Founder Of Reaganomics Says That "Without A Revolution, Americans Are History"

The United States is running out of time to get its budget and trade deficits under control. Despite the urgency of the situation, 2010 has been wasted in hype about a non-existent recovery. As recently as August 2 Treasury Secretary Timothy F. Geithner penned a New York Times column, “Welcome to the Recovery.”

As John Williams (shadowstats.com) has made clear on many occasions, an appearance of recovery was created by over-counting employment and undercounting inflation. Warnings by Williams, Gerald Celente, and myself have gone unheeded, but our warnings recently had echoes from Boston University professor Laurence Kotlikoff and from David Stockman, who excoriated the Republican Party for becoming big-spending Democrats.

It is encouraging to see some realization that, this time, Washington cannot spend the economy out of recession. The deficits are already too large for the dollar to survive as reserve currency, and deficit spending cannot put Americans back to work in jobs that have been moved offshore.

However, the solutions offered by those who are beginning to recognize that there is a problem are discouraging. Kotlikoff thinks the solution is savage Social Security and Medicare cuts or equally savage tax increases or hyperinflation to destroy the vast debts.

Perhaps economists lack imagination, or perhaps they don’t want to be cut off from Wall Street and corporate subsidies, but Social Security and Medicare are insufficient at their present levels, especially considering the erosion of private pensions by the dot com, derivative and real estate bubbles. Cuts in Social Security and Medicare, for which people have paid 15 per cent of their earnings all their lives, would result in starvation and deaths from curable diseases.

Tax increases make even less sense. It is widely acknowledged that the majority of households cannot survive on one job. Both husband and wife work and often one of the partners has two jobs in order to make ends meet. Raising taxes makes it harder to make ends meet–thus more foreclosures, more food stamps, more homelessness. What kind of economist or humane person thinks this is a solution?

Ah, but we will tax the rich. The rich have enough money. They will simply stop earning.

Let’s get real. Here is what the government is likely to do. Once Washington realize that the dollar is at risk and that they can no longer finance their wars by borrowing abroad, the government will either levy a tax on private pensions on the grounds that the pensions have accumulated tax-deferred, or the government will require pension fund managers to purchase Treasury debt with our pensions. This will buy the government a bit more time while pension accounts are loaded up with worthless paper.

The last Bush budget deficit (2008) was in the $400-500 billion range, about the size of the Chinese, Japanese, and OPEC trade surpluses with the US. Traditionally, these trade surpluses have been recycled to the US and finance the federal budget deficit. In 2009 and 2010 the federal deficit jumped to $1,400 billion, a back-to-back trillion dollar increase. There are not sufficient trade surpluses to finance a deficit this large. From where comes the money?

The answer is from individuals fleeing the stock market into “safe” Treasury bonds and from the bankster bailout, not so much the TARP money as the Federal Reserve’s exchange of bank reserves for questionable financial paper such as subprime derivatives. The banks used their excess reserves to purchase Treasury debt.

These financing maneuvers are one-time tricks. Once people have fled stocks, that movement into Treasuries is over. The opposition to the bankster bailout likely precludes another. So where does the money come from the next time?

The Treasury was able to unload a lot of debt thanks to “the Greek crisis,” which the New York banksters and hedge funds multiplied into “the euro crisis.” The financial press served as a financing arm for the US Treasury by creating panic about European debt and the euro. Central banks and individuals who had taken refuge from the dollar in euros were panicked out of their euros, and they rushed into dollars by purchasing US Treasury debt.

This movement from euros to dollars weakened the alternative reserve currency to the dollar, halted the dollar’s decline, and financed the US budget deficit a while longer.

Possibly the game can be replayed with Spanish debt, Irish debt, and whatever unlucky country is eswept in by the thoughtless expansion of the European Union.

But when no countries remain that can be destabilized by Wall Street investment banksters and hedge funds, what then finances the US budget deficit?

The only remaining financier is the Federal Reserve. When Treasury bonds brought to auction do not sell, the Federal Reserve must purchase them. The Federal Reserve purchases the bonds by creating new demand deposits, or checking accounts, for the Treasury. As the Treasury spends the proceeds of the new debt sales, the US money supply expands by the amount of the Federal Reserve’s purchase of Treasury debt.

Do goods and services expand by the same amount? Imports will increase as US jobs have been offshored and given to foreigners, thus worsening the trade deficit. When the Federal Reserve purchases the Treasury’s new debt issues, the money supply will increase by more than the supply of domestically produced goods and services. Prices are likely to rise.

How high will they rise? The longer money is created in order that government can pay its bills, the more likely hyperinflation will be the result.

The economy has not recovered. By the end of this year it will be obvious that the collapsing economy means a larger than $1.4 trillion budget deficit to finance. Will it be $2 trillion? Higher?

Whatever the size, the rest of the world will see that the dollar is being printed in such quantities that it cannot serve as reserve currency. At that point wholesale dumping of dollars will result as foreign central banks try to unload a worthless currency.

The collapse of the dollar will drive up the prices of imports and offshored goods on which Americans are dependent. Wal-Mart shoppers will think they have mistakenly gone into Neiman Marcus.

Domestic prices will also explode as a growing money supply chases the supply of goods and services still made in America by Americans.

The dollar as reserve currency cannot survive the conflagration. When the dollar goes the US cannot finance its trade deficit. Therefore, imports will fall sharply, thus adding to domestic inflation and, as the US is energy import-dependent, there will be transportation disruptions that will disrupt work and grocery store deliveries.

Will farms will be raided? Will those trapped in cities resort to riots and looting?

Is this the likely future that “our” government and “our patriotic” corporations have created for us?

Here is what can be done. The wars, which benefit no one but the military-security complex and Israel’s territorial expansion, can be immediately ended. This would reduce the US budget deficit by hundreds of billions of dollars per year. More hundreds of billions of dollars could be saved by cutting the rest of the military budget which, in its present size, exceeds the budgets of all the serious military powers on earth combined.

US military spending reflects the unaffordable and unattainable crazed neoconservative goal of US Empire and world hegemony. What fool in Washington thinks that China is going to finance US hegemony over China?

The only way that the US will again have an economy is by bringing back the offshored jobs. The loss of these jobs impoverished Americans while producing oversized gains for Wall Street, shareholders, and corporate executives. These jobs can be brought home where they belong by taxing corporations according to where value is added to their product. If value is added to their goods and services in China, corporations would have a high tax rate. If value is added to their goods and services in the US, corporations would have a low tax rate.

This change in corporate taxation would offset the cheap foreign labor that has sucked jobs out of America, and it would rebuild the ladders of upward mobility that made America an opportunity society.

If the wars are not immediately stopped and the jobs brought back to America, the US is relegated to the trash bin of history.

Obviously, the corporations and Wall Street would use their financial power and campaign contributions to block any legislation that would reduce short-term earnings and bonuses by bringing jobs back to America. Americans have no greater enemies than Wall Street and the corporations and their prostitutes in Congress and the White House.

The neocons allied with Israel, who control both parties and much of the media, are strung out on the ecstasy of Empire.

The United States and the welfare of its 300 million people cannot be restored unless the neocons, Wall Street, the corporations, and their servile slaves in Congress and the White House can be defeated.

Dr. Paul Craig Roberts is the father of Reaganomics and the former head of policy at the Department of Treasury. He is a columnist and was previously the editor of the Wall Street Journal. His latest book, “How the Economy Was Lost: The War of the Worlds,” details why America is disintegrating.

‘restoration of the Republic under the U.S. Constitution of 1789 is as inevitable as the restoration of the Monarchy in England after the death of Cromwell’

That is what my namesake thought in Rome, and for a little while, by means of an ocean of blood, he succeeded. Fifty years later, after nearly continuous Civil Wars, the exhausted Romans turned to Caesar Augustus.

Like I’ve said before the gauntlet of revolution and civil war has been thrown at the feet of American Patriots - Our options are either bow down to our degenerate and reactionary Leftist ruling class as their slaves, or make them disappear.

I prefer the final option.

Exactly. Ronald Reagan himself would be very surprised to discover that the far left has taken to calling Paul Craig Roberts "The Father of Reaganomics" in order to bolster Roberts' cred for all of his support for their nutty paranoid & anti-semitic conspiracies, including 9/11 trutherism. He was an Assistant Secretary of the Treasury for Economic Policy for less than a year (1981) during which time he helped work on the Economic Recovery Tax Act of 1981. Not even a frickin' Under Secretary. That's it.

Ah, but now he's been miraculously promoted to the "Father of Reaganomics" by the Michael Moore crowd on the loony left & to some extent the gullible far right who were either too young during Reagan's Presidency & haven't read their histories of Reagan's political career very well or they were/are too stoned to figure out they're being thoroughly bamboozled here by people who are NO FANS OF REAGAN.

This article should have been attributed to Paul Craig Roberts at the headline — not the bottom of the article. You would have saved a bunch of us time wasted reading this. Dr. Roberts has turned into a kook over the years.

He and Stockman have given up on “supply-side economics” not because it didn’t work but because it didn’t stop the rise of spending. So the rational person would say: OK, let’s focus on getting spending under control. But no, these nuts want to throw out the whole logic of Reaganomics.

Paul Craig Roberts - anti-Semite, Truther, traitor. Maybe some people are stupid enough to believe that he was the "Father of Reaganomics" but FReepers should really know better.

Moreover, it should be obvious that the War Of Independence cannot be repeated - we are not the political subjects of a foreign monarch and we have representation. The two key drivers of the Independence movement do not exist in 2010. This government is our fault: we created it, we voted for it. A "revolution" today would not mean a well-organized limited war of position against foreign armies stationed on our soil taking part in set piece battles like the Battle of Monmouth Courthouse. It would not even mean a sectional Civil War. It would mean bloody fighting almost block by block with a ferocity that would not spare women and children.

You first, Paul Craig Roberts.

Sulla:

Many Americans would INDEED fight fifty years of civil wars in the defense of liberty rather than fall under the iron boot of radical socialism for one single mircosecond!

Always remember if we allow this current version of communism to conquer America, it will literally change the USA into a NEW USSR that will never again relate to the vision of our Founding Fathers.

Take a look at Russia.

When Communism finally collapsed after decades in 1989 it proved to be impossible to restore even a fraction of the freedom that existed even under the oppressive Czars, much less that of the liberal regime of Alexander Kerensky that lasted only a few short months in 1917.

The same would be true in America.

War - even civil war - is not the worse fate to befall a country.

Never forget the American Republic is not the ancient Roman Republic ruled by oligarchy of slave owning aristocrats like the long gone Sulla: We are a Free Republic that has learned much from the mistakes of other nations including Rome. All true Americans - perhaps one HUNDRED MILLION STRONG - believe the REPUBLIC is “our thing” belonging to each Patriot equally who have always rallied when “their thing” was endangered by tyranny.

Today the sleeping giant of American republicanism still sleeps...But one eye has opened.

Correct, Lucius. Finally a sane post on this thread.

Putting aside the concepts of “treason” and “please try to work within the system” for a moment, consider:

armed revolution = many innocent deaths

Maybe:
many innocent deaths + success

But much more likely today:
many innocent deaths + bloody chaos for decades to come

People suggesting the possibility of revolution today need to remember that this isn’t 1776!

Back then, most folks just kept on farming while the combatants fought a few pitched battles over a few years. Then everybody shook hands and went home.

Today, an American revolution would more likely spin out of control and be more like the horror of the Russian or French revolutions and their equally horrific aftermaths.

Not pretty or romantic at all.

I would respectfully suggest that the “revolutionaries” out there put their efforts instead into serious lobbying for a Constitutional Convention. This would be, IMHO, a much better way to try to fix this country’s many problems.

If you feel that there’s not enough popular will for a Convention, then there’s not enough popular will to cleanly win your “revolution”.

It would mean bloody fighting almost block by block with a ferocity that would not spare women and children.

Only if the government wants it that way.
Only if the government believes Might Is Right.
Only if the Will of the People means nothing.

If the people want less government within their local area, and wish to be left alone, then government should respect that. If the government insists that the people need to bend their knee and submit, then that provides justification for a war of ferocity.

No one should attack the government. The right revolution involves creating a situation where the government is ignored and inconsequential. If the government attacks us as a result of that, then that's another thing.

You miss the point... The revolutionary war (civil war, take your pick)has already been started against the American People by the Obama. The battle has been joined with peaceful and lawful resistance. In the next stage, that will start after the November elections that promise to deliver strong Congressional delegation for the Free Republic, the oppressive Obama Regime must respond. This response will likely be in the form of rule by decree, unelected Czars and the vast federal bureaucracy. Thus the Will of the new Congress and the American People will continue to be ignored by the Obama Regime. At some point the economy will collapse... The entire federal house of cards will collapse. Weimar Republic redux... What then?

You are correct that Civil Wars are wars of extinction, of neighbor against neighbor and brother against brother, far more than the American Civil War (really the War of Southern Secession) was. The survivors of the defeated, if not expelled from the country will carry bitterness and be a constant source of treachery and sedition, for hundreds of years. Some would form gangs, like the Sicilian Mafia, caused by social groups crushed by historical victors. Some might be like the Syrian Assassins (Hashish Eaters), always fighting to infiltrate the dominant groups and murder as many as possible. These problems are the reason that genocide and exile are the usual paths of the losers.

Hear! HEAR! THE MAN!

We keep our powder dry until the Redcoats march on U.S.

If elections and civil disobedience work cause a peaceful revolution - I’m all for it.

But if peaceful redress fails and the federal government strikes with the mailed fist of law enforcement or military formations...

“SURRENDER, YOU DAMN REBELS!” said the British officer.

“Stand your ground, men. Don’t fire unless fired upon. But if they mean to have a war, let it begin here.”

-Captain Parker, U.S. Army, April 19, 1775, Lexington, Massachusetts

Your scenario involves poor strategy and unrealistic assumptions.

First, there will be disputes in "local areas" about whether or not federal laws should be ignored. There will be plenty of tweeners who will want freedom but also benefits. And the main issue will be the payment of taxes. The government cannot be expected to ignore nonpayment. And those who depend on the government for their living will not take kindly to neighbors whom they perceive as trying to destroy them.

You speak of the "Will of the People" when the whole point is that this collective will is not unitary or unanimous. The government will go after nonpayers on the grounds that they are defying the law of the land and the popular will.

The government has full, legitimate authority to enforce tax collection and it will make examples of those who break the law. Moreover, it's more than happy to leave people alone who pay all their taxes but reject all benefits - that means more funds to allocate for fewer people.

I learned all about civil war from Shakespeare:

“O, pardon me, thou bleeding piece of earth,
That I am meek and gentle with these butchers!(275)
Thou art the ruins of the noblest man
That ever lived in the tide of times.
Woe to the hand that shed this costly blood!
Over thy wounds now do I prophesy
Which like dumb mouths do ope their ruby lips(280)
To beg the voice and utterance of my tongue,
A curse shall light upon the limbs of men;
Domestic fury and fierce civil strife
Shall cumber all the parts of Italy;
Blood and destruction shall be so in use,(285)
And dreadful objects so familiar,
That mothers shall but smile when they behold
Their infants quarter’d with the hands of war;
All pity choked with custom of fell deeds,
And Caesar’s spirit ranging for revenge,(290)
With Ate by his side come hot from hell,
Shall in these confines with a monarch’s voice
Cry “Havoc!” and let slip the dogs of war,
That this foul deed shall smell above the earth
With carrion men, groaning for burial.(295)”

But with all its destruction and horror, I still say if the choice is ONLY between dying on your knees, or dying on feet, I would chose the latter.

“Give me liberty or give me death.”

You and I see things differently.

The government has full, legitimate authority to enforce tax collection and it will make examples of those who break the law.

If 51% of the population receives money from the government, but does not pay money to the government, then 51% of the population may decide that your tax rate is 80%.

Would you work so that 80% of the money you earn can be given to those who do not work? Many would not. So, more people stay at home, receive government benefits and depend on the suckers who work. Slowly, we spiral into a third world country. Lack of food. Lack of clean water. Lack of access to medical supplies. Sewer system breakdown. Hey, there's no money for any of that stuff -- nobody works any more!

Now, according to your principles, at no point in that descent is it right for anyone to say "I refuse". And if any indivdual were to say "I refuse", it sounds like you would recognize the government right to come in and squash that person like a bug. It's taxes. Pay up. I'm from the government. Who are you to defy me?

Like I say, you and I see things differently.

I realize that a majority of American do not favor taking up arms in defense of liberty at this point - They still think elections will rollback the Red Tide. It won’t. The Communists (who call themselves “Progressives”) also control Academia, Media and Business. The only means of restoration of the republic is by force of arms, since many thousands of hardcore socialists can only be removed from public life by brute force.

Good post at #27.

The war against totalitarians/socialists should be waged on all levels including philosophical, political, social and financial before you have to get to physical. Defund totalitarians and their collectives. It's their economy right NOW. $top $pending to $tarve it. Then, ballot box in November 2010 and 2012. We are just now awakening from our philosophical slumber and getting organized (grassroots/diffuse).

Cash box, soap box, ballot box. Identify targets...the liars, the deceivers, the socialists. Vote them out. Defund, dismantle their collectives. Always be prepared with the ultimate backup plan...the cartidge box. One way or another, the smackdowns are coming.

He understands the magnitude but is delusional about the solutions.

“The only way that the US will again have an economy is by bringing back the offshored jobs. .... These jobs can be brought home where they belong by taxing corporations according to where value is added to their product.”

What is it with increased taxes being the salvation of all national woes?

Those jobs left for a reason. They left because the pressures of undue regulation and minimum wage laws. They will not be regained by increasing pressures elsewhere, they will find yet another undesirable solution which lacks such undue pressures - or they will be driven of business. Elsewhere he notes “...tax the rich. The rich have enough money. They will simply stop earning.” Likewise businesses: tax them enough and their “fat cat CEOs” will just cash out and let the business die, or will just move or split the company entirely out of federal jurisdiction.

He observes that this administration has tripled the deficit in two years.
He observes that the populace is up against an economic wall.
He then offers the solution of...increased taxes? WTF?

The last Civil War before Shakespeare was the War of the Roses, which he was obviously aware of, since he wrote his plays: Richard II; Henry IV, Part 1; Henry IV, Part 2; Henry V; Henry VI, Part 1; Henry VI, Part 2; Henry VI, Part 3; and Richard III about the war, from incidence to bloody conclusion. But it had ended a century before his birth, and no public friends of the House of York survived to his day to talk about the downside. Also, as Civil Wars go, it had been rather mild, with most injuries to professional soldiers and hardly any damage done to non-military structures. If he had survived another 30 years or so he would have seen the real thing, in the English Civil War of Cromwell vs. Charles I.

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