The United States does not have enough money to sustain its own activities. For reasons that I did not understand, nor apparently Alan Greenspan, rather than curb our country’s excesses we went into historic levels of indebtedness. Our foreign debt has more than quadrupled and our total national debt is over three trillion dollars.
This previously unknown level of debt quite predictably caused the dollar to weaken. As the dollar fell we have made a variety of efforts to prop it up but the weight of our debt has been too much for the interim measures we have undertaken.
While our leaders were focused on a war we entered into for reasons that have never been adequately explained by our leaders, they did not mind the store at home so that reckless lending practices were allowed to metastasize. This certainly artificially sustained the economy for a while and just as certainly these practices were unsustainable over the long haul. They were doomed to fail with fluctuations in the real estate market and like all houses of cards a tremor would be ruinous.
For reasons the Bush administration can best explain we were caught unprepared. We have been forced to take measures that will be hard for our economy to endure if they are successful in stemming the current disaster. At a time when we are borrowing money almost as fast as we can, the government is committing its resources to propping up its financial and insurance institutions. This diversion of funds that are already inadequate to meet expenses will add to our sorry state of indebtedness.
The second measure that we are taking is to print more money. Yesterday the Federal Reserve announced that it will be dumping $56 billion into the economy. When you print the stuff that is pretty easy to do. This however will contribute to the downward spiral of the value of the dollar.
I have commented, after reading Naomi Klein’s “Shock Doctrine,” that the United States really has been taking on the attributes of many South American countries. It has a diminishing middle class; the polarization of wealth distribution is greater than it has been since the beginning of the industrial age, before the first timid implementation of the restraints complained of by Republicans.
Like our neighbors to the south we have promoted the power of the executive to a greatly heightened level. We have reduced oversight of private financial activity while loosening restraint on governmental activity with respect to its citizens. Like South American countries we have gone deeply in debt and our financial institutions are not stable. Similar to them our currency is falling.
The current measures to cure the crisis are not the smoke and mirrors approach that we have adopted in the past. At the same time if they avert disaster they will leave us with an economy in worst condition than we thought it was in before the crisis. In short we will bring the crisis in the wings that we already knew about a few steps closer to center stage.