Thursday, July 26, 2012

Paul Craig Roberts on the Economic Crisis

"[A debt-based economy requiring perpetual growth] is a problem, but one among many. We have also, for example, the offshoring of US middle class jobs which has dismantled the ladders of upward mobility in “the opportunity society,” sent US incomes and GDP to China, and caused Federal Reserve chairman Alan Greenspan to substitute an expansion in consumer debt for the missing growth in consumer income in order to keep the economy growing. Indeed, without the offshoring of US jobs by US corporations and the offsetting growth in mortgage and consumer debt, there would have been no financial crisis as the Fed would not have created the credit and real estate bubble that led to the mortgage-backed derivatives." - Paul Craig Roberts (left), former Assistant Secretary of the Treasury under Ronald Reagan, from The Matterhorn Interview.

In the 1990s, we were told that elimination of trade regulations would raise everyone's standard of living. Ross Perot disputed this and said that he heard a "giant sucking sound" as American jobs and prosperity would whoosh out of this nation and into others. I personally questioned the wisdom of these actions at the time, but as a young man, I trusted to what I thought was the superior wisdom of the two major parties that both supported free trade. In retrospect, however, didn't Ross Perot have it right? In the quote above, one of the developers of Reaganomics, Paul Craig Roberts, suggests that the offshoring of jobs has only made the wealthy wealthier. There was a Perotian "giant sucking sound" of American wealth out of our country and into China. And since the US economy was in a rut, the Fed, under Greenspan, creating artificial growth in the economy by maintaining very low interest rates that encouraged debt. Ultimately, the housing bubble was created by opportunities that the financial sector identified as a means of capitalizing on even more debt. Hence, they became richer still, but at the expense of everyone else.  Where is the debate about free trade and the offshoring of jobs? The two major political parties don't appear to want to have this discussion. The mainstream media don't want to have this discussion. And as long as Wall Street can keep getting wealthier from artificially low interest rates and speculation on our failure, they sure won't encourage this discussion.

No comments:

Post a Comment