Home > Top Economist Warns Of "Serious Breakdown" In World Financial System
Top Economist Warns Of "Serious Breakdown" In World Financial System
by Open-Publishing - Wednesday 23 January 20081 comment
Top Economist Warns Of "Serious Breakdown" In World Financial System
Father of Reaganomics warns that massive interest rate cut could undermine dollar’s status as world reserve currency
Paul Joseph Watson
Prison Planet, Tuesday, January 22, 2008
Father of Reaganomics and former editor of the Wall Street Journal Paul Craig Roberts today warned that the Fed’s shock 75 basis points interest rate cut would only succeed in putting average families through the ringer and could even portend the collapse of the dollar as the world reserve currency.
Speaking on The Alex Jones Show, Roberts said that average hard working families, and not money casino cowboy shareholders, would be the biggest victims of the latest downturn as a recession looms on the back of the surprise rate cut.
"The more important thing is the hardship for the average American family - many of them have not had any real increase in their income for years and they’ve lost jobs to offshoring, they’ve lost jobs to work visas for foreigners and now they’re confronted with losing jobs to recession," said Roberts.
"They also are heavily indebted and have used up their home equity in consumption and many of them now have mortgages that threaten them with being homeless and so I think the worst part of this will not be felt by Wall Street and banks and shareholders but by the average American family - I think they’re now going to go through the ringer," he concluded.
Roberts speculated on the impact that today’s rate cut would have on the dollar, further undermining its position as the world reserve currency.
"It is true that in the long run the decline of the dollar could cause it to lose its reserve currency role and if another currency has a rythm to take its place, it would be very hard to conduct international trade on the basis that it is now where you have a reserve currency that one accepts in payment," said Roberts, adding that the massive interest rate cut today only signalled more inflation despite the tax rebate.
Roberts said that he expected the economic decline to be slow and gradual, but that it was inevitable that the living standards of Americans would drop, similar to when the pound lost 80 per cent of its value during the two world wars and lost its status as a world reserve currency.
Roberts said that the only solution to the current crisis was to cut the current defense budget in half and halt the offshoring of jobs by U.S. corporations.
"If they can’t do anything about that the world is going to conclude that the dollar is not going to be the reserve currency forever and they’ll start getting out from under it in larger ways and then that pressure on the dollar will mount and become stronger and it will completely cancel the ability to do anything about the domestic economy - whether it’s in recession or depression," said Roberts, adding that a "real serious breakdown," the likes of which have not been witnessed so far, will occur if these issues are not addressed.
Roberts said that it was difficult for ordinary people to diversify and find a safe haven because if they bought gold they would become a target for government theft just as happened in 1933.
Roberts added that a total breakdown of the global economy would take place, "If the destruction of the dollar’s role as world reserve currency continues and there’s not a clear alternative that arrives to take its place," warning that it was the biggest danger and there would be "no way to survive" its impact.
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24 January 2008, 10:03
During the last half of ’07 the Plunge Protection team http://en.wikipedia.org/wiki/Plunge... bolstered the stock market numerous times in order to fortify the illusion that the U.S. economy was thriving. This happened at strategic points when the stock market was headed for a 200+ point drop after experiencing recent losses in order to prevent a deep slide.
Sooner than later, however, it became apparent that the subprime and credit markets were in deep trouble. And the PPT has stepped in several times in the past few weeks to prevent the appearance of catastrophe. But time is running out.
The most recent, conspicuous rescue happened at approximately 1:32 on 1/23/’08 as the market started to make a miraculous turnaround, about 10 minutes before W appeared on the air and proclaimed that the American economy is sound. If you doubt the assertion, check the ticker for yesterday and watch the markets climb for no clearly rational reason. Especially because global markets were down significantly.
On the one hand the Fed is stepping in to prevent serious damage, which protects investors, and may even make the Fed a penny or two in profits, though, on average, that’s not likely. Yet, by interfering with natural market forces, the Fed is maintaining a safety blanket - wittingly or unwittingly - for firms who would otherwise have to revitalize on their own, if possible.
Worse, however, is that the Fed is printing money beyond the growth indicators that permit reasonable funding. In other words, the Fed is seriously inflating the currency and devaluing the dollar.
Sadly, these efforts, although in a more controlled manner, could’ve helped home owners on the verge of foreclosure, firms on the verge of recession, and finacial institutions on the verge of collapse if they were performed no later than 4Q ’06 and continued through ’07. It’s now a day late and billions of dollars short.
Aside from economic exigencies, these conditions exist because of the woeful "War on Terror" since the Neocons are being forced to prop up the illusion of U.S. supremacy while the empire is in decline. It’s tough to face down your enemy when they know there won’t be many more "smart bombs" on the way. The markets have been a key indicator - far more meaningful than the Surge - of America’s might.
Had the Administration, Wall Street, and the media - particularly outlets like CNBC - explored and truthfully presented the severe problems with America’s broken economy, rather than cheerfully and deceitfully insisting everything’s dandy, these problems may have been resolved with a much greater degree of proficiency. But America is now drowning in a sea of lies and can’t fathom what’s happening on an overall basis. Too many people in too many arenas pitching bull to the masses can’t now go back and retract their tales. The damage has been done.
At this point, deceit is the greatest threat to America’s democracy. Overall trust in officials and authority is rapidly declining, as is all too apparent on sites such as this one. Politicians such as Bill Clinton ruthlessly fabricate stories and foment conflict in order to further their interests. He’s not alone for sure.
This is not a testamonial for Ron Paul, whose stock has also gone down after it was revelaed his newsletter exhibited racial bias for years. Nonetheless, Paul has been the only candidate who has accurately outlined the scope of the overall problems as well as prescribed the appropriate solutions to solve them, beginnning with an immediate withdrawal from Iraq.
None of the other Republicans come close. Romney’s at best a distant second. On the other side of the aisle, Clinton has no clue, especially since it was Bill’s pro-NAFTA and big business stance that in part produced much of the grief now being felt from one coast to the other.
To a great extent, the country needs an antidote to the globalization promoted by the Clintons, which has radically reduced incomes and job opportunities.
Obama may have the agility to sit and listen to all the powers and reach a successful middle ground, but it won’t be easy. And Edwards, who is a noble soul plagued by the homeless and helpless, is, unfortunately, pitching two Americas. One that by now won’t listen to him for very long and the other, the Federal government, which is already overextended. How’s it going to help a deeply troubled economy?
In the not too distant future the PPT is going to run out of tricks simply because a large infusion of capital to bolster the markets is going to trigger an exit from the dollar. That’s a turning point that will have grave repercussions for decades, if not centuries to come.