The $55 trillion question By Pepe Escobar
But the whole scenario gets more dangerous. As McCain inexorably implodes, an extremely angry Republican party in most of its strands rears its ugly head - the extraordinary levels of hate at recent McCain-Palin rallies are just the tip of the iceberg. This correspondent has seen the mob become really brown-shirt scary, brandishing "Obama bin Lyin" placards or yelling "Kill him!" In the official Republican website in Sacramento, California, there was even a direct link between Obama and Osama bin Laden - with an explicit call to "Waterboard Barack Obama" (it was finally pulled out by Republican leaders).
***
The Reagan Revolution spawned al-Qaeda, which spawned blowback, which spawned serial, over-inflated Pentagon budgets. American taxpayers have shelled out over $1 trillion to fight elusive "terrorists" - money for nothing. It's impossible not to be reminded of one Bin Laden a few days before the 2004 presidential election, asserting in his "Message to the American people" video that al-Qaeda's strategy was to bleed the empire to bankruptcy. It has been a slo-mo 9/11 for over seven years now - with the 2008 financial crisis as the icing on the gory cake.
***
Drowning in numbers
And then there are the "invisible" crisis numbers. The CDS market - the market for credit default swaps invented by McCain's economic adviser Phil Gramm in 2000 (via the Commodities Future Modernization Act) - is now worth no less than a staggering $62 trillion. It was "only" $900 billion in 2000. This Wall Street speculation racket is now an astonishing five times the size of all the holdings in the New York Stock Exchange.
Nobody knows what will happen to it - a leftover from the fall of Lehman Brothers. And no one is even starting to talk about the $1 trillion black hole of credit-card debt which may well swallow two remaining US bank giants, JPMorgan Chase and Bank of America.
The now indispensable Nouriel Roubini, the New York University professor who predicted the financial crisis way back in 2006, is adamant: this will be the worst US recession in 40 years, lasting as long as 24 months, with unemployment reaching 9% and depressed home prices falling another 15%.
Roubini stresses, "The US government will need to double its purchase of bank stakes and force lenders to eliminate dividends to save them from bankruptcy." And forget about a market rally. "The stock market is going to stop rallying soon enough when they see the economy is really tanking right now."
As for total credit losses from the subprime mortgage market meltdown, they will be "closer to $3 trillion", up from his initial estimate of $1 trillion to $2 trillion. Last week, the (discredited) International Monetary Fund said it would be $1.4 trillion. The IMF is now warning of imminent "systemic meltdown".
And that's nothing compared to warnings from former Comptroller General David Walker - the head of the US government's accountability office for 10 years. Walker told talk show host Bill Maher "both these guys that are running right now will only make it worse. The bottom line is both of their proposals will make our debts and our deficits worse."
Maher and Walker joked that the debt clock in New York has run out of digits. According to Walker, "The number that they were showing was over $10 trillion. We got over $40 trillion more off the balance sheet. This country is in a $55 trillion hole. That's $480,000 per household [compare it to median household income in America, which is less than $50,000 a year]. That's the number we need to be focusing on. It goes up by $2 to $3 trillion a year even with a balanced budget." And all this on top of urgent, necessary reforms of social security, the health care system, and the tax system.
***
The Reagan Revolution spawned al-Qaeda, which spawned blowback, which spawned serial, over-inflated Pentagon budgets. American taxpayers have shelled out over $1 trillion to fight elusive "terrorists" - money for nothing. It's impossible not to be reminded of one Bin Laden a few days before the 2004 presidential election, asserting in his "Message to the American people" video that al-Qaeda's strategy was to bleed the empire to bankruptcy. It has been a slo-mo 9/11 for over seven years now - with the 2008 financial crisis as the icing on the gory cake.
***
Drowning in numbers
And then there are the "invisible" crisis numbers. The CDS market - the market for credit default swaps invented by McCain's economic adviser Phil Gramm in 2000 (via the Commodities Future Modernization Act) - is now worth no less than a staggering $62 trillion. It was "only" $900 billion in 2000. This Wall Street speculation racket is now an astonishing five times the size of all the holdings in the New York Stock Exchange.
Nobody knows what will happen to it - a leftover from the fall of Lehman Brothers. And no one is even starting to talk about the $1 trillion black hole of credit-card debt which may well swallow two remaining US bank giants, JPMorgan Chase and Bank of America.
The now indispensable Nouriel Roubini, the New York University professor who predicted the financial crisis way back in 2006, is adamant: this will be the worst US recession in 40 years, lasting as long as 24 months, with unemployment reaching 9% and depressed home prices falling another 15%.
Roubini stresses, "The US government will need to double its purchase of bank stakes and force lenders to eliminate dividends to save them from bankruptcy." And forget about a market rally. "The stock market is going to stop rallying soon enough when they see the economy is really tanking right now."
As for total credit losses from the subprime mortgage market meltdown, they will be "closer to $3 trillion", up from his initial estimate of $1 trillion to $2 trillion. Last week, the (discredited) International Monetary Fund said it would be $1.4 trillion. The IMF is now warning of imminent "systemic meltdown".
And that's nothing compared to warnings from former Comptroller General David Walker - the head of the US government's accountability office for 10 years. Walker told talk show host Bill Maher "both these guys that are running right now will only make it worse. The bottom line is both of their proposals will make our debts and our deficits worse."
Maher and Walker joked that the debt clock in New York has run out of digits. According to Walker, "The number that they were showing was over $10 trillion. We got over $40 trillion more off the balance sheet. This country is in a $55 trillion hole. That's $480,000 per household [compare it to median household income in America, which is less than $50,000 a year]. That's the number we need to be focusing on. It goes up by $2 to $3 trillion a year even with a balanced budget." And all this on top of urgent, necessary reforms of social security, the health care system, and the tax system.
posted by temporal at 10/17/2008
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