WORLD NEWS TRUST: Causes and Cures for our Current Debt Crisis (Richard Backus)

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Richard Backus -- World News Trust

It is touching to see Mr. Bernanke and Mr. Paulson getting credit for their proposed solution to the financial crisis we now face, especially since it was caused by policies which they and previous government officials had purposely followed knowing full-well that this current calamity could be the result.

FED chairmen, in particular Alan Greenspan in his erstwhile promotion of the interests of America's rich, have constantly flirted with a depression by employing interest rate and monetary policy practices designed to support an overvalued dollar or to cause a recession in order to reduce purchase of foreign-made goods. The FED, under Mr. Greenspan, has constantly increased interest rates during otherwise normal business cycles, under the pretext of preventing an undesired inflation which he alone supposedly understood (or experienced), when his true interest were in preventing a market-induced devaluation of the dollar. These interest rate increases simply shut down needed business activities and, together with corresponding monetary policies designed to decrease consumption, created systemic weaknesses increasing the possibilities of a depression.

This may seem quite preposterous to you, the reader, so I will briefly explain the reasons for these policies.

When “globalization”, the scheme of multinational corporations to extend the exploitation of laborer's wage rates to the entire world (beginning 30 years ago), began to produce unsustainable trade deficits in the western world there were, practically speaking, only 3 ways to resolve the resulting trade imbalances. They were protection (tariffs, quotas,etc.), a devaluation of the nation's currency, or a recession, which would cause unemployment and a resulting loss of consumer's purchasing power (hopefully for foreign products).

U.S. legislators, in the interests of U.S. multinationals who were manufacturing goods overseas to sell in the U.S. (the ever-increasing outsourced products and services), were “persuaded” to discontinue these tariffs, quotas, subsidies, etc. protective of American industries (a process known as “globalization”). They also were directed by U.S. wealthholders, their sponsors, to resist any devaluation of the dollar, and to cooperate with our trading partners in their efforts to keep their own currency values lower (ignoring the fact that their industries would, as a consequence, gain a major portion of the world's product manufacturing and services.) The sole solution left to resolve the trade deficits , in the opinion of the U.S. policymakers, was to drive the U.S. into what turned out to be a series of low-level recessions. This would not only tend to limit U.S. consumer's purchases of foreign products and services (unfortunately products made in the U.S. as well) and would (presumably) result in a decline in the trade deficits. In this scheme, only the wealthy could afford considerable purchases of foreign-made goods. This would not alone solve the fundamental trade problems, however. The trade imbalances would continue until America's workers could again compete fairly with their foreign counterparts.

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