Have we learned from history? Apparently not. David Lazarus, a columnist for the Los Angeles Times, recently reported:
"According to Fed statistics released recently, U.S. consumers are carrying a record $2.456 trillion in debt (not including mortgages).
The amount of revolving credit, such as credit cards, carried by consumers rose in July at an annual rate of 6.6 percent, or by $5 billion -- the third straight month of significant gains. Revolving credit was up 6.4 percent in June and a whopping 10.9 percent in May, the Fed reported."
This over-reliance on luxury spending and credit meant that if conditions were to take a downturn (as they did with the market crashed in fall and winter 1929), this spending and investment would slow to a halt.
The crisis in the housing market is only the tip of the iceberg. If Americans suddenly default on their credit cards en masse, we could see a credit meltdown that could topple the house of cards that the ever-increasingly fragile economy is built upon.
Yet another factor comes into play in the creation of a market meltdown: Mass speculation. Mass speculation went on throughout the late 1920's, hyperinflating the value of stocks, and creating an artificial "bubble". The excessive speculation in the late 1920's kept the stock market artificially high, but eventually lead to large market crashes. These market crashes, combined with the unequal distribution of wealth, caused the American economy to capsize.
We've already lived through the crash of 1987 and the implosion of the dot com stocks. The question is: have we learned? Economic analysts are pessimistic . As James J. Puplava states:
"The daily actions of investors (speculators would be a better term) have turned our financial markets into a casino. Investors are treated to daily doses of irrationality as money jumps from one sector to the next and then back again. The constant need to buy stocks is consistently being fed through various media outlets from the Internet to cable TV."
Analysts agree that the policy of spending money to prop up the sagging economy is unsustainable. The United States is currently spending nearly $600 billion more a year than it produces. This amounts to almost 6 percent of its annual gross domestic product. Bush, a so-called "conservative", has single-handedly undone the work that Clinton did in keeping a balanced budget and reducing the deficit. The US is now more in debt than ever.
So what exactly is propping up the US economy and keeping it from sinking entirely? Two things- foreign investment, and war profits. This strategy of borrowing from friends (and enemies), as well as using a costly war to prop up industry, could easily backfire.
According to the NY Times, Asian governments, including China, "have bought more than $1 trillion in Treasury securities and other dollar assets in the last two years to help keep the dollar strong against Asian currencies."
Asian investors, paticularly China, have been pumping money into the US economy for years, keeping the dollar artificially strong. China has also been making oil and gas alliances with Iran in the Middle East, strengthening her position through networks of trade. Furthermore, China is also a major player at the UN Security Council, using whatever political advantage they can.
The Chinese now hold 1,330 billion dollars of foreign reserves, both paper currency and Treasury Bonds. What does China get in this arrangement?
For one thing, they have been using their investment in the US to curry favor with the US, holding their investments as a "political weapon" to use lest the US government should think of questioning any of their foreign policy decisions.
What begun with mere hinting a few months ago has now become a full-fledged threat. The Chinese government has, in the past hinted that it may liquidate its vast holding of US Treasury bonds if Washington imposes trade sanctions to force a yuan revaluation.
According to the NY Times, Cheng Siwei, vice chairman of the Standing Committee of the National People's Congress, gave a conference last Wednesday, where he boldly stated, "We will favor stronger currencies over weaker ones, and will readjust accordingly,". Meanwhile, according to Bloomberg News, Xu Jian, a Chinese central bank vice director, said the dollar was "losing its status as the world currency".
As more and more countries start to use the Euro or other currencies, we have seen the dollar drop against the Euro, pound and yen; this week, we have seen the results of the dollar's new unpopularity, as more and more investors dropped their dollars. This could spell bad news for the US, as there could be a domino effect.
The dollar has, as of this week, fallen to its lowest level against the Canadian dollar since 1950, and has fallen equally badly against the British pound and the Swiss franc. Concurrently, the Euro has reached an all-time high of $1.4729. This could mean that the US would be increasingly at the mercy of potentially hostile financial mercenaries.
Of course, if the Chinese were to drop their holdings, it would harm them, as well. According to the NY Times, "China and Japan depend on the purchasing power of Americans for their exports. They, along with the oil producers, hold so many dollars that they are loath to do anything to cause a precipitous fall."
In addition to foreign investment, there is one other factor propping up the US economy: war. The great depression did not come to a final end until US war production and manufacturing, spurred by the US's entry into WWII, broke the slump in the lagging markets and increased production. President Bush, aware that a buildup in the military and defense could only be justified by the presence of a dangerous enemy, real or imagined, used 9/11 as a pretext to begin a war against an invisible and formidable enemy- "terrorism".
The Bush administration, financed and propped up by powerful special interests, has made war the number one money-making industry in America.
In "War, Incorporated: the profits of mass destruction", John Glansbeek and Andrea Bauer write:
"According to Fed statistics released recently, U.S. consumers are carrying a record $2.456 trillion in debt (not including mortgages).
The amount of revolving credit, such as credit cards, carried by consumers rose in July at an annual rate of 6.6 percent, or by $5 billion -- the third straight month of significant gains. Revolving credit was up 6.4 percent in June and a whopping 10.9 percent in May, the Fed reported."
This over-reliance on luxury spending and credit meant that if conditions were to take a downturn (as they did with the market crashed in fall and winter 1929), this spending and investment would slow to a halt.
The crisis in the housing market is only the tip of the iceberg. If Americans suddenly default on their credit cards en masse, we could see a credit meltdown that could topple the house of cards that the ever-increasingly fragile economy is built upon.
Yet another factor comes into play in the creation of a market meltdown: Mass speculation. Mass speculation went on throughout the late 1920's, hyperinflating the value of stocks, and creating an artificial "bubble". The excessive speculation in the late 1920's kept the stock market artificially high, but eventually lead to large market crashes. These market crashes, combined with the unequal distribution of wealth, caused the American economy to capsize.
"The daily actions of investors (speculators would be a better term) have turned our financial markets into a casino. Investors are treated to daily doses of irrationality as money jumps from one sector to the next and then back again. The constant need to buy stocks is consistently being fed through various media outlets from the Internet to cable TV."
Analysts agree that the policy of spending money to prop up the sagging economy is unsustainable. The United States is currently spending nearly $600 billion more a year than it produces. This amounts to almost 6 percent of its annual gross domestic product. Bush, a so-called "conservative", has single-handedly undone the work that Clinton did in keeping a balanced budget and reducing the deficit. The US is now more in debt than ever.
So what exactly is propping up the US economy and keeping it from sinking entirely? Two things- foreign investment, and war profits. This strategy of borrowing from friends (and enemies), as well as using a costly war to prop up industry, could easily backfire.
According to the NY Times, Asian governments, including China, "have bought more than $1 trillion in Treasury securities and other dollar assets in the last two years to help keep the dollar strong against Asian currencies."
Asian investors, paticularly China, have been pumping money into the US economy for years, keeping the dollar artificially strong. China has also been making oil and gas alliances with Iran in the Middle East, strengthening her position through networks of trade. Furthermore, China is also a major player at the UN Security Council, using whatever political advantage they can.
The Chinese now hold 1,330 billion dollars of foreign reserves, both paper currency and Treasury Bonds. What does China get in this arrangement?
For one thing, they have been using their investment in the US to curry favor with the US, holding their investments as a "political weapon" to use lest the US government should think of questioning any of their foreign policy decisions.
What begun with mere hinting a few months ago has now become a full-fledged threat. The Chinese government has, in the past hinted that it may liquidate its vast holding of US Treasury bonds if Washington imposes trade sanctions to force a yuan revaluation.
According to the NY Times, Cheng Siwei, vice chairman of the Standing Committee of the National People's Congress, gave a conference last Wednesday, where he boldly stated, "We will favor stronger currencies over weaker ones, and will readjust accordingly,". Meanwhile, according to Bloomberg News, Xu Jian, a Chinese central bank vice director, said the dollar was "losing its status as the world currency".
As more and more countries start to use the Euro or other currencies, we have seen the dollar drop against the Euro, pound and yen; this week, we have seen the results of the dollar's new unpopularity, as more and more investors dropped their dollars. This could spell bad news for the US, as there could be a domino effect.
The dollar has, as of this week, fallen to its lowest level against the Canadian dollar since 1950, and has fallen equally badly against the British pound and the Swiss franc. Concurrently, the Euro has reached an all-time high of $1.4729. This could mean that the US would be increasingly at the mercy of potentially hostile financial mercenaries.
Of course, if the Chinese were to drop their holdings, it would harm them, as well. According to the NY Times, "China and Japan depend on the purchasing power of Americans for their exports. They, along with the oil producers, hold so many dollars that they are loath to do anything to cause a precipitous fall."
In addition to foreign investment, there is one other factor propping up the US economy: war. The great depression did not come to a final end until US war production and manufacturing, spurred by the US's entry into WWII, broke the slump in the lagging markets and increased production. President Bush, aware that a buildup in the military and defense could only be justified by the presence of a dangerous enemy, real or imagined, used 9/11 as a pretext to begin a war against an invisible and formidable enemy- "terrorism".
The Bush administration, financed and propped up by powerful special interests, has made war the number one money-making industry in America.
In "War, Incorporated: the profits of mass destruction", John Glansbeek and Andrea Bauer write:
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