Fiscal Cliff: Economy and Currency

Once again, says it more clearly than most:

Source:  http://www.paulcraigroberts.org/2012/12/01/our-collapsing-economy-and-currency/
Our Collapsing Economy and Currency 
by Paul Craig Roberts, Institute for Political Economy 
December 1, 2012

Is the “fiscal cliff” real or just another hoax? The answer is that the fiscal cliff is real, but it is a result, not a cause. The hoax is the way the fiscal cliff is being used.

The fiscal cliff is the result of the inability to close the federal budget deficit. The budget deficit cannot be closed because large numbers of US middle class jobs and the GDP and tax base associated with them have been moved offshore, thus reducing federal revenues. The fiscal cliff cannot be closed because of the unfunded liabilities of eleven years of US-initiated wars against a half dozen Muslim countries–wars that have benefitted only the profits of the military/security complex and the territorial ambitions of Israel. The budget deficit cannot be closed, because economic policy is focused only on saving banks that wrongful financial deregulation allowed to speculate, to merge, and to become too big to fail, thus requiring public subsidies that vastly dwarf the totality of US welfare spending.

The hoax is the propaganda that the fiscal cliff can be avoided by reneging on promised Social Security and Medicare benefits that people have paid for with the payroll tax and by cutting back all aspects of the social safety net from food stamps to unemployment benefits to Medicaid, to housing subsidies. The right-wing has been trying to get rid of the social safety net ever since Franklin D. Roosevelt constructed it, out of fear or compassion or both, during the Great Depression.

Washington’s response to the fiscal cliff is austerity: spending cuts and tax increases. The Republicans say they will vote for the Democrats’ tax increases if the Democrats vote for the Republican’s assault on the social safety net. What bipartisan compromise means is a double-barreled dose of austerity.

Ever since John Maynard Keynes, economists have understood that tax increases and spending cuts suppress, not stimulate, economic activity. This is especially the case in an economy such as the American one, which is driven by consumer spending. When spending declines, so does the economy. When the economy declines, the budget deficit rises.

This is especially the case when an economy is weak and already in decline. A declining economy means less sales, less employment, less tax revenues. This works against the effort to close the federal budget deficit with austerity measures. Instead of strengthening the economy, the austerity measures weaken it further. To cut unemployment benefits and food stamps when unemployment is high or rising would be to provoke social and political instability.

Some economists, such as Robert Barro at Harvard University, claim that stimulative measures, the opposite of austerity, don’t work, because consumers anticipate the higher taxes that will be needed to cover the budget deficit and, therefore, reduce their spending and increase their saving in order to be able to pay the anticipated higher taxes.

In other words, the Keynesian effort to stimulate spending causes consumers to reduce their spending. I don’t know of any empirical evidence for this claim.

Regardless, the situation on the ground at the present time is that for the majority of people, incomes are stretched to the limit and beyond. Many cannot pay their bills, their mortgages, their car payments, their student loans. They are drowning in debt, and there is nothing that they can cut back in order to save money with which to pay higher taxes.

Many commentators are complaining that Congress will refuse to face the difficult issues and kick the can down the road, leaving the fiscal cliff looming. This would probably be the best outcome. As the fiscal cliff is a result, not a cause, to focus on the fiscal cliff is to focus on the symptoms rather than the disease.

The US economy has two serious diseases, and neither one is too much welfare spending.

One disease is the offshoring of US middle class jobs, both manufacturing jobs and professional service jobs such as engineering, research, design, and information technology, jobs that formerly were filled by US university graduates, but which today are sent abroad or are filled by foreigners brought in on H-1B work visas at two-thirds of the salary.

The other disease is the deregulation, especially the financial deregulation, that caused the ongoing financial crisis and created banks too big to fail, which has prevented capitalism from working and closing down insolvent corporations.

The Federal Reserve’s policy is focused on saving the banks, not on saving the economy. The Federal Reserve is purchasing not only new Treasury bonds issued to finance the more than one trillion dollar annual federal deficit but also the banks’ underwater financial instruments, taking them off the banks’ books and putting them on the Federal Reserve’s books.

Normally, debt monetization of this amount results in rising inflation, but the money that the Federal Reserve is creating in its attempt to manage the public debt and the banks’ private debt is hung up in the banking system as excess reserves and is not finding its way into the economy. The banks are too busted to lend, and consumers are too indebted to borrow.

However, the debt monetization poses a second threat that is capable of biting the US economy and consumer living standards very hard. Foreign central banks, foreign investors in US stocks and financial instruments, and Americans themselves observing the Federal Reserve’s continuous monetization of US debt cannot avoid concern about the dollar’s value as the supply of ever more dollars continues to pour out of the Federal Reserve.

Already there is evidence of central banks and individuals moving out of dollars into gold and silver bullion and into other currencies of countries that are not hemorrhaging debt and money. According to John Williams of Shadowstats.com, the US dollar as a percentage of global holdings of reserve assets has declined from 36.6% in 2006 to 28.7% in 2012. Gold has increased from 10.5% to 12.8% and other foreign currencies except the euro increased from 38.4% to 44.4%.

Russia, China, Brazil, India, and South Africa intend to conduct trade among themselves in their own currencies without use of the dollar as reserve currency. The EU countries conduct their trade with one another in euros, and although not reported in the US media, Asian countries are discussing a new common currency for trade among themselves.

The world is abandoning the use of the dollar to settle international accounts, and the demand for dollars is falling as the Federal Reserve increases the supply of dollars.

This means that the price of the dollar is threatened.

Concern over the dollar means concern over dollar-denominated financial instruments such as stocks and bonds. The Chinese hold some $2 trillion in US financial instruments. The Japanese hold about $1 trillion in US Treasuries. The Saudis and the oil emirates also hold large quantities of US dollar financial instruments. At some point the move away from the dollar also means a move away from US financial instruments. The dumping of US stocks and bonds would destabilize US financial markets and wipe out the remainder of US wealth.

As I have previously written, the Federal Reserve can create new money with which to purchase the dumped financial instruments, thus maintaining their prices. But the Federal Reserve cannot print gold or foreign currencies with which to buy up the dollars that foreigners are paid for their US stocks and bonds. When the dollars in turn are dumped, the exchange value of the dollar will collapse, and US inflation will explode.

The onset of hyperinflation can be as sudden as the collapse of a currency’s exchange value.

The real crisis facing the US is the impending collapse of the US dollar’s foreign exchange value. The US dollar’s value in relation to silver and gold has already collapsed. In the past ten years, gold’s price in US dollars has increased from $250 per ounce to $1,750 per ounce, an increase of $1,500. Silver’s price has risen from $4 per ounce to $34 per ounce. These price rises are not due to a sudden scarcity of gold and silver, but to a flight from the dollar into the two forms of historical money that cannot be created with the printing press.

The price of oil has risen from $20 a barrel ten years ago to as high as $120 per barrel earlier this year and currently $90 a barrel. This price rise has come about despite a weak world economy and without any supply restrictions other than those caused by the attempted US occupation of Iraq, the Western assault on Libya, and the self-harming Western sanctions on Iran, impacts most likely offset by the Saudis, still Washington’s faithful puppet, a country that pumps out its precious life fluid in order to save the West from its own mistakes. The moronic neoconservatives wish to overthrow the Saudi Arabian government, but what more faithful servant has Washington ever had than the Saudi royal house?

What can be done? For a number of years I have pointed out that the problem is the loss of US employment, consumer income, GDP, and tax base to offshoring. The solution is to reverse the outward flow of jobs and to bring them back to the US. This can be done, as Ralph Gomory has made clear, by taxing corporations according to where they add value to their product. If the value is added abroad, corporations would have a high tax rate. If they add value domestically with US labor, they would face a low tax rate. The difference in tax rates can be calculated to offset the benefit of the lower cost of foreign labor.

As all offshored production that is brought to the US to be marketed to Americans counts as imports, relocating the production in the US would decrease the trade deficit, thus strengthening belief in the dollar. The increase in US consumer incomes would raise tax revenues, thus lowering the budget deficit. It is a win-win solution.

The second part to the solution is to end the expensive unfunded wars that have ruined the federal budget for the past 11 years as well as future budgets due to the cost of veterans’ hospital care and benefits. According to ABC World News, “In the decade since the Sept. 11, 2001 terrorist attacks on the World Trade Center, 2,333,972 American military personnel have been deployed to Iraq, Afghanistan or both, as of Aug. 30, 2011 [more than a year ago].” These 2.3 million veterans have rights to various unfunded benefits including life-long health care. Already, according to ABC, 711,986 have used Veterans Administration health care between fiscal year 2002 and the third-quarter of fiscal year 2011.

The Republicans are determined to continue the gratuitous wars and to make the 99 percent pay for the neoconservatives’ Wars of Hegemony while protecting the 1 percent from tax increases.

The Democrats are little different.

No one in the White House and no more than one dozen members of the 535 member US Congress represents the American people. This is the reason that despite obvious remedies nothing...

...is being done about it.

Paul Craig Roberts was Assistant Secretary of the Treasury for Economic Policy and associate editor of the Wall Street Journal. He was columnist for Business Week, Scripps Howard News Service, and Creators Syndicate.

The Real Reason Petraeus Resigned

Obama's BenghaziGate: October Surprise Gone Bad

The following is a review of pertinent revelations trickling out on BenghaziGate: 

10/26 CIA operatives were told to “stand down” in Benghazi after three requests for back-up denied.

10/26 Senators demand that Obama declassify the drone video of the attack.

10/31 Revealed that two major media outlets sitting on information regarding Benghazi.



11/1 Senior U.S. officials say State Department never requested additional security in Benghazi.

11/1 Obama had the hubris to declare “al-Qaeda is decimated” during a campaign stop in Wisconsin following the Benghazi terror attack waged by al-Qaeda militants.

11/1 CBS reports on the Benghazi scandal with a report revealing that standard counterterrorism task force was not convened during the attack.

11/1 Revealed Ambassador Stevens pleaded on phone for help during Benghazi siege.



Important related articles to review: 

- Why Was Security Stripped in Benghazi?

- Sources: Key task force not convened during Benghazi consulate attack

- Security officials on the ground in Libya challenge CIA/Jarrett timeline

- SENATOR TOLD NETWORKS HAVE EMAILS FROM WHITE HOUSE ORDERING TEAM TO STAND DOWN ON BENGHAZI RESCUE

- TO MEDIA OUTLETS SITTING ON DAMNING BENGHAZI EMAILS: RELEASE THEM OR BE EXPOSED

Obama's Rules of Engagement, SEAL Team 6, and Nov. 6th

Navy SEALs Don't Trust Obama

U.S. Const. Art. II Sec. 3 Clause 5:  Caring for the faithful execution of the law: 

The President must "take care that the laws be faithfully executed." This clause in the U.S. Constitution imposes a duty on the President to take due care while executing laws and is called Take Care Clause, also known as the Faithful Execution Clause. The purpose of this clause is to ensure that a law is faithfully executed by the President, even if the president disagrees with the purpose of that law. By virtue of his executive power, the President may execute the law and control the law execution of others. Under the Take Care Clause, however, the President must exercise his law-execution power to "take Care that the Laws be faithfully executed." - Wikipedia



...And...

Sources:  http://bitly.com/Y4Ec4s and http://bitly.com/Y3P4Q1

AC-130 Gunship Was On-Scene In Benghazi With Former SEAL CIA Officer On Ground Pointing Laser Designator At Target, Obama Admin Refused To Let It Fire...

The following was buried in an earlier post but needs to be pointed out.  An armed drone was also circling overhead:

[I]n fact, at least one member of the team was on the roof of the annex manning a heavy machine gun when mortars were fired at the CIA compound. The security officer had a laser on the target that was firing and repeatedly requested back-up support from a Specter [AC-130] gunship, which is commonly used by U.S. Special Operations forces to provide support to Special Operations teams on the ground involved in intense firefights. The fighting at the CIA annex went on for more than four hours — enough time for any planes based in Sigonella Air base, just 480 miles away, to arrive. ...two separate Tier One Special operations forces were told to wait...

HT: WZ & PJM

...Lastly...

TESTED: Osama for Obama's Foreign Contributions

Source:  http://www.wnd.com/2012/10/obama-accepts-osama-bin-laden-donations/

OBAMA ACCEPTS 'OSAMA BIN LADEN' DONATIONS
No block to foreign money – not even from dead terrorists
by AARON KLEIN Oct. 29, 2012

WASHINGTON – Using a Pakistani Internet Protocol, or IP address, a disposable credit card and a fake address, “Osama bin Laden” has successfully donated twice to Barack Obama’s presidential re-election campaign.

The “Bin Laden” donations, actually made by WND staff, included a listed occupation of “deceased terror chief” and a stated employer of “al-Qaida.”

“Bin Laden” is currently set up on the official campaign website to contribute more to Obama’s campaign. The name is also registered as a volunteer.

Since the “foreign” contribution was sent, “Bin Laden’s” email address has received several solicitations from Obama’s campaign asking for more donations.

The apparently foreign-based contributions were conducted as a test after a flurry of media reports described the ability of foreigners to donate to the Obama campaign but not to Mitt Romney’s site, which has placed safeguards against such efforts.

The acceptance of foreign contributions is strictly illegal under U.S. campaign finance law...

[WND full report HERE.]

[cont.] ... Last week, the New York Post reported a British citizen, Chris Walker, was able to make two $5 donations through Obama’s campaign website, while a similar attempt to give Mitt Romney online funds was rejected.

The Post noted how the Federal Election Commission posted data showing Obama’s campaign took in more than $2 million from donors who provided no ZIP code or incomplete ZIP codes.

Michael Czin, an Obama campaign spokesman, told the Post that FEC data was the result of “a minor technical error.” [The Obama campaign refuses to release the identification of donors who give less than $200.]

... The non-profit Government Accountability Institute recently released a report alleging Obama’s campaign had solicited foreigners for political donations through its social media websites.

As the Daily Caller reported, a statement accompanied the GAI’s report from former U.S. Attorney Ken Sukhia noting that 68 percent of traffic to Obama.com comes from foreign users, all of whom were redirected to a fundraising page operated by the president’s re-election campaign.

The GAI report further documented how Obama.com was registered in September 2008 to Robert Roche, an Obama campaign bundler living in Shanghai, China...

See the GAI report at:

- America the Vulnerable:  Are Foreign and Fraudulent Online Campaign Contributions Influencing U.S. Elections?  Sept. 26, 2012 (109 pages)

O-B-A-M-A, O-B-A-M-A: FOUR MORE YEARS!

Obama WATCHED Benghazi Attack LIVE, and Rejected Repeated Distress Calls

Watch related video reports: 

- Serious questions loom over Benghazi attack
- Father of former SEAL killed in Libya wants the truth
- Libya:  The Truth

You Forgot, Mr. President, "We Don't Leave Americans Behind"

The following videos all broke on Oct. 26th. They indicate that the White House observed the Benghazi assault visually and in real time over almost 6 1/2 hours and early on in the assault from the highest levels (POTUS) turned down repeated requests for assistance from both the Ambassador and intelligence officers on the ground in Benghazi. Events completely contrary to what the American people had been told prior to Oct. 26th. Our assessment of the situation follows below these videos:



There was an black operation going on here that REQUIRED no security for the Ambassador as had been set up before Sept. 11, 2012, by the Obama Administration so that the Ambassador would have no real dedicted protection, and continued on Sept. 11, with White House "stand down" orders to all security and military personnel in the area while the Ambassador would be abducted. The operation fell apart, though, when 2 former Navy SEALs disobeyed their orders and faught back to try to help the Ambassador, thus disrupting the abduction and escalating the incident into a botched black op. The Office of the POTUS didn't expect there would be 2 former Navy SEAL CIA Officers there who would take the latitude to disobey ill-conceived orders and try to assist those in perceived need. Call it a botched "October Surprise."

Obama WH Watched Benghazi Attack Live & Purposefully Chose Not To Respond

Video Source:  Western Center on Journalism 

Article Source:  http://www.forbes.com/sites/larrybell/2012/10/24/breaking-news-white-house-watched-benghazi-attacked-and-didnt-respond/

White House Watched Benghazi Attacked And Didn't Respond
by Larry Bell,  Forbes Contributor  10/24/2012

Just one hour after the seven-hour-long terrorist attacks upon the U.S. consulate in Benghazi began, our commander-in-chief, vice president, secretary of defense and their national security team gathered together in the Oval Office listening to phone calls from American defenders desperately under siege and watching real-time video of developments from a drone circling over the site.  Yet they sent no military aid that might have intervened in time to save lives.

Why?

The attack began on September 11, at about 10:00 p.m. Libyan time (4:00 p.m. in Washington). Ambassador Chris Stevens and his small staff inside our consulate immediately contacted Washington and our embassy in Tripoli. Thirty minutes later, after the main consulate building was on fire and Ambassador Stevens was missing, Tripoli (400 miles away) dispatched an aircraft carrying 22 men.   Much more formidable response resources including Special Operations Forces, transport aircraft and attack fighters were available 480 miles away at the U.S. military base in Sigonella, Sicily, but were never dispatched. An F18 fighter jet blazing in with afterburner thundering to unnerve attackers and take out mortar locations could have reached Benghazi in an hour. Commandos could have arrived there within three hours. This was four hours into the seven- hour assault after President Obama, Vice President Biden and Secretary of Defense Panetta initially met at 5:00 p.m...

...CBS News has reported that a series of email alerts received late Tuesday evening provides additional information that was known by Obama administration officials shortly after the attack commenced. The messages were also independently obtained by ABC News. Although names of individual recipients were redacted, the source who requested anonymity said it appears they were sent to the State Department Operations Center to distribution lists and email accounts of top security officials at the State Department, Pentagon, the FBI, the White House Situation Room and the office of the Director of National Intelligence.

The first alert with a subject line “U.S. Diplomatic Mission in Benghazi Under Attack” which arrived from Tripoli just 25 minutes after the attack began describes an assault on the compound by 20 armed people firing shots, with explosions heard as well. It reported that Ambassador Stevens and four COM (Chief of Mission) personnel were sequestered in the compound safe haven with the 17th of February militia providing security support. Another email arriving about one-half hour later reported that shooting had stopped and that the response team was attempting to locate COM personnel.

A third email received two hours after the attack commenced updated officials that Ansar al-Sharia, a terrorist group, claimed responsibility for the Benghazi attack on Facebook and Twitter, and had also threatened to attack the Tripoli embassy. The Facebook claim was subsequently denied by the group at a news conference in the following days, but not entirely convincingly, saying: “We are saluting our people for this zeal in protecting their region, to grant victory to the prophet. The response has to be firm.”

The Obama administration has an immediate obligation to inform the public why security responses were so tragically lacking both before and during the course of this terrible and fatal assault.   Why was Ambassador Stevens, after he recognized and communicated the existence of a special 9/11 security threat, repeatedly denied protection he requested?  It is clear that on August 2nd the consulate asked for an additional 11 security personnel to be added to the rotation of 24. Though the 11 were to replace temporary security staff, Stevens had made it clear that violence and terrorism were a threat amid a volatile political landscape. He wrote: “Due to the level of threat in regards to crime, political violence and terrorism, post feels this is an appropriate number of LES [locally employed staff] security personnel needed to further embassy diplomatic outreach missions. Violent security incidents continue to take place due to the lack of a coherent national Libyan security force and the strength of local militias and large numbers of armed groups.” He further emphasized that “Host national security support is lacking and cannot be depended on to provide a safe and secure environment.”

Andrew Wood, former head of a U.S. military team in Libya, has reported: “…the security in Benghazi was a struggle and remained a struggle throughout my time there”. He added that the head of U.S. security in the region had pushed for more people “…but was never able to attain the numbers he felt comfortable with.” Eric Nordstrom, the former security chief for U.S. diplomats in Libya, has observed that he had been fighting a losing battle over numbers in which “ …we couldn’t even keep what we had.” He finally concluded after his contact with state department bosses that “…we were not going to get resources until the aftermath of an incident.”

And why, in the heat of battle with real-time communications regarding what was going on, didn’t our top leaders send responsive help that was so urgently needed? Past presidents have taken rapid actions to protect our people. For example, in 1984, President Reagan ordered U.S. pilots to force an airliner carrying terrorists to land at Sigonella within a 90 minute window while they were still airborne. The Obama national security team had several hours to move forces from that same air base to Benghazi.  The American people deserve an explanation.

Tyrone Woods' father wants to know who gave the order not to rescue the 4 Americans:

Charles Woods, Father of Former Navy SEAL Tyrone Woods Who Gave His Life in Benghazi by TheLarsLarsonShow