by Paul Craig Roberts
, 23 July 2011 — The drama of it all! Will Congress refuse to raise the debt ceiling, forcing the US government to default and, thereby, immediately turning the “world’s only superpower” into a Third World country subject to an IMF austerity program? The markets are poised to explode upward in jubilation or collapse in despondency. Only in America could such fantasy dominate the news.
Does anyone really believe that the US government would default on its debt?
The debt ceiling/default “crisis” is nothing but political theater. The Republicans are employing scare tactics in their attempt to destroy the social safety net. The Democrats are playing along with the assault on “entitlements,” because it is what the majority of their large contributors want.
The presstitutes dish out the fantasy as if it were reality.
The US government will never default on its debt, because the government can print an endless stream of money to redeem its bonds.
The Republicans would love to gut Medicare, Medicaid, Social Security, food stamps, unemployment insurance, education, and any and everything that benefits ordinary people. But do they want to gut their wars?
Do they want to gut American financial hegemony over the world?
Do they want the US dollar replaced as world reserve currency and oil to be priced in a different currency than the US dollar?
Of course they don’t. And if the Republicans are not smart enough to have figured out these consequences of their refusal to raise the debt ceiling, someone will tell them before it is too late.
But in truth it matters not whether the debt ceiling is raised. The Bush regime, with the complicity of the federal courts and Congress, established that the president has essentially unlimited powers not bound by law when the country is at war. The president does not have to follow the Constitution or obey statutory law. He can ignore the laws against spying on Americans without warrants. He can ignore the laws against torture and against indefinite detention without presenting charges in a court. He can even ignore the War Powers Act. Obviously, the president can also ignore the debt ceiling limit.
If banks are too-big-to-fail, so is the US government. All Obama has to do is to declare a national emergency, set aside the debt ceiling limit on national security grounds, and continue to issue debt. If the Federal Reserve were to resist, which it never would, Obama would simply nationalize the institution. If US presidents can take over the steel industry, or bring the industry to heel with the threat, it can take over the Federal Reserve.
If Congress fails to raise the debt ceiling, the only consequence would be the further erosion of Congress’ diminished power. Obama would say, and the public would accept, that Congress was unable to do its share of governing and had left the troops without supplies, the dollar unprotected, and was casting away American power.
The final result would be that Congress, having already lost the power to declare war, would lose the power of the purse. Henceforth budgets would be determined by the executive branch, which would also determine the proportions of expenditures covered by taxes, by borrowing, and by money creation.
The Republicans would have made Congress irrelevant like the Roman senate under the caesars.
P.S. The Summer Trends Journal will be sent out
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A New Surge In Job Layoffs - Decline of the Empire - July 21, 2011 - Companies are laying off employees at a level not seen in nearly a year, hobbling the job market and intensifying fears about the pace of the economic recovery... Cisco Systems Inc., Lockheed Martin Corp. and troubled bookstore chain Borders Group Inc. are among those that have recently announced hefty cuts, while recent government numbers underscore how companies have shifted toward cutting jobs... The increase in layoffs is a key reason why the U.S. recorded an average of only 21,500 new jobs over the past two months, far below the level needed to bring down unemployment, which now stands at 9.2%... The cuts also reflect the shifting outlook of employers, many of whom had expected the economy to gain speed as the year progressed. Instead, growth has faltered. If the pace continues to disappoint, more companies will feel pressure to pull back. "Layoffs have played a big role [in weak job growth] over the last few months," said Mike Montgomery, an economist at IHS Global Insight. "The soft patch is more layoffs and nothing else to pick up the slack."... In May, U.S. public and private employers shed 1.78 million workers, the highest level since August 2010. Among those layoffs, 1.66 million were from the private sector [graph above].
How Your Social Security Money Was Stolen – Where Did the $2.5 Trillion Surplus Go? - Ampedstatus.org - Introduction by David DeGraw, Reports by Dr. Allen Smith - The Social Security surplus revenue should have been saved and invested in public-issue, marketable Treasury bonds. These bonds are “good as gold” and default-proof. They are the kind of U.S. Treasury bonds that are owned by China and Japan, Bill Gates, pension funds, and every other serious investor that owns Treasuries. If the Social Security surplus had been invested in public-issue marketable Treasury bonds, as it could have been, and should have been, Barbara Kennelly would be correct in saying that the Social Security holdings are “as solid as what we owe China and Japan.” Unfortunately not a single dollar of the surplus Social Security revenue was saved or invested in anything. It was all spent, and, once money is spent, there is nothing left to invest... The government cannot, and will not, ever default on any of its public issue, marketable Treasury bonds because of the panic it would create in world markets and the damage it would do to the nation’s worldwide credibility. But Congress has the legal authority to default on its debt to Social Security, and, if it should do so, the outside world would probably view it primarily as an internal matter between the United States Government and its citizens. One of the least known facts about Social Security is that, although the government does have a moral obligation to pay Social Security benefits to those who have earned them, the government does not have a legal obligation to do so... In a 1960 ruling by the United States Supreme Court, the court ruled that nobody has a “contractual earned right“ to Social Security benefits. Section 1104 of the 1935 Social Security Act specifically states, “The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress.” According to the above strong language, Congress could do whatever it wanted to do with regard to changing or even eliminating Social Security.
“Robo-Signing” Fraud Continues–Surprise! - USA Watchdog - Greg Hunter - July 20, 2011 - In April, fourteen of the nation’s biggest banks promised federal regulators they would stop robo-signing documents to foreclose on homes. This was part of a settlement to clean up the foreclosure mess caused by wild lending of the banks... Nearly 8 months ago, the banks were caught red handed fraudulently creating fake documents because they lost track of the originals in the haze of creating mortgaged-backed securities. Why is this still going on? More importantly, why aren't bank executives going to jail instead of letting them off the hook? Many have called this outright organized crime!!! The implications of this, to me, say the mortgage industry and bankers are panicked and desperate. It also signals the real estate market will not recover for many years... The story that follows is a must read from the Associated Press:
Gang of Six Plan Gives Tax Breaks for Wealthy, Social Security Cuts for Ordinary Workers - Truthout - Dean Baker - July 19, 2011 - Washington, D.C.- The budget plan produced by the Senate’s “Gang of Six” offers the promise of huge tax breaks for some of the wealthiest people in the country, while lowering Social Security benefits for retirees and the disabled. Despite claiming that they will "reform" Social Security on a "separate track, isolated from deficit reduction," the plan includes cuts to Social Security that would be felt in less than six months, as the plan calls for a new inflation formula that will reduce benefits by 0.3 percentage points a year compared with currently scheduled benefits. The plan also calls for a process that is likely to reduce benefits further for future retirees... It is striking that the Gang of Six chose to respond to the crisis created by the collapse of the housing bubble by developing a plan that will give even more money to top Wall Street executives and traders. By contrast, the European Union is considering imposing financial speculation taxes to reduce the power of the financial industry and raise more than $40 billion a year in revenue... The plan calls for substantial cuts elsewhere in the budget which are likely to cut into the incomes of large segments of the population, especially the sick and the elderly. The cuts it proposes to the military are just over 1.0 percent of projected spending over the next decade.
Federal Reserve audit highlights possible conflicts of interest - Washington Post - Neil Irwin - July 21, 2011 - For instance, William C. Dudley, the president of the Federal Reserve Bank of New York who was a senior official there in 2008, owned stock of American International Group before the Fed bailed out the giant insurance firm. The GAO report did not mention him by name, but Sen. Bernie Sanders (I-Vt.), who spearheaded the audit, identified Dudley as the unnamed official described in the report... Lawyers at the New York Fed allowed Dudley to continue owning the shares while working on issues relating to the bailout. They concluded that for him to sell the shares immediately after the central bank bailed out the firm would be more ethically problematic than simply holding onto them and selling at a later date... Dudley “held shares in these companies as part of his personal portfolio that predated his service at the New York Fed,” a spokesman for the central bank said. “A waiver was granted allowing him to hold these shares based in part on the judgement that had he sold these shares immediately after the interventions it would have the appearance of a conflict.”
Too Big To Fail?: 10 Banks Own 77 Percent Of All U.S. Banking Assets - The Economic Collapse - July 18, 2011 - The American people were promised that TARP and all of the other bailouts would enable the big banks to lend out lots of money which would help get the economy going for ordinary Americans again... Well, it turns out that in 2009 (the first full year after Congress passed the bailout legislation) U.S. banks posted their sharpest decline in lending since 1942... Lending has never fully recovered since the crash of 2008. The big financial institutions like Goldman Sachs, Morgan Stanley and JPMorgan Chase have been able to get all the cash that they need, but they have not passed that generosity along to ordinary Americans... In fact, the biggest U.S. banks have actually reduced small business lending by about 50 percent since the crash of 2008... That doesn’t sound like what we were promised... These “too big to fail” banks have been able to borrow gigantic amounts of money from the Fed for next to nothing and yet they still refuse to let credit flow to local communities. Instead, the big banks have found other purposes for all of the super cheap money that they have been getting from the Fed as Ellen Brown recently explained….
Burning Collapse....But Nothing to See Here - Charlie McGrath says it better than I ever could - July 21, 2011