance for their party`s
nomination.

Obama, who provided some hope for change, undercut
his support on the eve of the New Hampshire primary by
declaring that he would

invade Pakistan in order to protect America. It is a
mystery why Obama thought this message would motivate
those inclined to support his candidacy.

This means change is unlikely. Neocon think tanks,
media, evangelical preachers, President Bush, Vice
President Cheney, and many other members of the
government have succeeded in turning a majority of
Americans into scared Islamophobes and in denying
Americans any reliable information about the cause of
the conflict.

Unfolding economic events during 2008 are likely to
increase fear among the US population–the fear that
comes from recession and indebtedness.

As the German National Socialists said, a fearful
population welcomes a savior. The Bush Regime has put
into place all the necessary pieces for rule by the
executive.

The Greenspan Fed created money and low interest
rates to hide the effect on the US economy of

job loss from offshoring. The low prices, achieved
by substituting

low-cost Asian labor for American labor, masked the
inflationary impact of the Fed`s monetary policy.

The low interest rates created artificial increases
in home prices by reducing the carrying costs of
mortgages. Most people buy according to monthly payment,
not purchase price of the home.

Many homeowners refinanced to capture and spend the
rise in home equity produced by the low interest rates.
This spending and the construction boom misled people
about the strength of the economy.

So did US productivity and GDP statistics. As Susan
Houseman has

shown, US statistics have not been adjusted for
offshoring and include in US productivity and GDP growth
both the lower labor costs and the real output of
offshored goods that are in fact part of Asian GDP.

Performance-driven executives at financial
institutions were suckered into purchasing subprime
derivatives, which have crashed, leaving the financial
system with serious problems.

Bailouts require yet more liquidity, but the exchange
value of the US dollar has been reeling from US budget
and trade deficits. Creating more dollars makes holding
existing dollar assets even less attractive to the
foreigners who finance US deficits.

The dollar has retained its

reserve currency role despite its loss of value,
because there is no clear alternative. The euro is a
currency without a country, and might be adversely
affected by differential interest rates arising within
the EU membership. The UK economy is comparatively small
and faces similar problems to the US. The rising Asian
economies are not ready to assume the role.

As I have documented repeatedly, job growth in the US
has been confined to

domestic nontradable services. The US is now far
more dependent on imported manufactured goods than it is
on imported energy. Offshoring makes it impossible for
the US to balance its trade as offshoring turns US GDP
into imports.

Offshoring is now reaching beyond manufacturing into
high-end service jobs. Princeton University economist
Alan Blinder, a former vice chairman of the Federal
Reserve, estimates that there are as many as 30 million
US service jobs filled by college graduates that are
susceptible to offshoring.

As long as China continues its currency peg to the
dollar, lower prices from a continuation of offshoring
can hide the new round of Fed money creation. But can a
new round of money creation create enough new consumer
spending by over-indebted consumers to mask the jobs
lost to offshoring with more employment for waitresses
and bartenders, or will the new liquidity be used up in
saving the troubled financial institutions? Access to
more credit does not help people who are maxed out and
cannot pay their bills, especially when they are losing
their jobs.

Studies by economists with the Economics Policy
Institute

report that as of 2006, the most recent data, the
typical

American family`s income remained $1,000 below its
peak in 2000. Six years of

“economic recovery”
were unable to put the real median family
income back to its previous peak. The combination of
massive indebtedness, offshoring job loss, and recession
is likely to produce further decline in US living
standards.

Last month (December 2007) the Congressional Budget
Office released its report on household incomes.[PDF]
The CBO

data show that 80% of Americans have experienced a
falling share of US income, and that the top 1% of the
income distribution has received almost the entire
income gain of the top 20% of Americans. Keep in mind
that some of this measured income gain is in reality
phantom income according to the research of Susan
Houseman.

An economy that concentrates its income gains at the
very top while wiping out high value-added jobs by
sending them abroad, thus dismantling the ladders of
upward mobility, is an economy headed for serious
troubles even without subprime derivative and currency
problems.

All of the presidential candidates currently in the
running have authoritarian personalities. America`s next
president is likely to seize upon rising domestic
economic hardship and growing resistance abroad to US
hegemony to complete the dismantling of America`s
constitutional system.

COPYRIGHT

CREATORS SYNDICATE, INC.

Paul Craig Roberts
[email
him] was Assistant
Secretary of the Treasury in the Reagan Administration.
He is the author of

Supply-Side Revolution : An Insider`s Account of
Policymaking in Washington;
 Alienation
and the Soviet Economy and

Meltdown: Inside the Soviet Economy,
and is the co-author with Lawrence M. Stratton of


The Tyranny of Good Intentions : How Prosecutors and
Bureaucrats Are Trampling the Constitution in the Name
of Justice. Click

here for Peter
Brimelow`s Forbes Magazine interview with Roberts
about the recent epidemic of prosecutorial misconduct.