Linked with Richard C. Cook – USA, and with Is an International Financial Conspiracy Driving World Events.
Published on Global Research.ca, by Richard C. Cook, January 20, 2008.
It is not quite true that the U.S. economy is heading into a recession, even though President Bush and most other politicians seem to be discovering it for the first time. It’s like the famous scene in Casablanca where Louis, the Prefect of Police, shuts down Rick’s nightclub while pocketing his winnings for the night, because, I am shocked, shocked to learn that gambling is going on in this establishment!
Actually, as this writer and others have been saying for months, the producing economy, you know, the one where men and women go to work every day to make things of value (not just push paper for financial services) has been in decline for at least a year. This can be measured by the steady decrease of M1, the money available in cash and checking accounts for immediate purchases.
But if you dig a little deeper, it is easy to see that the U.S. never really got out of the recession of 2000-2002 which followed the bursting of the dot.com bubble at the end of the Bill Clinton presidency. This event was marked by the stock market crash starting in December 2000 that cost Americans over a trillion dollars in retirement savings and other forms of paper wealth over a period of a few months.
The U.S. producing economy never really came back from that debacle. Instead, the Federal Reserve, under Maestro Alan Greenspan, facilitated the blowing of three financial bubbles, upon which the Bush/Cheney ship-of-state has sailed along merrily until recent weeks.
The first of these bubbles, of course, was the housing one, marked by officially-sanctioned fraudulent lending practices leading to the sub-prime mortgage collapse. By 2005, this bubble had been creating fifty percent of all economic growth in the U.S. But now that growth has reversed in a nationwide home price deflation.
The second was the explosion of leveraged debt in the areas of commercial real estate, mergers and buyouts by equity funds, and hedge/derivative fund speculation. This debt has also begun to unravel which is reflected in declining equity values in the stock market.
The third bubble has been the less conspicuous trillion dollars in off-budget spending for the Afghanistan and Iraq Wars which has kept the military-industrial complex in clover. Meanwhile government tax revenues have plummeted due to the Bush tax cuts for the rich and the continued erosion of the U.S. job base and our public and private infrastructures.
It is the bursting of these bubbles, combined with the absence in our economy of an engine to replace the decade-long habit by homeowners of staying afloat by cashing in on their inflated housing equity, which is generating the crisis.
Let’s look at the solutions various parties are proposing: … (full long text).