It was a terrible tragedy: this morning's above the fold, front page story of the collapsed crane that killed two workers and injured four.
The Miami Herald, on another front page story below the fold, acknowledges the toppled expectations of ordinary people; "Confidence at 17-year low."
This comes on the heels of yesterday's front page story, "Home prices fall; sales to rise?", with a sliver of positive news.
The newspaper noted that the average median home price in Miami-Dade has fallen 20 percent in the past year, but oddly did not include the aspect of the new data that made national news on television: that home prices in Miami fell more sharply than any other city in the nation except Las Vegas.
It is an interesting omission of fact.
A free and independent press could have blunted the free-wheeling, anything goes atmosphere in matters relating to zoning, building and construction, wrapping up the rising political fortunes of public officials (like former Governor Jeb Bush), land speculators, lobbyists, and the Growth Machine.
Over a long period of time, the accommodations of the media to real estate advertisers more or less obliterated balanced coverage of the housing boom that ended in 2005. In 2003, former chair of the Bush campaign finance machinery, WCI Chairman Al Hoffman crowed to The Washington Post that suburban sprawl was "an unstoppable force."
(A ceaseless flood of new regulations to facilitate growth around the limitations of water supply and wastewater disposal accompanied the boom-- like the effort to change the Safe Drinking Water Act by permitting the movement of fluids within layers of underground aquifers. With a new round of applications to move the Urban Development Boundary approaching the county commission in April, the Herald ought to acknowledge that the Powerpoint presentation dragged all over town in 2005 by builders' lobbyists to make their case for moving the Urban Development Boundary then showed demand and population on a curve straight into the stratosphere, at the very instant the opposite force of reality had started to make its own case.)
Skeptical voices--whether from community activists or environmentalists--were either not covered or marginalized in comparison to those who knew better, because they were contributing to "economic growth".
"Balance" was imputed from a position deemed to be unassailable by publishers and advertisers: that wealth confers right. Its corollary: that engineering and technology can surmount any obstacles of geography or natural resources impeding growth.
Now that the results are in, the media is playing catch up. Readership interest is up, advertising revenues are down. What to do?
Deeper analysis is in order by the mainstream press, relative to the position of the presidential candidates for how to "rescue" the economy from the implosion of housing markets. John McCain says that he is only in favor of "rescue" when it is clear that the financial system is at risk. Barack Obama and Hillary Clinton both have plans ($10 billion and $30 billion respectively) to "help homeowners at risk of foreclosure."
But the place from which to start, is where former Associate Editor of the Opinion Page of the Wall Street Journal-- Paul Craig Roberts-- started recently: the collapse of American power. (His editorial is reprinted, below.)
Allowing home ownership to turn into a form of riverboat gambling could only happen by trashing caution: the loosening of regulations or failure to regulate at all, the "streamlining" of environmental permitting, and the hijacking of measures to protect the environment by special interests.
The loose regulatory atmosphere that allowed the flow of toxics underground is the same as that which allowed the proliferation of toxic financial derivatives.
Now the Federal Reserve has committed to take on hundreds of billions in derivative debt tied to mortgages, as collateral for loans to the big banks.
None of the presidential candidates have addressed the fact that the lender of last resort is the US taxpayer.
As such, the assumption of liability by unwitting consumers and taxpayers for pollution and toxics in our air and water is the the same as taking on the excesses of the housing boom in places like Miami and Las Vegas: these are forms of taxation without representation.
There is a role for a free and independent press in telling truth to power: taxation without representation is intolerable.
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published at counterpunch.com
March 18, 2008
A Bankrupt Superpower
The Collapse of American Power
By PAUL CRAIG ROBERTS
In his famous book, The Collapse of British Power (1972), Correlli Barnett reports that in the opening days of World War II Great Britain only had enough gold and foreign exchange to finance war expenditures for a few months. The British turned to the Americans to finance their ability to wage war. Barnett writes that this dependency signaled the end of British power.
From their inception, America's 21st century wars against Afghanistan and Iraq have been red ink wars financed by foreigners, principally the Chinese and Japanese, who purchase the US Treasury bonds that the US government issues to finance its red ink budgets.
The Bush administration forecasts a $410 billion federal budget deficit for this year, an indication that, as the US saving rate is approximately zero, the US is not only dependent on foreigners to finance its wars but also dependent on foreigners to finance part of the US government's domestic expenditures. Foreign borrowing is paying US government salaries--perhaps that of the President himself--or funding the expenditures of the various cabinet departments. Financially, the US is not an independent country.
The Bush administration's $410 billion deficit forecast is based on the unrealistic assumption of 2.7% GDP growth in 2008, whereas in actual fact the US economy has fallen into a recession that could be severe. There will be no 2.7% growth, and the actual deficit will be substantially larger than $410 billion.
Just as the government's budget is in disarray, so is the US dollar which continues to decline in value in relation to other currencies. The dollar is under pressure not only from budget deficits, but also from very large trade deficits and from inflation expectations resulting from the Federal Reserve's effort to stabilize the very troubled financial system with large injections of liquidity.
A troubled currency and financial system and large budget and trade deficits do not present an attractive face to creditors. Yet Washington in its hubris seems to believe that the US can forever rely on the Chinese, Japanese and Saudis to finance America's life beyond its means. Imagine the shock when the day arrives that a US Treasury auction of new debt instruments is not fully subscribed.
The US has squandered $500 billion dollars on a war that serves no American purpose. Moreover, the $500 billion is only the out-of-pocket costs. It does not include the replacement cost of the destroyed equipment, the future costs of care for veterans, the cost of the interests on the loans that have financed the war, or the lost US GDP from diverting scarce resources to war. Experts who are not part of the government's spin machine estimate the cost of the Iraq war to be as much as $3 trillion.
The Republican candidate for President said he would be content to continue the war for 100 years. With what resources? When America's creditors consider our behavior they see total fiscal irresponsibility. They see a deluded country that acts as if it is a privilege for foreigners to lend to it, and a deluded country that believes that foreigners will continue to accumulate US debt until the end of time.
The fact of the matter is that the US is bankrupt. David M. Walker, Comptroller General of the US and head of the Government Accountability Office, in his December 17, 2007, report to the US Congress on the financial statements of the US government noted that "the federal government did not maintain effective internal control over financial reporting (including safeguarding assets) and compliance with significant laws and regulations as of September 30, 2007." In everyday language, the US government cannot pass an audit.
Moreover, the GAO report pointed out that the accrued liabilities of the federal government "totaled approximately $53 trillion as of September 30, 2007." No funds have been set aside against this mind boggling liability.
Just so the reader understands, $53 trillion is $53,000 billion.
Frustrated by speaking to deaf ears, Walker recently resigned as head of the Government Accountability Office.
As of March 17, 2008, one Swiss franc is worth more than $1 dollar. In 1970, the exchange rate was 4.2 Swiss francs to the dollar. In 1970, $1 purchased 360 Japanese yen. Today $1 dollar purchases less than 100 yen.
If you were a creditor, would you want to hold debt in a currency that has such a poor record against the currency of a small island country that was nuked and defeated in WW II, or against a small landlocked European country that clings to its independence and is not a member of the EU?
Would you want to hold the debt of a country whose imports exceed its industrial production? According to the latest US statistics as reported in the February 28 issue of Manufacturing and Technology News, in 2007 imports were 14 percent of US GDP and US manufacturing comprised 12% of US GDP. A country whose imports exceed its industrial production cannot close its trade deficit by exporting more.
The dollar has even collapsed in value against the euro, the currency of a make-believe country that does not exist: the European Union. France, Germany, Italy, England and the other members of the EU still exist as sovereign nations. England even retains its own currency. Yet the euro hits new highs daily against the dollar.
Noam Chomsky recently wrote that America thinks that it owns the world. That is definitely the view of the neoconized Bush administration. But the fact of the matter is that the US owes the world. The US "superpower" cannot even finance its own domestic operations, much less its gratuitous wars except via the kindness of foreigners to lend it money that cannot be repaid.
The US will never repay the loans. The American economy has been devastated by offshoring, by foreign competition, and by the importation of foreigners on work visas, while it holds to a free trade ideology that benefits corporate fat cats and shareholders at the expense of American labor. The dollar is failing in its role as reserve currency and will soon be abandoned.
When the dollar ceases to be the reserve currency, the US will no longer be able to pay its bills by borrowing more from foreigners.
I sometimes wonder if the bankrupt "superpower" will be able to scrape together the resources to bring home the troops stationed in its hundreds of bases overseas, or whether they will just be abandoned.
Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration. He was Associate Editor of the Wall Street Journal editorial page and Contributing Editor of National Review. He is coauthor of The Tyranny of Good Intentions.He can be reached at: PaulCraigRoberts@yahoo.com
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