Scary Times By William Bowles

24 May 2003

When Big Capital gets worried you know things are looking bad. An economist Stephen Roach, writing for Morgan-Stanley, one of the world’s leading investment banks says;

‘The world has been in a ‘great disinflation…from 1982 to 2002…. And now the unwinding of a new disequilibrium is at hand – the rebalancing of a U.S.-centric world.’ Why? First of all because of the ‘ever-widening disparities in the world’s external accounts.’ He says that ‘as the United States squanders its already depleted national saving’ and ‘as the rest of the world remains on a subpar consumption path,’ the situation can only get worse.’ Source:


‘Can a saving-short US economy continue to finance an ever-widening expansion of its military superiority? My answer is a resounding ‘no.” What will therefore happen? The ‘prices of dollar-denominated assets compared to those of non-dollar-denominated assets’ must fall, and fall drastically soon.’ Source:

This, by the way, is all from a must read article by Emmanuel Wallerstein available on Zednet, from which I’ve taken these extracts. He goes on to say:

‘In short, Roach is arguing that the macho militarism swagger of the Bush regime, the dream of the U.S. hawks to remake the world in their image, is not merely undoable, but distinctly negative from the point of view of large U.S. investors, the audience for whom Roach writes, the customers of Morgan Stanley. Roach is of course absolutely right, and it is noteworthy that this is not being said by some left-wing academic, but by an insider of big capital.’ Source:

As I’ve pointed out in earlier pieces, the rest of the world has financed the US’ external debt through the petro-dollar, a debt which is running at a staggering $3.9 trillion! The entire edifice only hangs together for as long as an over-valued dollar does and as the article points out:

‘Roach estimates: ‘a 20% drop in real exchange rates and nearly double that in nominal terms, higher real interest rates, reduced growth in domestic demand, and faster growth overseas.’ He ends his piece by saying that ‘the world is not functioning as a global economy’ (so much for the globalization theorists) and that ‘for a lopsided global economy, a weaker dollar may well be the only way out.’ Source:

And will the dollar plunge in value? Well it already has (and by over 10%), as has the pound by about 5% (both against the Euro). The NYSE has dropped another 25% in value and the LSE by almost 20% just in this year alone. Global meltdown? You bet.

Of course, it can be argued that the combination of the giant oil conglomerates and the military-industrial complex, collectively can ‘rescue’ the US economy but the reality is that in order to pay the $400 billion annual arms bill, federal spending on virtually everything else has to go. As Wallerstein points out:

‘The near bankruptcy of the state governments across the United States even today is a foreshadowing of what is to come.’

Source: domestic demand is hitting the civilian economy hard. As long as the Federal government goes on printing dollars which are subsidised by the rest of the planet through forcing us to use over-valued petro-dollars, (the only currency we can buy oil with) the situation can only get worse. In other words, for the gas-guzzling US economy to continue functioning, it has to have cheap oil, cheap oil that the rest of the world pays for.

The sectarian interests of a narrow section of the US capitalist class have a hammer-lock on US foreign policy, which is borne out by the events of the past two decades and especially the desperate desire on the part of the US to go to war with Iraq, which was triggered (in part) by the major oil producers (Iraq, Venezuela, Iran) switching (or threatening) to the Euro.

The entangling of ideology with economics is nothing new of course, the real issue is whether or not the ideology and the economics make any kind of sense. The tragedy is that the rest of the world, especially its poor, pay for it. And the way out? Perhaps the next US election will decide but the Clinton years, whilst not as ‘extreme’ ideologically as the Bush presidency, were driven by essentially the same interests, so it’s unlikely that a change to a Democratic administration will make a radical difference.

Ultimately, the only ‘solution’ may be the collapse of the US economy but this brings with it its own dangers. The vast disparity in military power between the US and the rest of the world could lead desperate measures on the part of the US, leading to an increasing likelihood of war on a general scale, either between competing economies or attempts by the US to impose its hegemony on the world aka the Fourth Reich. And like the Fourth Reich whose major backers were the arms manufacturers like Thyssen and Krupps, the US political class is dominated by a clique of comparable military manufacturers.

Will those US capitalists whose future depends on a stable global economic system be able to make an impact on US policy? Currently all the indications are no. What makes the current situation so dangerous is the alliance of the military-industrial complex with the mass media, which in part has been made possible by the ‘convergence’ of digital technologies and the wholesale mergers of the media, IT and military industries, each reinforcing the other. Without any kind of space for alternate views in the public sphere, an insane propaganda campaign has convinced the public of the need for a massive increase in arms spending even as they watch their schools, hospitals, and other public services being gutted. Without an alternate political voice, the great mass of the US public have been disenfranchised from the political process, which of course works to the advantage of the Bush clique. Scary times indeed.


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