[Bret L]

((Actually it might be good for Joe and Jane Average for the US to
lose its reserve currency status. We would no longer be ABLE to
import so many things....Bret.))

The Expiring Economy

By Paul Craig Roberts

"Tent cities springing up all over America are filling with the homeless unemployed from the worst economy since the 1930s. While Americans live in tents, the Obama government has embarked on a $1 billion crash program to build a mega-embassy in Islamabad, Pakistan, to rival the one the Bush government built in Baghdad, Iraq.

Hard times have now afflicted Americans for so long that even the
extension of unemployment benefits from 6 months to 18 months for 24
high unemployment states, and to 46 - 72 weeks in other states, is
beginning to run out. By Christmas 1.5 million Americans will have
exhausted unemployment benefits while unemployment rolls continue to
rise.

Amidst this worsening economic crisis, the House of Representatives
just passed a $636 billion "defense" bill.

Who is the United States defending against? Americans have no enemies
except those that the US government goes out of its way to create by
bombing and invading countries that comprise no threat whatsoever to
the US and by encircling others—Russia for example—with threatening
military bases.

America’s wars are contrived affairs to serve the money laundering
machine: from the taxpayers and money borrowed from foreign creditors
to the armaments industry to the political contributions that ensure
$636 billion "defense" bills.

President George W. Bush gave us wars in Iraq and Afghanistan that are
entirely based on lies and misrepresentations. But Obama has done Bush
one better. Obama has started a war in Pakistan with no explanation
whatsoever.

If the armaments industry and the neoconservative brownshirts have
their way, the US will also be at war with Iran, Russia, Sudan and
North Korea.

Meanwhile, America continues to be overrun, as it has been for
decades, not by armed foreign enemies but by illegal immigrants across
America’s porous and undefended borders.

It is more proof of the Orwellian time in which we live that $636
billion appropriated for wars of aggression is called a "defense
bill."

Who is going to pay for all of this? When foreign countries have spent
their trade surpluses and have no more dollars to recycle into the
purchase of Treasury bonds, when US banks have used up their "bailout"
money by purchasing Treasury bonds, and when the Federal Reserve
cannot print any more money to keep the government going without
pushing up inflation and interest rates, the taxpayer will be all that
is left. Already Obama’s two top economic advisors, Treasury Secretary
Timothy Geithner and director of the National Economic Council Larry
Summers, are floating the prospect of a middle class tax increase.
Will Obama be maneuvered away from his promise just as Bush Sr. was?

Will Americans see the disconnect between their interests and the
interests of "their" government? In the small town of Vassalboro,
Maine, a few topless waitress jobs in a coffee house drew 150
applicants. Women in this small town are so desperate for jobs that
they are reduced to undressing for their neighbors’ amusement.

Meanwhile, the Obama government is going to straighten out Afghanistan
and Pakistan and build marble palaces to awe the locals half way
around the world.

The US government keeps hyping "recovery" the way Bush hyped
"terrorist threat" and "weapons of mass destruction." The recovery is
no more real than the threats. Indeed, it is possible that the
economic collapse has hardly begun. Let’s look at what might await us
here at home while the US government pursues hegemony abroad.

The real estate crisis is not over. More home foreclosures await as
unemployment rises and unemployment benefits are exhausted. The
commercial real estate crisis is yet to hit. More bailouts are coming,
and they will have to be financed by more debt or money creation. If
there are not sufficient purchasers for the Treasury bonds, the
Federal Reserve will have to purchase them by creating checking
accounts for the Treasury, that is, by debt monetization or the
printing of money.

More debt and money creation will put more pressure on the US dollar’s
exchange value. At some point import prices, which include offshored
goods and services of US corporations, will rise, adding to the
inflation fueled by domestic money creation. The Federal Reserve will
be unable to hold down interest rates by buying bonds.

No part of US economic policy addresses the systemic crisis in
American incomes. For most Americans real income ceased to grow some
years ago. Americans have substituted second jobs and debt
accumulation for the missing growth in real wages. With most
households maxed out on debt and jobs disappearing, these substitutes
for real income growth no longer exist.

The Bush-Obama economic policy actually worsens the systemic crisis
that the US dollar faces as reserve currency. The fact that there
might be no alternative to the dollar as reserve currency does not
guarantee that the dollar will continue in this role. Countries might
find it less risky to settle trade transactions in their own
currencies.

How does an economy based heavily on consumer spending recover when so
many high-value-added jobs, and the GDP and payroll tax revenues
associated with them, have been moved offshore and when consumers have
no more assets to leverage in order to increase their spending?

How does the US pay for its imports if the dollar is no longer used as
reserve currency?

These are the unanswered questions."

http://www.vdare.com/roberts/090805_...ng_economy.htm