Iceland’s economic collapse (see below) was due to most of the same forces that presently menace the U.S.: huge budget and trade deficits added to the “world banking crisis,” which comprises the attempted unwinding of a mega-Ponzi scheme (far larger than the sub-prime bubble) involving unregulated inter-bank insurance policies called Credit Default Swaps (CDS), which originally amounted to $45 TRILLION but which will rise to around $500 Trillion(!) when the unregulated trading in these CDS is taken into account:
Just the $45 Trillion alone is approximately equal to the Gross Domestic Products (GDP) of the entire world combined!
Meanwhile, the average American is in debt up to his/her keister, while Americans’ real wages are falling and jobs (particularly good ones) are rapidly drying up. Since 75% of the U.S. GDP derives from consumer spending (counting 5% due to residential home sales), it is inevitable that the U.S. GDP will now contract rapidly. When this contraction is recognized by the rest of the world as irreversible, there will be a rapid sell-off of dollars eventually crashing the greenback – exactly the same thing that just happened to the Icelandic krona. My guess is that the dollar will fall by at least 50% from its present value in the not-too-distant future and won’t bounce back in my lifetime. Consequently, those of us with incomes and savings denominated in American dollars will find the prices of imported goods (presently comprising most of our non-food purchases) to double overnight!
At least we Americans still have a safety net in Social Security, Medicare, U.S. Government pensions, and the U.S. Pension Benefit Guaranty Corporation (PBGC). Or do we?
In fact, the PGBC has exhausted its entire $8 billion surplus as a result of a series of big corporate bankruptcies last year: http://www.wsws.org/articles/2003/jan2003/pens-j29.shtml ). Meanwhile, Henry Paulson (former Goldman Sachs top fox) is now giving away what’s left of our protective “chicken coop” to the very foxes responsible for the unfolding economic disaster! Moreover, he asserts that the government must now address Bush’s deficits by pursuing "policies that promote economic growth and fiscal responsibility, and address entitlement reform” – translation: cut our Social Security, Medicare, etc. (see below).
Quoting Naomi Klein (in last article below): “If this final looting is not stopped (and yes, there is still time), we can forget about Obama making good on the more progressive aspects of his campaign platform, let alone the hope that he will offer the country some kind of grand Green New Deal.”
What there is “still time” for us to do is to demand that Obama – and more immediately the damn Congress – stop the giveaway to the perps and instead inject that fraction of that $700 billion that is greater than what Warren Buffet would pay for the banks' shares directly into the economy, particularly for mortgage relief for those facing foreclosure and job creation in the areas of developing cheap non-polluting energy sources and other new green technologies and rebuilding our crumbling infrastructure (for example, our interstate highways are in disrepair, our bridges are falling down, and our passenger trains are absolutely pathetic compared to the energy-efficient fast trains of Western Europe and Japan).
Make your voice heard. The time is growing short.
Stunned Icelanders Struggle After Economy’s Fall
By SARAH LYALL
New York Times
Published: November 8, 2008
REYKJAVIK, Iceland — The collapse came so fast it seemed unreal, impossible. One woman here compared it to being hit by a train. Another said she felt as if she were watching it through a window. Another said, “It feels like you’ve been put in a prison, and you don’t know what you did wrong.”
This country, as modern and sophisticated as it is geographically isolated, still seems to be in shock. But if the events of last month — the failure of Iceland’s banks; the plummeting of its currency; the first wave of layoffs; the loss of reputation abroad — felt like a bad dream, Iceland has now awakened to find that it is all coming true. ...(Go to link above for more.)
Paulson's Swindle Revealed
By William Greider
October 29, 2008
The swindle of American taxpayers is proceeding more or less in broad daylight, as the unwitting voters are preoccupied with the national election. Treasury Secretary Hank Paulson agreed to invest $125 billion in the nine largest banks, including $10 billion for Goldman Sachs, his old firm. But, if you look more closely at Paulson's transaction, the taxpayers were taken for a ride--a very expensive ride. They paid $125 billion for bank stock that a private investor could purchase for $62.5 billion. That means half of the public's money was a straight-out gift to Wall Street, for which taxpayers got nothing in return. ...(Go to link above for more.)
The New Trough
The Wall Street bailout looks a lot like Iraq — a "free-fraud zone" where private contractors cash in on the mess they helped create
Posted Nov 13, 2008 12:00 AM (amended to reflect developments)
... After years of corruption born of no-bid contracts and paltry oversight, many Iraqis are still waiting for the lights to come back on. Today, a new team of contractors is lining up to reconstruct the U.S. economy — reconstruct it from the mess made by the very banks, brokers and law firms that are now applying for contracts. And it's not at all clear that America can survive their assistance. ...
... Secretary Paulson promised that the banks won't just "hoard" the money — they will quickly "deploy it" through the economy in the form of badly needed loans. There is just one hitch: Neither Paulson nor [the private company hired to perform the bailout] got that "deploy" part in writing — nor did they put in place any mechanism to require the banks to spend their taxpayer billions. Apparently, the part about lending the money to homeowners and small businesses was sort of implied. ...
... Shortly after receiving the contract [to disburse $700 billion in taxpayer money], [the president of the bank that won the contract] told investors that his institution is now well-positioned to profit from the market meltdown. "There's a lot of new business that's going on even in this chaotic marketplace," he said, "and so some of those things have been very positive to us."...
... On the same day that he allocated the first $125 billion to the banks, Secretary Paulson announced the largest federal budget deficit in U.S. history. Buried in his statement was a preview of the next phase of the financial disaster. The deficit numbers, he declared, reinforce the need to "pursue policies that promote economic growth and fiscal responsibility, and address entitlement reform." He was referring to Americans who feel entitled to receive Social Security in their old age and Medicaid when they are sick. Those programs, Paulson implied, might not be able to survive the budget crisis he is currently creating for the next administration. ...
(Go to link above for more.)
Real Change Depends on Stopping the Bailout Profiteers
By Naomi Klein - November 4th, 2008
... [Obama’s] first order of business—and one that cannot wait until inauguration—must be halting the robbery-in-progress known as the “economic bailout.” I have spent the past month examining the loopholes and conflicts of interest embedded in the U.S. Treasury Department’s plans. The results of that research can be found in a just published feature article in Rolling Stone, The Bailout Profiteers, as well as my most recent Nation column, Bush’s Final Pillage.
Both these pieces argue that the $700-billion “rescue plan” should be regarded as the Bush Administration’s final heist. Not only does it transfer billions of dollars of public wealth into the hands of politically connected corporations (a Bush specialty), but it passes on such an enormous debt burden to the next administration that it will make real investments in green infrastructure and universal health care close to impossible. If this final looting is not stopped (and yes, there is still time), we can forget about Obama making good on the more progressive aspects of his campaign platform, let alone the hope that he will offer the country some kind of grand Green New Deal. ... (Go to link above for more.)