"America's Fiscal Collapse — Obama's Budget Will Impoverish America"

from a "Guns and Butter" interview with economist and author,
Michel Chossudovsky on KPFA (Berkeley, CA USA; March 2, 2009)

For access, see the note at the bottom.

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Synopsis:
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The administration' s 2010 budget will entail the most drastic curtailment in public spending in American history, leading to social havoc and the potential impoverishment of millions of people. Defense spending and bank bailouts will consume all government revenue resulting in fiscal collapse that will lead to the privatization of the state.

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Excerpt
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At first sight, the budget proposal has all the appearances of an expansionary program, a demand oriented "Second New Deal" geared towards creating employment, rebuilding shattered social programs and reviving the real economy.

The realities are otherwise. Obama's promise is based on a mammoth austerity program. The entire fiscal structure is shattered, turned upside down.
To reach these stated objectives, a significant hike in public spending on social programs (health, education, housing, social security) would be required as well as the implementation of a large scale public investment program. Major shifts in the composition of public expenditure would also be required: i.e. a move out of a war economy, requiring a movement out of military related spending in favour of civilian programs.

In actuality, what we are dealing with is the most drastic curtailment in public spending in American history, leading to social havoc and the potential impoverishment of millions of people.

The Obama promise largely serves the interests of Wall Street, the defence contractors and the oil conglomerates. In turn, the Bush-Obama bank "bailouts" are leading America into a spiralling public debt crisis. The economic and social dislocations are potentially devastating.

Obama's budget submitted to Congress on February 26, 2009 envisages outlays for the 2010 fiscal year (commencing October 1st 2009) of $3.94 trillion, an increase of 32 percent. Total government revenues for the 2010 fiscal year, according to preliminary estimates by the Bureau of Budget, are of the order of $2.381 trillion.

The predicted budget deficit (according to the president's speech) is of the order of $1.75 trillion, almost 12 percent of the U.S. Gross Domestic Product.

War and Wall Street

This is a "War Budget". The austerity measures hit all major federal spending programs with the exception of:
1. Defence and the Middle East War;
2. the Wall Street bank bailout;
3. Interest payments on a staggering public debt.

The budget diverts tax revenues into financing the war. It legitimizes the fraudulent transfers of tax dollars to the financial elites under the "bank bailouts".

The pattern of deficit spending is not expansionary. We are not dealing with a Keynesian style deficit, which stimulates investment and consumer demand, leading to an expansion of production and employment.

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Access:
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1) go to http://www.smirkers-of-the-world.org/
2) click "Project: SMIRK Audio Theatre"
3) click "America's Fiscal Collapse — Obama's Budget Will Impoverish America"

In the Know: Conspiracy, Complicity, Chaos and Profit in the Great Game

Interesting story from Chris Floyd. Extract:
"...Just like Vietnam, Cambodia, Iraq, Afghanistan, Somalia, et al, the conflicts in the Balkans were a seething mass of ruthless, violent state and non-state actors entwined in a fifteen-sided, hydra-headed, ever-shifting scrum of blood, money, lies and power. That's how the great game works. Factions change sides, penetrate each other, work together today and make war tomorrow -- sometimes at their genuine behest of their leaders, sometimes according to the agenda of their penetrators.

And yes, there are conspiracies galore in these raucous, cloudy shadowlands; but no, they are not all guided by a single sinister hand or over-arching intelligence.The big players -- including the biggest kahuna of all, the Beltway Gang on the Potomac (itself an ever-shifting scrum of ruthless factions) -- are often able to push this writhing ball in the general direction of their agenda of the moment; but just as often it spirals out their control, out of anyone's control. But of course, the resulting chaos and violence are also profitable for the merchants of death and the profiteers of fear. So it's usually a win-win situation all around -- except for the cannon fodder and "collateral damage" that gets chewed up along the way. But nobody who is anybody gives a damn about them.

These brawling factions, big and small, state and non-state, are driven more by the lust for loot, and the power and prestige that loot buys -- and by the psycho-emotional jazzmo they get from killing, robbing, raping, dominating and torturing (or ordering these to be done) -- than from ideology, ethnicity, nationality or religion, although these do play a part, especially in giving a faction some measure of internal coherence.

And if nothing else, the saga of Jovica Stanisic shows what happens to "valued CIA assets" once they have served their purpose in advancing the Beltway kahunas' agenda of the day. You can suddenly go from "trusted friend" to "war criminal" or even "new Hitler" at the drop of a hat. Just ask Saddam Hussein or Manuel Noriega, among many, many others." Read all here

Implications of the loss of the dollar’s reserve status

From Eric deCarbonnel on Marketskeptics:

"...As the dollar loses its reserves status, at least half of the world’s $5,385 billion dollar reserves will be sold off and replaced with other currencies (yuan, euro, khaleeji, gold, rand, etc…). The US, with its $71 foreign reserves, will not be able to do anything to counteract this mass exodus from the dollar. With outflows of this magnitude, the dollar’s value will collapse to a fraction of where it is now.

The process of foreign nations extracting themselves from the dollar is not going to be pretty. The likely impacts are:

1) The dollar’s value will plunge as investors see the writing on the wall and jump ship.

2) US credit markets will collapse. As the dollar fall, a mass exodus from credit market will begin. Investors sitting on toxic securities will sell at firesale prices to escape the currency depreciation.

3) The fed’s balance sheet will explode beyond all reason. In response to the mass exodus from credit markets, the fed will buy trillions worth debt in a desperate attempt to hold interest rates down. Unfortunately, the more debt the fed buys, the more quickly the dollar will fall, and the more panicked the credit selloff will become.

4) US interest rates will soar, despite (or because of) the fed's efforts.

5) Countries around the world will be hurt badly by the dollar’s decline. These countries include:

A) Nations which are heavily dependent on US exports: Japan, Mexico, etc…
B) Nations with large dollar reserves: Japan, China, Gulf oil states, etc…
C) Nations which receive large amount of US foreign aid: Israel, Egypt, etc…
D) Nations which rely on remittances from citizens working in the US: Mexico, India, etc...
E) Nations which use dollars as their official currency: Liberia, Panama, etc…
F) Nations which have large amounts of dollars in circulation: Central and South America (especially Argentina), Eastern Europe, etc…

6) Some nations will see benefits from the dollar’s decline. These countries include:

A) Nations with large gold reserves: EU zone, Switzerland, etc…
B) Nations which owe dollar denominated debt will see that debt wiped out: Iceland, African nations, etc…
C) Nations who stable currencies: EU zone, Switzerland, China, etc…

7) World politics will be greatly altered. There will be considerable anger at the US from nations hurt by dollar’s fall. The US will lose influence to Asia (mainly China).

8) US retailers will get crushed. As the dollar falls, the cost of imports for retailers will increase, but the American consumer will be unable to afford to these higher prices. Competition between desperate retailers will force them the sell inventory at below cost, creating massive losses. Retailers most heavily dependent on imports (ie: Wal-Mart) will be the first to go under. Eventually as more and more retailers go bankrupt, the few survivors will be able to raise prices enough to cover costs, and the sector will stabilize at a fraction of its current size.

9) American lifestyles will change radically. The end of cheap oil, low interest rates, and deficit spending will mean a lower quality of life and higher taxes.

10) The price of gold and other precious metals will explode.

11) US will experience hyperinflation."