Is This The End of America?

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Helicopter Ben Bernanke’s Federal Reserve is dropping trillions of fresh paper dollars on the world economy, the President of the United States is cracking jokes on late night comedy shows, his energy minister is threatening a trade war over carbon emissions, his treasury secretary is dithering over a banking reform program amid rising concerns over his competence and a monumentally dysfunctional U.S. Congress is launching another public jihad against corporations and bankers.

As an aghast world — from China to Chicago and Chihuahua — watches, the circus-like U.S. political system seems to be declining into near chaos. Through it all, stock and financial markets are paralyzed. The more the policy regime does, the worse the outlook gets. The multi-ringed spectacle raises a disturbing question in many minds: Is this the end of America?

Probably not, if only because there are good reasons for optimism. The U.S. economy has pulled out of self-destructive political spirals in the past, spurred on by its business class and corporate leaders, the profit-making and market-creating people who rose above the political turmoil to once again lift the world out of financial crisis. It’s happened many times before, except for once, when it took 20 years to rise out of the Great Depression.

Past success, however, is no guarantee of future recovery, especially now when there are daily disasters and new indicators of political breakdown. All developments are not disasters in themselves. The AIG bonus firestorm is a diversion from real issues , but it puts the ghastly political classes who make U.S. law on display for what they are: ageing self-serving demagogues who have spent decades warping the U.S. political system for their own ends. We see the system up close, law-making that is riddled with slapdash, incompetence and gamesmanship.

One test of whether we are witnessing the end of America is how many more times Americans put up with congressional show trials of individual business people and their employees, slandering and vilifying them for their actions and motives. And for how long will they tolerate a President who berates business and corporations as dens of crime and malfeasance? If the majority of Americans come to accept the caricatures of business as true, then America is closer to the end of its life as a global leader, as a champion of markets and individualism.

But America is at risk in other ways, especially in the technical business of setting and executing policy. The presidency of Barack Obama has set out on a course that has no precedent in U.S. history. Franklin D. Roosevelt, whose New Deal transformed the U.S. economy during the Great Depression, pushed America off on a sharply different political and ideological course. The Obama administration is different in many ways, not least in its supreme self-confidence in its methods and objectives.

Reform of health care, environmental policy, education, energy, banking, regulation — every nook and cranny of the U.S. economy has been put on alert for major change. Expansion of government spending, plunging the U.S. into unprecedented deficits, is without parallel. In economic policy, through regulation and control of energy output, financial services and monetary expansion, the U.S. government has embarked on a fundamental reshaping of America. It is designed, in short, to bring on the end of America.

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Experts Warn Of Massive Dollar Collapse

Peter Schiff warns of imminent collapse of  the US dollar and dire days ahead for US.   Watch The Video

Bank of England policymaker Willem Buiter says Americans should prepare now.

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Americans must prepare themselves for a massive collapse in the dollar as investors around the world dump their US assets, a former Bank of England policymaker has warned.

The long-held assumption that US assets – particularly government bonds – are a safe haven will soon be overturned as investors lose their patience with the world’s biggest economy, according to Willem Buiter.

Professor Buiter, a former Monetary Policy Committee member who is now at the London School of Economics, said this increasing disenchantment would result in an exodus of foreign cash from the US.

The warning comes despite the dollar having strengthened significantly against other major currencies, including sterling and the euro, after hitting historic lows last year. It will reignite fears about the currency’s prospects, as well as sparking fears about the sustainability of President-Elect Barack Obama’s mooted plans for a Keynesian-style increase in public spending to pull the US out of recession.

Writing on his blog , Prof Buiter said: “There will, before long (my best guess is between two and five years from now) be a global dumping of US dollar assets, including US government assets. Old habits die hard. The US dollar and US Treasury bills and bonds are still viewed as a safe haven by many. But learning takes place.”

Source

US Rescue Averted Financial Collapse – Treasury

The question is, “averted for how long?”

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Massive rescue efforts by the US government and central bank in recent months helped avert a “financial collapse” and are working to stabilize the economy, a Treasury report said Wednesday.

The Treasury report to a congressional panel overseeing the 700-billion-dollar rescue plan passed in early October said the extraordinary actions probably averted deeper problems.

“Treasury, working with the Federal Reserve, the FDIC (Federal Deposit Insurance Corp.) and other regulators, has taken the necessary steps to prevent a financial collapse,” the report said.

“The most important evidence that our strategy is working is that Treasury’s actions, in combination with other actions, stemmed a series of financial institution failures. The financial system is fundamentally more stable than it was when Congress passed the legislation.”

The report said there are signs of an easing of the credit crisis since the legislation was enacted, including a lowering of the key LIBOR, or London interbank rate used for loans between banks.

But the report said a broader economic recovery will take time, but that the program including vast capital injections into commercial banks will help.

“It is important to note that nearly half the money allocated to the Capital Purchase Program has yet to be received by the banks,” the report said.

“Clearly this capital needs to get into the system before it can have the desired effect. In addition, we are still at a point of low confidence — both due to the financial crisis and the economic downturn. As long as confidence remains low, banks will remain cautious about extending credit, and consumers and businesses will remain cautious about taking on new loans.”

On December 10, Congress published an extremely critical report of the Treasury Department’s handling of the financial industry bailout to stabilize the US economy.

The 30-page report by the Congressional Oversight Panel — a commission specially created to monitor the bailout — raises several areas of concern over the government’s execution of the Troubled Asset Relief Program (TARP) that Congress passed on October 3.

The commission called for a clear line of action from the Treasury, after accusing the department of changing its action plan several times.

via US rescue averted ‘financial collapse’: Treasury.