WE HAVE REACHED
A CRISIS POINT
Written By: S.R. Shearer
September 17, 2008
"The capitalist gods must love the poor
- they are making so many of them."
- Bill Bonner, The Daily Reckoning
The U.S. has reached a pivotal point insofar as the American
Empire is concerned.
Internally, the U.S. is gripped by the threat
of a massive economic meltdown - a meltdown with enormous implications insofar
as the living standards of ordinary Americans are concerned. The failure of
Lehman Brothers, the fire-sale of Merrill Lynch to Bank of America, the bailout
of Bear Stearns, Fannie Mae, Freddie Mac and AIG, the growing concern about
Morgan Stanley’s ability to raise capital, the continuing slide of Goldman
Sachs’ stock, the collapse of IndyMac and the fact that the number of U.S.
commercial banks in serious trouble has leaped to the highest level in years
are just the tip of the iceberg. Underneath what shows on the surface is more
than $20 TRILLION of unfunded, unregulated "paper" that has,
according to well-known investment analyst Jim Sinclair, "... no market and,
therefore, no real value." Sinclair goes on to say that when the market
begins to realize the seriousness of this situation,
"THE BOTTOM WILL DROP OUT."
Externally, the American Empire is stretched
to the breaking point militarily, especially insofar as the military’s "human
resources" are concerned. Gilbert Achcar of ISR writes:
"The military adventurism that the Bush-Cheney-Rumsfeld team started in Afghanistan
in October 2001, and then continued in Iraq, has led to a situation of overstretch
of the military means of the United States: not of its technological means,
to be sure, but of its ‘human resources’."
"From any point of view, the capacities of the U.S. armed forces are clearly
above the level of the Vietnam War-except on one point that was grossly underestimated:
soldiers. The current troop levels of the U.S. armed forces are much reduced
compared with the time of the Vietnam War: in 1970, the total personnel of
the Department of Defense exceeded 3 million people; today that figure hardly
reaches 1.4 million, which includes all civilian personnel, administrative
and otherwise. Since then, the pressures put on the ‘human resources’ of the
armed forces have been pushed to the extreme."
Ashcar labels the inability of the U.S. military to field enough
"foot soldiers" to take care of its empire-wide "responsibilities" (i.e.,
to keep America’s slave-states properly subdued) is its greatest weakness.
"This is surely where the Achilles’ heel of U.S. military power is located."
As a result, Ashcar says that it is "inconceivable" if not "unthinkable"
that the U.S. can go on much longer without resorting to the draft; but how?
Absent an earth-shattering military crisis, the American public would revolt
if the government tried to restore the draft.
These problems - and we speak here of both America’s internal and
external problems - are driving the elites who control the American New World
Order System into taking the kind of drastic action that could very well CHANGE
THE WORLD PERMANENTLY.
THE INTERNAL CRISIS
Beginning in the late 1990s and continuing on into the first
decade of the 21st Century, the Federal Reserve Bank kept short-term
interest rates down to 1-2 percent, stimulating, as Joel Geier says,
"... a runaway housing market, that was responsible for 40 percent of growth
and job creation ... [in the United States]. Housing prices soared on the basis
of low mortgage rates, producing large profits for builders, developers, mortgage
brokers, and banks."
As housing prices soared, so did the appearance of prosperity;
this was tied to the ability of home owners to leverage their incomes - which
were actually in decline - by borrowing on the equity of their homes. Geier
"To keep production up, "exotic" mortgages were invented, with no down payments,
and low monthly contributions based on inexpensive ‘teaser’ rates for an initial
period of two years that were then offset by drastically higher rates of 9-11
percent for the remaining twenty-eight years."
Buyers were assured, however, that they could avoid these higher
rates: Since home prices were rising rapidly, they would acquire tremendous
value in their houses, and with the availability of "easy credit," they would
be able to refinance at lower rates before their mortgage payments were adjusted
upward. Geier continues:
"The investment banks bundled ... these mortgages into securities, or bonds,
which were sold to commercial banks, their off-balance-sheet subsidiaries,
pension funds, insurance companies, hedge funds, and international financial
"The enormous profits from this arrangement [eventually] produced ... an overproduction
of houses, which could not be sold at the usual profit. A year ago construction
activity and housing prices stagnated and then fell, coincidentally just as
the resetting of mortgage rates began. People found that with falling home
prices they could not refinance, and were now stuck with these higher, unaffordable
rates. Within a few months, half a million families couldn’t make their mortgage
payments and lost their homes. It is estimated that if the economy doesn’t
get worse (which no one now believes) an additional two million families will
lose their homes in the next two years as mortgage rates rise beyond their
ability to pay."
Geier goes on to say:
"Beyond the human tragedy, this will add to the large inventory of unsold
houses, further depressing prices. Many mortgages will be greater than the
house is worth, which in turn will lead more people to walk away from homes
with inflated prices, producing even more forecloses, and further price declines.
And of course the banks are now refusing to make mortgages in declining or
unstable markets, narrowing the pool of potential buyers. It is the mad logic
of the ... market in crisis spiraling downward and producing the worst housing
depression since the 1930s."
THE SLUMP IN HOUSING PRICES COULD
CONTINUE FOR THE NEXT TEN YEARS
Many analysts have tried to reassure the public that prices
on homes will begin to stabilize in about six months. Other analysts, however,
say that THE SLUMP IN HOUSING PRICES COULD VERY WELL CONTINUE FOR THE NEXT
Geier reports that as the housing industry
contracts there is less demand for furniture, appliances, home decorating
and improvement goods, etc. Manufacturing orders are falling. Construction,
financial, and industrial workers are starting to be laid off.
Moreover, according to Geier, the decline in housing prices has started
to hit retail sales. Family income has never recovered from the last recession.
Neoliberal economic policies channeled all the growth in wealth to the top
10 percent; everyone else’s income is less than it was in 1999. As wages stagnated
or declined, consumption was only maintained through the growth of debt. As
we just stated, homeowners borrowed against the rising value of their homes,
at a rate of $800 billion a year for the last three years. Debt levels rose
and the savings rate became negative for the first time since the grim 1930s.
Now that housing prices are falling, increasing house debt as the vehicle
to maintain living standards is over, and retail sales to working-class families
All of this is cutting into profits, the dynamic that drives the
capitalist engine. In the last quarter, profits fell by 8 percent from a year
ago, the first decline in the mass of profits since the last recession. With
less profit, business spending for capital goods is being cut back. All the
elements of a recession have been slowly unfolding for months. But this is
more than an ordinary recession, it is also the opening of an international financial
crisis unlike any in the post-Second World War period.
THE MASSIVE BUILD-UP OF TOXIC DEBT IS THREATENING
THE "GOOD" FUNCTIONING OF THE AMERICAN EMPIRE
Geier says that the massive build-up of toxic debt is threatening
the "good" functioning of the international financial system (meaning the
"good" functioning of the American New World Order System). The banks have
been forced to write down billions and billions of dollars of bad mortgage
debt. Conservative estimates are that they will have to take losses of $300-400
billion in the next year-if the economy doesn’t go into recession. Citibank,
the largest American bank, has had to "write-off" a $20 billion loss on its
worst subprime mortgages alone. Like other banks it also has severe problems
with its corporate debt book, and its off-balance-sheet subsidiaries, which
it did not put up capital reserves for. The most important international bank
may face a capital crisis because it does not have adequate reserves to cover
all of its bad loans.
These are the conditions that are producing an international credit
crunch, in which banks are reluctant to lend money to corporations or other
banks because they are afraid they will not be repaid, or because of the necessity
to preserve capital to deal with the bad debts on their books or those of
their off-balance-sheet subsidiaries. It is estimated that the subprime crisis
alone may cause a contraction of the banks’ ability to lend $2 trillion, further
deepening a recession.
Already, a few banks in Germany and England have had to be rescued
from bankruptcy by state bailouts. Many of the large European and Asian banks
have suffered substantial losses from the U.S. mortgage meltdown. And that
is before the bursting of the housing bubbles in other countries, in many
of which housing prices were even more inflated than in the United States.
The Swiss bank UBS was forced to take a $10 billion write-down in December,
and it also received an $11.5 billion capital infusion from Singapore’s state
investment arm and a Middle East investor.
Geier says that -
"The financial bust in America threatens to produce a massive international
crises as it finally bursts the limits of the long, unsustainable, structural
imbalances of the global trading system."
What Geier means by this is that the tribute system the U.S.
has imposed on the rest of the world is beginning to suck the
life-blood out of its slave states in order to keep America
afloat. In the last three years alone, the U.S. has drained
over $3 TRILLION out of its tributary states -
the equivalent of 80 percent of the world’s savings. [Please
see Part 3 of Chapter
XII of the NEW ANTIPAS PAPERS, "U.S.
Economic Supremacy," for an explanation of the functioning
of America’s tribute system.]
A DILEMMA UNPRECEDENTED IN THE SHORT
HISTORY OF THE AMERICAN EMPIRE
Very obviously, this can’t continue indefinitely without causing
massive unrest among America’s slave-state populations, and
even among the elites the U.S. has installed in these countries
to run things for them. NONETHELESS, DESPITE ALL THE TRIBUTE
MONEY THAT HAS BEEN FLOWING INTO THE U.S., DOMESTIC INFLATION
IN THE UNITED STATES IS NOW 3.5 PERCENT; IF WE WERE USING THE
INDEXES THAT WERE USED IN THE 1980s, IT WOULD BE 6-10 PERCENT.
AND FOR WORKING-CLASS FAMILIES, REAL INFLATION IS EVEN HIGHER
THAN THAT BECAUSE THE BIGGEST PRICE INCREASES HAVE BEEN IN FOOD,
FUEL, HOUSING, AND HEALTH COSTS. [Again, please see Part
3 of Chapter
XII of the NEW ANTIPAS PAPERS, "U.S.
Economic Supremacy," for an explanation of the functioning
of America’s tribute system.]
OF THIS CONFRONTS THE U.S. WITH A PROBLEM OF UNPRECEDENTED MAGNITUDE: IF THE
U.S. CONTINUES TO SUCK ITS SLAVE-STATES DRY IN ORDER TO STEM THE FULL IMPACT
OF THE WORLD-RECESSION FROM OVERTAKING ITS OWN POPULATION - A SITUATION THAT
COULD LEAD TO MASSIVE UNREST IN THE U.S. - THE ELITES WILL HAVE TO BE PREPARED
TO USE ITS MASSIVE MILITARY POWER TO IMPOSE ORDER ON ITS SLAVE-STATES WHOSE
OWN POPULATIONS ARE BECOMING EVER MORE RESTLESS UNDER THE BURDEN OF THE AMERICAN
THE U.S., HOWEVER, DOES NOT HAVE THE MANPOWER IN ITS MILITARY
TO ACCOMPLISH ALL THIS. IT MUST INCREASE THE SIZE OF ITS MILITARY
- BUT THAT WILL, IN ITSELF, CAUSE MASSIVE TURBULENCE IN THE
U.S. [Please see our article, "Closing
the Trap: The Draft" and "The
Draft: You Had Better Get Ready."]
A DILEMMA! HOLD ON TO YOUR HATS - WE’RE IN FOR ONE HELL OF A RIDE! ONLY GOD
KNOWS WHAT THE ELITES ARE PLANNING TO DO TO SOLVE THIS CRISIS.
Until next time, God bless you all!
Brothers and sisters: we URGE you to remember the Word of God:
"IF WE HAVE SOWN UNTO YOU SPIRITUAL THINGS, IS IT A GREAT THING
IF WE SHALL REAP YOUR CARNAL (MATERIAL) THINGS?" (1 Cor. 9:11)
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imposed on the peoples and nations the American military
machine has ravaged - A BLOODY, TERROR-RIDDEN RAMPAGE
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