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OpEdNews Op Eds    H2'ed 3/4/10

Double-Dip Recession Directly Ahead

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According to reports, recent auctions of Treasury debt have not gone well. China, America's biggest creditor, has reduced its participation and is even selling some of its existing holdings. Whenever all of a new Treasury debt offering is not taken, the Federal Reserve buys the remainder. This results in debt monetization. The Fed pays for the bonds by creating new checking accounts for the Treasury, in other words, by printing money.

On February 24, Fed chairman Ben Bernanke told Congress that the U.S. faced a serious debt crisis and that the Fed was not going to print money in order to pay the government's bills. In fact, Bernanke would have no choice but to print money.

Bernanke's warning to Congress is his way of adding Federal Reserve pressure to that of Wall Street and former Treasury Secretary Paulson for Congress to balance the budget by gutting Social Security and Medicare. In case you haven't noticed, no one in Washington or New York talks about cutting trillion dollar wars or trillion dollar handouts to rich bankers. They only talk about taking things away from little people. It is not the Bush/Cheney, Obama, neocon wars that are in the cross hairs; it is Social Security and Medicare.

Other Obama economic officials, such as White House economist Larry Summers, a former Treasury secretary, have called for a middle class tax increase. The problem with this "solution" is that a good part of the middle class is now jobless and homeless.

Money will have to be found somewhere if the Fed is to avoid printing it. During the Clinton administration a Treasury official proposed a 15-percent capital levy on all private pensions to make up for their tax deferral status. This idea didn't fly, but today a desperate government, which has wasted $3 trillion invading countries that pose no danger to the U.S. and wasted more trillions of dollars combating a crisis brought on by the government's failure to regulate the financial sector, is likely to steal people's pensions as well as to gut Social Security and Medicare.

The reason is that the dollar's role as reserve currency is at stake. If the Federal Reserve has to monetize the federal deficit, the world will turn its back on a rapidly depreciating dollar. The minute the dollar loses the reserve currency role, the U.S. can no longer pay its bills in its own currency, and its days as a superpower come to a sudden end. Wars can't then be financed, and Washington's pursuit of world hegemony will hit a brick wall.

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Several years after receiving my M.A. in social science (interdisciplinary studies) I was an instructor at S.F. State University for a year, but then went back to designing automated machinery, and then tech writing, in Silicon Valley. I've (more...)
 

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