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  • From: "Tradingpost" <tradingpost@gilanet.com>
  • To: livingontheland@lists.ibiblio.org
  • Subject: [Livingontheland] Quo Vadis: Playing For Keeps (economic collapse)
  • Date: Tue, 07 Dec 2004 18:04:59 -0700


Quo Vadis: Playing For Keeps
Patrick C. Doherty
December 02, 2004
http://www.tompaine.com/articles/quo_vadis_playing_for_keeps.php

When the chief economist at Morgan Stanley says we have a
one-in-10 chance of avoiding economic Armageddon, one tends to
take notice. When America's second-largest creditor tells us
to get our economic house in order the same week, two points
begin to determine a line. But the Bush administration has not
so much as flinched. In the latest installment of Quo Vadis?,
Patrick Doherty says that when GOP strategists ask, "Where do
we go from here?" they answer, "toward an economic 9/11."

Patrick C. Doherty is associate editor at TomPaine.com.
Previously, he spent a decade working on conflicts and
economic development in the Middle East, Africa, the Balkans
and the Caucasus. His column, Quo Vadis, means "Where do we go
from here?" and focuses on America's strategic dysfunction and
how to transform it.

"Democrats play for lunch. We play for keeps." -Grover
Norquist

Last week, America received two pieces of monstrously bad
news. First, the chief economist of Morgan Stanley (along with
Robert Reich, Larry Summers, Paul Krugman, China and the
currency markets) warned us that the U.S. economy is about to
collapse. Second, we learned that the Bush administration is
willing to ignore the likelihood of collapse and will push
ahead aggressively with tax and Social Security reform. Put
these two pieces of information together and you get a
nightmare scenario.

Movement conservatives are willing to tank the economy while
they control the federal government in order to remake it
according to their liking.

Impending Economic Collapse

You know things aren't looking good when the chief economist
of Morgan Stanley uses the word Armageddon in a briefing to
the world's largest equity investing house.

In an article published last Tuesday, Stephen Roach reportedly
told his colleagues at Fidelity that America has a one in 10
chance of avoiding economic Armageddon. His comments came
toward the end of a string of bad economic omens. China's
central banker told America to get our own house in order,
European and Asian central bankers began talk of buying
Euro-based securities, and OPEC felt enough pressure to
announce that it had no intention, for the moment, of pricing
oil in euros instead of dollars.

Three days later, Roach revised and extended his remarks in an
op-ed in The New York Times:

"The day could come when foreign investors demand better terms
for financing America's spending spree (and savings
shortfall).That is the day the dollar will collapse, interest
rates will soar and the stock market will plunge. In such a
crisis, a United States recession would be a near certainty.
And the rest of an America-centric world would be quick to
follow."

Rather than focus on the downside risks on Black Friday, Roach
reframed his NYT analysis on what it would take to secure that
one-in-10 chance of avoiding the reckoning. In short, he says
the world's central banks must arrange the world's accounts
such that Americans spend less and save more while everyone
else spends more and saves less.

It's easy to see why Roach is so cynical. Such a solution
would entail reversing the flow of the global economy. China,
Japan and Europe would have to voluntarily reduce their
companies' exports, profits, and shareholder return. Not to
mention that to most world leaders, such a deal would reward
George W. Bush and the GOP-dominated Congress for their
reckless fiscal and military policies that both created the
economic crisis and increased global insecurity.

So foreign rescue is not likely. But it doesn't matter. The
Bush administration is not interested in rescuing the economy.

Shock Therapy, Norquist-Style

In the 1980s, Reagan's chief budget adviser, David Stockman,
admitted that it was White House policy to expand the federal
deficits in order to squeeze out social entitlement spending.
The Bush administration has taken that tactic one step
further, explained by the pre-eminent Republican operative
Grover Norquist's famous goal, "to get government down to the
size where we can drown it in the bathtub."

And they have already declared their intentions to do just
that. The Bush administration has identified its top three
legislative priorities in the next term, and none of them
involves reducing American consumption and increasing American
savings. Instead, their priorities represent the final
operations of the battle started in 1964: tort reform, Social
Security reform and tax reform. Tort reform to curtail
consumer protections. Social Security reform to force every
working American to buy risk-filled investment accounts. Tax
reform to make taxation fully regressive, placing the highest
burden on the lowest earners through either a flat tax or a
value-added tax.

Given our severe account imbalances, this second-term agenda
of the Bush administration will signal to our global creditors
that we are not serious about our debts. That will make
dollar-denominated securities worthless and the dollar will
cease to be the global currency, as America will no longer be
the mass market of last resort. At some point, OPEC will have
to switch to a new currency-probably Euros-and the price of
oil for Americans will rise significantly as the dollar
continues to fall. As Roach's collapsing stock market ushers
in a recession, the inevitable job losses will pop the housing
bubble across the country. Americans, with trillions of
dollars of consumer debt leveraged on the value of their
homes, will find that their futures will have disappeared.
Hard-earned home equity will be gutted and stock values will
have crashed. Unemployment will be widespread.

With a full four years in the White House, two years of
hegemony in Congress, and an escalating, multi-fronted war,
the far right has plenty of time and cover to push their
agenda through. With no interim accountability, they can
ignore reality and continue to spin wildly to the American
public. Indeed, this administration has already shown that it
can use a national crisis to advance goals that in fact
reinforce the causes of the crisis. It happened with 9/11, and
it can happen again.

Too Crazy To Believe

The movement conservatives leading the GOP have decided that
the way to get what they want is to throw out all the
rules-whether that means speaking truthfully to American
citizens, comity in the Senate, stare decisis in the Supreme
Court or fiscal discipline in the budget. These concepts once
defined the American form of government and placed the
republic above partisanship. But to operatives like Karl Rove
and Grover Norquist, they represent Democratic blind spots to
be exploited. Bipartisanship, as Norquist once said, is merely
another word for date rape.

Destroying the economy in order to remake it is just the kind
of gambit that Democrats would believe so unlikely that it is
not worth considering. It defies logic and credibility. Just
like the possibility that Christian Zionists could take over
Congress or that Bush might invade Iraq with no real evidence
of a threat.

It's hard to write such a depressing analysis. It feels overly
cynical. But then I remembered Ron Suskind's profile of George
W. Bush in the NYT Sunday Magazine. In it, a senior adviser to
Bush told Suskind: "We're an empire now, and when we act, we
create our own reality. And while you're studying that
reality-judiciously, as you will-we'll act again, creating
other new realities, which you can study too, and that's how
things will sort out. We're history's actors...and you, all of
you, will be left to just study what we do."

And then I think I might just be right.






  • [Livingontheland] Quo Vadis: Playing For Keeps (economic collapse), Tradingpost, 12/07/2004

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