Greed has won

In a biting reminder that only US citizens are restricted from visiting Cuba, a British naval vessel made a port call in Havana. It could be taken as insult added to injury. In what appears to be a shift to a multilateral world, the “top analyst” in the US intelligence community is forecasting “a steady decline in U.S. dominance in the coming decades, as the world is reshaped by globalization, battered by climate change, and destabilized by regional upheavals over shortages of food, water and energy.” This estimation appears not to consider the financial upheavals that have focused the world’s attention and led to passage of a $700 billion bailout. Jennifer Barry at the Market Oracle looks at all the debt swirling around and forecasts doom for the dollar; she writes:

Many commentators claim that the former GSE’s [government secured enterprise’s] liabilities are not like usual government debt, as the mortgages are backed by homes. However, Catherine Austin Fitts indicates that many of the Fannie, Freddie and FHA loans are actually fraudulent, as the same property is sold repeatedly to phantom buyers or the property does not actually exist. At least $1 trillion of Fannie and Freddie’s mortgages are already in trouble, and the data on mortgage resets indicates the problem will not end until 2012. This bailout effectively doubled America’s publicly traded debt overnight.

On September 14, the Fannie and Freddie bombshell was followed by the sale of Merrill Lynch to Bank of America for $50 billion. Paulson admitted he was involved with the Merrill Lynch purchase at a steep premium to the market price. Bank of America is hardly a bastion of stability however, as over half its builders loans “are considered troubled.” The institution is a leading issuer of consumer credit cards, and with the U.S. in a recession, much of this debt will default. Bank of America already bought subprime lender Countrywide earlier this year in a curious deal where the firm refused to take on many of Countrywide’s liabilities.

Perhaps I missed it in the actual article, but from her headline, it is clear she thinks the dollar is doomed. US Treasury Secretary Henry Paulson told a business group in the United Arab Emirates on June 2nd that “The U.S. dollar has been the world’s reserve currency since World War Two and there is a good reason for that. The United States has the largest, most open economy in the world, and our capital markets are the deepest and most liquid.” Since then, it has become quite clear that U.S. capital markets are nowhere deep nor liquid enough; and the “open economy” seems to be undermined by opaque financial instruments and “toxic assets” whose value cannot be determined. If I’m understanding all this even close to correctly, it is now hard to see how the value of any US debt can be determined, which would seem to mean that the value of the dollar cannot be determined. Compounding the problem, this would mean that the dollar cannot be a “reserve currency,” that is, the currency which “the world’s central banks must acquire and hold . . . reserves in corresponding amounts to their [own] currencies in circulation” in order to defend against “speculative and manipulative attacks.” Even worse, oil producers will decide they can no longer accept the dollar, which will mean that the most oil-hungry nation in the world will have to sell dollars and purchase some other currency in order to buy oil.

Clearly the US is headed for a fall. I can’t forecast how hard. But there is nothing any longer sensible about US global military, economic, or political hegemony. And nothing is any longer sensible about our prosperity. We simply cannot afford it and even if Bush hadn’t antagonized the entire world, I don’t think there’s anyone big enough to bail us out. Greed has won, defeating even the greedy.

Author: benfell

David Benfell holds a Ph.D. in Human Science from Saybrook University. He earned a M.A. in Speech Communication from CSU East Bay in 2009 and has studied at California Institute of Integral Studies. He is an anarchist, a vegetarian ecofeminist, a naturist, and a Taoist.

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