portland independent media center  
images audio video
newswire article reposts united states

corporate dominance | economic justice | imperialism & war

Is the US Bankrupt?

"The old reputation of the US as an economic power and a safe haven cannot be justified any more. Since the revenues stagnate at best while the expenditures rise, bankruptcy occurs since an orderly debt service is no longer possible. The simplest solution is the devaluation of the dollar.. This will have the effect of throttling imports and promoting exports and thus improving the balance of trade." from the German
Is the US Bankrupt?

An Analysis

[This December 2003 article is translated from the German on the World Wide Web,
 http://www.feldpolitik.de/go.php?link=13434.]


Summary:

A bankruptcy occurs when the debtor can no longer afford his debt service. In the US economy, spending increases strongly while revenues structurally fall. In the medium term, the US is unable to pay for its debt service!

This will lead to worldwide shortfalls, especially for countries whose revenues come from the US [for example, oil] or where the US is the second currency.
[This analysis consciously avoids technical terms and statistical material to increase its readability.]

Analysis:

Seen historically, the US in the last 200+ years gained the reputation of an economic power and a secure haven. This was based on its export power and geographic position.

A creeping erosion of its economic power and security has occurred unnoticed by the general public.

The reputation of the secure haven, particularly the reputation of a safe harbor for investments, has suffered enormously through the financial scandals of the last decades [BCCI, Savings and Loans, Enron]. Billions of dollars of foreign investors and of old-age pension schemes of US citizens [cf. lawsuits against the management of mutual funds] were destroyed. Its economic power has also fallen constantly for years. That this is not thematicized in published opinions is clear in the following points:

* The change in the trend occurred slowly and therefore was hard to notice for the striken [explained later in detail].
* Most economists were educated in the US [even European economists] and don't question the US as a model.
A worldwide propaganda runs in which only the US economy is shown [for example, via CNN, CNBC]. That it is the largest economy of the world is repeated daily. This claim is questionable and untrue if one compares the US with the EU [European Union]. The gross domestic product of the US is artificially inflated. Expenditures for the military, inner security and prisons are counted here [the US has more prisoners per population than China (1)] which are not really productive

Therefore an objective accounting of the revenues and expenditures of the US economy is necessary.

Revenues:

Viewed historically, the US reputation as an economic power was founded on the follwing exports [trend: -falling/ =constant/ +rising]:

Wheat (-):

The US is one of the greatest agricultural exporters. However this is onlyh possible through high subsidies. After deducting these subsidies and considering the net value, the contribution to revenues is trifling.

The trend is more important. Lower revenues can be expected in the medium term through the over-exploitation of the soil [erosion] and water resources [for example, Ogala reservoir] and the change in climate.

Oil (-):

The US was one of the largest exporters of oil and oil products up to the middle of the 20th century. Since 1970 domestic energy production has stagnated. Imports have increased to 25% of energy consumption.

Industrial products (-):

The sales of industrial products [machines, trucks, consumer articles] have fallen for dccades. In the last years, around 1 million jobs per year have drifted away in this sector. This has led to the "worst unemployment since the depression [2]." The price relation of US products can be improved through a re-evaluation of other currencies, particularly the Chiinese Yuan or through a devaluation of the US dollar. However this will not change the core of the problem. US products have a quality problem. Nolt by chance, US consumers prefer foreign goods even when they are more expensive. In the long-term, the production know-how fades away.

Weapon exports (=):

The US has profited most in all the wars of the last 100 years [wars always occurred elsewhere]. In the last Iraq war, a considerable profit was gained through payments and subsequent weapon purchases by the Gulf states. This profit will hardly be rferalized in the current Iraq war. While financially sound customers fall away, other countries can only pay for the deliveries through US export credits [Turkey]. Whether these credits can be earned is unclear. The US also has a quality problem with the weapon systems as the test of the M1 tank clearly demonstrated.

In the last decades, the US has attempted to balance this deficit by developing modern services.

Entertainment industry (=):

The entertainment industry has been a true success story. Its export profits are greater than agricultural exports. Innovative management and market screening underlie this success. Foreign films may not be synchronized for the US market. Instead there are remakes of successful foreign films [3 Men and a Baby, Nightwatch... ].

The entertainment industry is attacked from many sides which will clearly reduce the financial success in the future:

transfer of production to low-cost locations [for example, Canada]
saturation of foreign markets and their counter-reaction through film promotion and taxation of US production as explicitly allowed in the UNESCO resolution
financing by foreign investors leading to the outflow of profits. Hollywood is already strongly dependent on these funds up to 50% A slight change of the tax law in the home countries of investors [for example, in Germany] could dry up this capital stream.
Revenue losses through pirate copies and the Internet will increase and not decrease and already amount to several billion dollars per year.

Software (-):

The license revenues from software, particularly for Microsoft, constantly increasing over decades are past.

The worldwide competition in the software area [India, eastern block] leads to lower market shares and margins.

As an operating system, Windows is under the increasing pressure of Linux which is less expensive, more extensive and more stable. This stability prompts many industrial users to change. Microsoft's license fee policy was the last straw for many authorities [Germany, Asian Linux initiative with Japan, China... ]

Patents + biotechnology (=)

The successful effort of the US to enforce genetic engineering patents worldwide could lead to new license revenues. The judgment that these revenues will stagnate is based on the following points:

the largest US seed producer has its headquarters in Bermuda. The revenues hardly benefit the US economy.
Patents were issued on very old varieties [for example, Basma rice]. US seed firms are now demanding license fees from indigenous Indian farmers. This process leads to massive tensions, damages the reputation of the US and ultimately leads to the annulment of all patents in these countries.
Genetically-engineered seed is dominant and spreads even in the old varieties through pollination. The Monsanto firm is presently suing farmers in Canada whose neighboring fiedlds were contaminated to pay license fees. These farmers had cultivated eco-seed [eco-raps] and now sue Monsanto for compensation. If the court follows the causal agent principle, this will be a huge loss for genetic agricultural technology. The wave of compensation suits could be the ruin of genetic engineering firms. [3] British studies already show that genetic food is dangerous to health. A wave of litigation could flood the genetic food industry as happened to tobacco companies.

This list is not complete and could easily be extended and verified with data. However the conclusion that the revenues of the US will stagnate or even fall in the medium term is more important.

This is significant because the trade deficit of the US has been enormously great for years and can only be paid through the constant influx of capital from abroad.

Expenditures:

Foreign expenditures should be considered after our analysis of revenues [trend: -falling/ =constant/ +rising]:

Import goods (=):

A clear reduction of imports can be expected with a strong devaluation of the US dollar. However this will not change the problems discussed under 1.3.

Energy imports (+):

The dependence of the US on energy imports will increase very strongly in the next years. On one hand, energy consumption incrfeases [climate technology, SUVs]. On the other hand, US production of oil and natural gas decreases. [4] Considerable price increases for oil and gas can be expected in addition to the quantitative growth. [5] Besides these direct costs, the indirect costs for the military security of the oil supply will rise... [6]

Military costs (+):

Even without Iraq, the costs of stationing abroad [in >150 countries] will increase, partly because the troop strength will grow and partly because the stationing countries are less and less ready to share the costs. [7] The costs of Iraq's occupation cannot be estimated.


Debt service (+):

The US imports $1.5 billion per day since the domestic savings rate is much toolow. The annual debt service increases $100 million per day. "If the US were a Third World country, the US would long ago have been on a watch list" [8]; its creditworthiness would have been downgraded!

Even if this list could be more exact, the conclusion is crucial that expenditures will increase!

Conclusion

The old reputation of the US as an economic power and a safe haven cannot be justified any more. Since the revenues stagnate at best while expenditures rise, bankruptcy occurs since an orderly debt service is no longer possible. The simplest solution is the devaluation of the dollar as already approached several times by the Bush administration. This will have the effect of throttling imports and promoting exports and thus improving the balance of trade. The implicit effect that is more important is dispossessing foreign creditors through the value loss and thus being free of the debts! $9 trillion is held by foreigners, half of all US bonds.

The US consumer is largely responsible for slowly carrying out this solution. The US consumer uses the falling interests, the rising real estate prices and the released mortgages for consumption. With a faster devaluation of the US dollar, interests would rise and consumption on credit would be stifled. If interests rose very strongly, many consumers could no longer use the credits. Real estate would flood rthe market and result in a dramatic drop in prices. This will reduce the security of further credits, an intensifying effect that will shake the US market.

This circumstance gives enough time to the informed foreign investor to withdraw from US bonds and shares before the gullible remnant notice their misjudgment.

Published sources:

Amnesty International
Zandi, Chief economist,
www.economy.com
DLF
DoE, EIO,
www.doe.gov
www.energiekrise.de
US Congress
Chalmers Johnson, Blowback
Paul Krugman, New York Times + Lehman Brothers, damocles software

homepage: homepage: http://www.mbtranslations.com
address: address: http://www.zmag.org


U.S. Bankrupt? 28.Dec.2003 07:38

Den Mark

Economically bankrupt? Possibly. Morally & intellectually bankrupt? Definitely!

U.S. Bankrupt? 28.Dec.2003 07:40

Den Mark

Economically bankrupt? Possibly. Morally & intellectually bankrupt? Definitely!

US in receivership 29.Dec.2003 16:00

reader

Our government experienced bankruptcy in 1933 and went into receivership. The people and our assets were pledged as collateral, hence the expanding reach of the federal government and the rising tax obligations. All of congress knows this and conspire to keep this salient fact from the people. The jailed congressman from New Jersey stated as much in his last address before congress. He now serves as a lesson to the others about speaking out on the reality of our bankrupt republic.

final act 29.Dec.2003 17:54

redbarns

What would the neocons do if they were in control? Ha Ha. Maybe stage an event that would make a US default more acceptable to the US people. Some act that might even produce patriotism and resolve. Remember that a significantly devalued US dollar sounds harmless to the uninitiated ear, but what it really means is a significantly reduced standard of living. The US will devalue the dollar in historic proportions this decade in all probablitity. God help us if the neocons see this an "opportunity".

if not now..won't be long with this "funny business" by McKorpAmerika 29.Dec.2003 23:21

Merlin

-Caveat Lector-

Reuters
December 24, 2003

US Companies Moving More Jobs Overseas

By David Zielenziger

NEW YORK - U.S. corporations are picking up the pace in
shifting well-paid technology jobs to India, China and
other low-cost centers, but they are keeping quiet for
fear of a backlash, industry professionals said.

Morgan Stanley estimates the number of U.S. jobs
outsourced to India will double to about 150,000 in the
next three years. Analysts predict as many as two
million U.S. white-collar jobs such as programmers,
software engineers and applications designers will
shift to low cost centers by 2014.

But the biggest companies looking to "offshoring" to
cut costs, such as Microsoft Corp. , International
Business Machines Corp. and AT&T Wireless, are
reluctant to attract attention for political reasons,
observers said this week.

"The problem is that companies aren't sure if it's
politically correct to talk about it," said Jack Trout,
a principal of Trout & Partners, a marketing and
strategy firm. "Nobody has come up with a way to spin
it in a positive way."

This causes a problem for publicly traded companies,
which would ordinarily brag about cost savings to
investors. Instead, they send vague signals that they
are opening up operations in India and China, but often
decline to elaborate.

Moreover, on the threshold of a U.S. presidential
election year, job losses are a hot button issue. A
company that highlighted a major job transfer could
wind up in the campaign debate.

Multinationals find that when they trumpet expansion
overseas, they cause problems at home. When Accenture
Ltd. executives in India this month announced plans to
double their staff to 10,000 next year, they triggered
a flood of calls to the company's U.S. offices about
U.S. job losses.

Offshoring companies "are paying Chinese wages and
selling at U.S. prices," said Alan Tonelson, of the
U.S. Business and Industrial Council, a trade group for
small business. "They're not creating better living
standards for America."

The U.S. sales director for one of India's top computer
services providers said his company has won business
from customers such as Walt Disney Co., Time Warner
Inc.'s CNN and the Fox division of News Corp. -- none
of which want public disclosure.

In India, some technology companies have recently
adopted lower profiles. Microsoft Corp. has been
removing its name from minibuses used to ferry
engineers on overnight shifts. Major Indian
beneficiaries of U.S. business such as Infosys
Technologies Ltd., Wipro Ltd. and Satyam Computer
Services Ltd. have stopped identifying new customers.

While there have been reports that IBM intends to ship
4,700 high-end jobs to India and China next year, they
mark a rare instance when figures "have been reported
in black and white," said Linda Guyer, president of
Alliance@IBM, a union that has tried to organize IBM
employees.

Those numbers were not released by IBM, but rather
disclosed by the Wall Street Journal, which had
obtained an internal memo. The company has declined to
comment.

Guyer believes as many as 40,000 of IBM's 160,000 U.S.
jobs will be transferred overseas by 2005, a figure she
says was gathered from phone calls by IBM employees.

Previously, IBM has pointed to a report by the McKinsey
Global Institute that concludes the U.S. economy
ultimately will benefit. The report was commissioned by
Nasscom, a group made up of Indian tech companies as
well as IBM's Indian services unit -- showing an effort
by those invested in offshoring to sway public opinion.

Recently, AT&T Wireless told the U.S. Securities &
Exchange Commission that it would lay off 1,900
employees this year. Communications Workers of America
members obtained an internal memo prepared by Tata
Consultancy Services of India that discussed how it
would assume those U.S. jobs.

Subsequently, AT&T Wireless officials acknowledged it
was exploring the job shifts but didn't offer details.

While some companies, such as Electronic Data Systems
Corp., CAP Gemini Ernst & Young and Sapient Corp.,
acknowledge they shift jobs abroad to exploit cost
advantages and around-the-clock work, IBM asserts that
it is not moving jobs but creating new ones.

"It's a business strategy, period. You cut costs. You
revamp. You look at what your mission statement says
and try to turn a profit," said Sylvia Thomas, who was
laid off by chipmaker Agere Systems Inc. after
declining offers to relocate to headquarters in
Allentown, Pennsylvania -- or to Singapore.

2003 Reuters Ltd

 http://www.reuters.com/newsArticle.jhtml?storyID=4039177



portside (the left side in nautical parlance) is a
news, discussion and debate service of the Committees
of Correspondence for Democracy and Socialism. It
aims to provide varied material of interest to people
on the left.

Post : mail to ' portside@yahoogroups.com'
Subscribe : mail to ' portside-subscribe@yahoogroups.com'
Unsubscribe : mail to ' portside-unsubscribe@yahoogroups.com'
Faq :  http://www.portside.org
List owner :  portside-owner@yahoogroups.com

ya ask is the American Economy bankrupt?...let's go check it at the... 01.Jan.2004 05:41

Bush Pawn Shop

repostings 4 u

-Caveat Lector-

Atcheson: Cashing in our future at the Bush pawn shop
By John Atcheson
 http://www.dodgeglobe.com/stories/122903/opi_1229030012.shtml

Before America allows President Bush to take bows on the economy, let's
take a closer look at this recovery. A simple thought experiment -- the
kind former President Reagan used to like to do -- will help.
Imagine for a moment that you took all your credit cards and maxed them
out. Now take your mortgage and borrow the maximum on it. Cash in the kid's
college fund, your rainy day savings, your 401(k) retirement savings. While
you're at it, stop paying for your health insurance and the maintenance on
your house, your car and your yard. Now take all that money and spend it.
Feeling pretty flush? Sure you are. You just pumped tens, maybe hundreds of
thousands of dollars into your pocket.

But you'd never do that.

Because you know that just because you'd be living large for the time
being, you wouldn't be wealthier. In fact, you'd be getting poorer by the
minute.

And yet, that's exactly what Bush's recovery is -- a giant borrowing binge.
But he'd rather you didn't know that. In February, the administration
buried a report from its own Treasury Department that said our current
fiscal policies, the ones Bush likes to claim are bringing on a "recovery,"
would create more than $44 trillion in chronic debt.

As the London Financial Times noted, $44 trillion is roughly equivalent to
10 times the publicly held national debt, four years of U.S. economic
output or more than 94 percent of all U.S. household assets. No wonder
things seem good. We've cashed in everything we own at the Bush Pawn Shop,
and now we're flashing a serious wad of walkin' around money.

The Democrats like to point out that we're still down some 2.5 million jobs
since Bush took over and that, absent a miracle, Bush is likely to be the
first president since Herbert Hoover to have fewer jobs at the end of his
administration than when he took over. But the real story is, how can we
not be living even larger, after borrowing all our children's assets and
shrinking the Federal Reserve rate to the lowest level since 1958? What
have we got to show for it?

An essentially jobless recovery. Bush likes to say the jobs will come.
They'd better. Because right now, all he's managed to do is spend about
$350 billion of "your money" to hire 328,000 checkout clerks and greeters
at the local Wal-Mart. Meanwhile, we've shipped some 2.6 million
high-paying manufacturing jobs overseas since January 2001. Is this a success?

So if we're cutting taxes by $350 billion a year in order to stimulate the
economy and the economy is growing, but we're only getting an anemic
response in employment, what's up? Kenneth L. Lay's stock portfolio, for
one thing. And the portfolio of those Bush pioneers we hear so much about.
And, of course, Bush's campaign contributions. As for the rest of us?

Bush seems to think people can eat gross domestic product. But a growing
economy doesn't mean a whole lot if it's not creating jobs. Unless you
happen to be Lay or one of those Bush pioneers who don't need a job to earn
money. For them, so long as the rest of us keep mortgaging our future, they
can keep getting richer.

Not a surprising result, really. Look at Bush's economic plan. He says the
tax cuts were about "your money." But the truth is, if you're like 80
percent of Americans, most of the taxes you pay from "your money" are in
the form of payroll taxes. And until Bush gave it away, you got "your
money" and more back in the form of Social Security, Medicare and
disability income.

Lay and his friends pay most of their taxes in the form of income taxes,
dividends and capital gains. Guess which ones Bush cut? Not your payroll taxes.

What's the biggest pot of money subject to double taxation? "Your money" --
the payroll tax. What double taxation did Bush eliminate? Ken and friends'
dividend tax. For some reason, Bush thought it was OK for you to be double
taxed, but not all right for Ken and his CEO friends. Bottom line: Bush
traded away "your money" to give his wealthiest millionaire buddies an
annual tax cut of $40,000 or more each.

The Democrats seem to be trembling at the recent numbers on the economy.
They shouldn't. We can't be a nation of Wal-Mart shoppers if we're all
employed at Wal-Mart. And that's exactly where Bush's plan is taking most
of us. Democrats should just quit worrying and give credit -- or blame --
where it's due.


Atcheson has held several policy positions in federal agencies.

------------------------------------------------
A free people ought not only to be armed and disciplined, but they should
have sufficient arms and ammunition to maintain a status of independence
from any who might attempt to abuse them, which would include their own
government.

--George Washington
-------------------------------------------------
Smash The State! mailing list home
 http://groups.yahoo.com/groups/smashthestate

Extropian Principles... the Future, Now
 http://www.extropy.org/principles.htm
---


----------------------------------
Smash The State WWW
 http://groups.yahoo.com/group/smashthestate

about this economy being bankrupt...what about... 01.Jan.2004 07:07

our so-called boom...?

we repost, you decide

-Caveat Lector-

Our So-Called Boom
By PAUL KRUGMAN

 http://www.nytimes.com/2003/12/30/opinion/30KRUG.html


It was a merry Christmas for Sharper Image and Neiman Marcus, which
reported big sales increases over last year's holiday season. It was
considerably less cheery at Wal-Mart and other low-priced chains. We don't
know the final sales figures yet, but it's clear that high-end stores did
very well, while stores catering to middle- and low-income families
achieved only modest gains.

Based on these reports, you may be tempted to speculate that the economic
recovery is an exclusive party, and most people weren't invited. You'd be
right.

Commerce Department figures reveal a startling disconnect between overall
economic growth, which has been impressive since last spring, and the
incomes of a great majority of Americans. In the third quarter of 2003, as
everyone knows, real G.D.P. rose at an annual rate of 8.2 percent. But wage
and salary income, adjusted for inflation, rose at an annual rate of only
0.8 percent. More recent data don't change the picture: in the six months
that ended in November, income from wages rose only 0.65 percent after
inflation.

Why aren't workers sharing in the so-called boom? Start with jobs.

Payroll employment began rising in August, but the pace of job growth
remains modest, averaging less than 90,000 per month. That's well short of
the 225,000 jobs added per month during the Clinton years; it's even below
the roughly 150,000 jobs needed to keep up with a growing working-age
population.

But if the number of jobs isn't rising much, aren't workers at least
earning more? You may have thought so. After all, companies have been able
to increase output without hiring more workers, thanks to the rapidly
rising output per worker. (Yes, that's a tautology.) Historically, higher
productivity has translated into rising wages. But not this time: thanks to
a weak labor market, employers have felt no pressure to share productivity
gains. Calculations by the Economic Policy Institute show real wages for
most workers flat or falling even as the economy expands.

An aside: how weak is the labor market? The measured unemployment rate of
5.9 percent isn't that high by historical standards, but there's something
funny about that number. An unusually large number of people have given up
looking for work, so they are no longer counted as unemployed, and many of
those who say they have jobs seem to be only marginally employed. Such
measures as the length of time it takes laid-off workers to get new jobs
continue to indicate the worst job market in 20 years.

So if jobs are scarce and wages are flat, who's benefiting from the
economy's expansion? The direct gains are going largely to corporate
profits, which rose at an annual rate of more than 40 percent in the third
quarter. Indirectly, that means that gains are going to stockholders, who
are the ultimate owners of corporate profits. (That is, if the gains don't
go to self-dealing executives, but let's save that topic for another day.)

Well, so what? Aren't we well on our way toward becoming what the
administration and its reliable defenders call an "ownership society," in
which everyone shares in stock market gains? Um, no. It's true that
slightly more than half of American families participate in the stock
market, either directly or through investment accounts. But most families
own at most a few thousand dollars' worth of stocks.

A good indicator of the share of increased profits that goes to different
income groups is the Congressional Budget Office's estimate of the share of
the corporate profits tax that falls, indirectly, on those groups.
According to the most recent estimate, only 8 percent of corporate taxes
were paid by the poorest 60 percent of families, while 67 percent were paid
by the richest 5 percent, and 49 percent by the richest 1 percent. ("Class
warfare!" the right shouts.) So a recovery that boosts profits but not
wages delivers the bulk of its benefits to a small, affluent minority.

The bottom line, then, is that for most Americans, current economic growth
is a form of reality TV, something interesting that is, however, happening
to other people. This may change if serious job creation ever kicks in, but
it hasn't so far.

The big question is whether a recovery that does so little for most
Americans can really be sustained. Can an economy thrive on sales of luxury
goods alone? We may soon find out.


------------------------------------------------
A free people ought not only to be armed and disciplined, but they should
have sufficient arms and ammunition to maintain a status of independence
from any who might attempt to abuse them, which would include their own
government.

--George Washington
-------------------------------------------------
Smash The State! mailing list home
 http://groups.yahoo.com/groups/smashthestate

Extropian Principles... the Future, Now
 http://www.extropy.org/principles.htm
---


----------------------------------
Smash The State WWW
 http://groups.yahoo.com/group/smashthestate

Of course it's bankrupt! 15.Jan.2004 08:18

Grizzlymama

The US government has to be rendered financially bankrupt in order to bankrupt the state and local governments. A "system" that is bankrupt, will be forced to look to corporations for loans to continue funding essential services. Of course this won't happen exclusively. At the same time, corporate tax exemptions and deregulation are positioning multinationals for this role. At the same time these multinationals are destroying our community businesses and farms and soon will be the only the employer and the only provider of goods. When the US, State and Local governments are funded by private industry and the only place to work is Wal-Mart. When all you need to buy is available only under one roof and it's the same roof that provides your paycheck, and the same roof that holds the mortgage on your community, feudalism will be firmly planted in this great country.

It is time for the poor to realize that every time they give a penny to Wal-Mart, they are funding their own demise. Better to shop at thrift shops (recycle, re-use, and preserve resources), than support the very corporation that plans to own you.

We must look at the Free Trade Agreements and the deregulation they promote. This is imperative for the survival of democracy. When the multinational banks are further deregulated our mortgage and loan rates will skyrocket, at the same time the dismantling of labor organizations and deregulation of employers will send our wages plummeting. And when there is no competition left in community, for Wal-Mart, the price of goods will also skyrocket (Wal-Mart is only temporarily a discount store, to crush community owned businesses, once there is no competition, they won't have to discount anything).

Is this crazy? I wish! Wal-Mart plans to enter the auto industry, the energy industry and finally the banking industry-all services and goods under one roof. This is so counter-intuitive that it's overwhelming.... And that is what they are bargaining on! It's time for the people to rise up before the Homeland Security is so tight that the possibility of change becomes laughable.

Homeland Security to ward off terrorism?? No no no, Homeland Security is the system that is being built to prevent the revolution when people start to loose their homes.