SovereignLife Freedom Blog

In the following article, Paul Craig Roberts – a previous Assistant Secretary for the US Treasury – outlines the dire state of the EU and US economies.

Saving The Rich, Losing The Economy

His essay is descriptive, not prescriptive, and raises a lot of important issues.

One of his contentions is that the US has been “offshoring” its jobs for some time now – with US companies setting up offshore (in China and India for example) in order to benefit from much lower labour costs.

I can see this is indeed what has happened – and also see this is an inevitable consequence of economic globalism.

After all, if you run a business and are able to set up shop wherever you want, then it’s entirely logical and rational to maximise one’s profits by seeking lower costs. And if that means manufacturing overseas, then so be it.

The MacBook Air I’m typing this on is brought to market by Apple Computer, a hugely successful US company that sells its products worldwide. But I also note it is made in China.

However, from recent news, I also note that Apple Computer is to build a huge “campus” in Los Angeles, and from memory I believe it is intended to house around 2,000 employees.

Obviously these people are not manufacturing computers as such, rather designing them – as well as software – and doing all the “brain” work behind Apple’s success. But the fact remains, there are plenty jobs on offer there – if you have here necessary skills.

So while I can see how this “offshoreing” process has caused  manual job losses in the USA, I cannot see how such would be stopped in any free society. And Mr Roberts doesn’t say so either.

Another fact to consider is that the jobs being lost are usually of the sort that locals don’t want to do. I know that FoxConn – one of Apple’s contractors in China – employs many people to do manufacturing and assembly work, but the question remains as to how many such jobs Americans would be willing to take up.

I see this development as one of the transition problems we are facing as nation states deal with the reality of an increasingly interdependent world. After all, who is to say that the life of a Chinese worker is any less valuable than that of a US worker – except a US politician out to get votes?

Either the current economic woes are the death throes of the old order, or the birth pangs of a new order – or perhaps both.

Right now the mainstream bigwigs are all talking about the necessity for “action” to stave off the impending economic train crash that’s headed our way. As usual, their solutions are to create more debt in order to avoid debt implosion.

Austerity seems logical, until you realise that the more you cut back the economy the more the country is unable to pay the interest on its debts or raise more debt. As the economy shrinks, the state takes in less taxes, more people are out of work, and consumption is reduced , businesses stop investing – all of which contracts an economy.

So if austerity by itself may not be the answer, and money-printing is a fool’s game, what’s to be done?

Bill Bonner has a simple yet profound plan – to wipe out the debt by defaulting on it, and start over – out outlined in his article: Give Collapse a Chance

Lew Rockwell has written a punchy essay on the US debt downgrade – and notes it was not downgraded nearly enough.

Day of Reckoning

China’s official response to the US credit rating (read debt rating) downgrade was surprisingly harsh, condemning the US of financial irresponsibility. The following article by Stephen S Roach casts some light on the Chinese thinking:

Read China’s Lips

What would you say to your best friend, if he or she insisted on solving their burgeoning credit card debt problem by getting yet another credit card? Surely you would warn them of the consequences of their actions and that paying off “old” debt with “new” debt can hardly be a long-term solution.

Yes, we all know that. But apparently our politicians don’t.

David Galland strips away the blather of media pundits and career politicians and reveals the Five Things You Need to Know About The Economy

Justin Raimondo looks a the “debt ceiling” issue and sees calls for it to be raised as simply continuance of the warfare state – as the debt could be seriously reduced by bringing US troops home and for the US to cease being the “policeman” of the world.

The Debt Ceiling and the Warfare State

Just as George Orwell predicted in his timeless novel 1984, words can be turned upside down and used to create illusions and falsehoods.

One example that quickly comes to mind is the word “inflation”. When you read media reports on rising inflation they are always talking about prices rising. This is further reinforced by reference to the CPI, the consumer price index, which measures rising prices.

But rising prices are a symptom of inflation, not a cause. And the very word “inflation” is misleading to start with. In this way the truth of the situation is being hidden by the use of a misleading word.

So what’s the best word that describes what is really going on when prices rise? I would suggest currency debasement. For that’s what inflation really is – it’s the progressive debasement (falling value) of currency. And because the currency is losing value, the cost of things (prices) is increasing.

If we were to use the word “currency debasement” to replace “inflation” then the root cause would be plain for everyone to see. Just ask the question, “Who is responsible for debasing the currency?” The state of course, or its proxy the central bank.

Just as seeing rising prices as the problem, without looking at the root cause, so looking at rising prices gives a distorted view of the real value of things.

So if we can’t trust prices when quoted in currency, how should we quote them?

In gold.

If you look at the prices of everything in grams of gold, rather than number of dollars, then you get an entirely different picture as to the real price of things – including the real value of competing currencies, the real value of the share market, and the real value of commodities.

To understand how this works, and see some startling examples, have a read of this fascinating article by Charles Vollum:

Its Weight in Gold: The Real Prices of Things

Jeff Clark of Big Gold asks a world-class panel of economists, authors, and investment advisors – including such people as Jim Rogers, Bill Bonner and Peter Schiff – what they expect for the future, in this fascinating article:

Investment Legends: “Dollar Collapse Inevitable”

Doug Casey looks at the real reasons for the last “Great Depression” and what brought America out of it – and rather than seeing history “repeating” itself, he sees the current developing economic situation as “rhyming” with the past.

Escaping The Great Depression – And Extending The Greater Depression

It’s obvious that individuals can become insolvent. So can companies. We know that very large companies and banks can become insolvent, unless bailed out by a larger financial entity. And we now know that even nations can become insolvent – if they live beyond their means and bond investors pull the plug.

But what happens to the lenders of last resort – the central banks – can they become insolvent?

Terry Coxon takes a close look at this distinct possibility in his essay: The Long Swim – How The Fed Could Become Insolvent