'Worse problems to come after austerity'
Fri May 27, 2011 8:17AM
Interview with Paul Craig Roberts, former assistant secretary of the US Treasury, Atlanta
The ramifications of the global financial crisis caused by bankers' greed and government corruption have led to massive political instability across Europe.
Press TV has interviewed Paul Craig Roberts, the former assistant secretary of the US Treasury, who surmises that the world is not prepared for another financial crisis, which has already begun with the emerging political instability across Europe. Following is a transcript of the interview.
Press TV: The Greek crisis and Euro zone crisis - if the strategy that's been adopted by now is not working - there is of course no prediction been made yet if there's going to be an alternative strategy, a plan B - What will happen if Greece defaults on its debt, would it take Portugal, Ireland and even Spain down with it? And how will this affect the Euro zone or the world economy?
Roberts: Well, I think the problem is much more serious because it looks as if the European peoples in Greece and Spain are not going to accept this solution that was imposed. So what has happened is there has been created in the European nations a massive political instability. The sort of protests that have been seen in Bahrain, Egypt and Tunisia we now see in Greece and Spain and they are likely to reappear in Ireland and the UK.
Whenever there is a situation where the government makes the poor pay for the mistakes of the rich - and really all of these mistakes come back to Wall Street - the unregulated greed, which produced so many fraudulent instruments that brought on this crisis. Whenever the poor are forced to pay for the mistakes of the rich you do implicate political instability and I think that is what's really new.
Press TV: Regarding the US economy, according to a 2007 graph of financial wealth distribution, the top 1% controlled more than 42% of the financial wealth in the US. If the data is broken down further we find that 93% of all financial wealth is controlled by the top 10% of the country - that's according to our graph of 2007. If we take Europe we could find a similar pattern there.
Do you think the existing economic and political systems and G8 Summit can fix the problem?
Roberts: No, I don't think the problem can be fixed. The US is suffering greatly as a result of globalism because so many American firms moved their production for American markets off shore to countries where labor was cheaper causing their profits to rise dramatically.
When the American work force loses its income; its jobs, and the consequence is greater profits for the corporate CEOs, Wall Street and shareholders, you get a much worse income distribution and that process has now been established for almost two decades.
I see no awareness in Washington that this is even a problem.
So I don't believe the problem will be fixed and it's putting tremendous pressure on the US dollar as a reserve currency. That of course is the basis of the international monetary system the dollar being the reserve currency and is also the basis for the power of the US. So I think we will have a crisis there with the dollar for which there is no preparation.
You see, the budget deficit is now so large in the US that it can only be financed by printing money. The Federal Reserve calls it 'quantitative easing'; they say they're going to stop next month; but they don't explain 'how' if they stop printing money i.e. buying bonds; monetizing the Treasury's debt - how that debt can be financed.
So these problems I think are accumulating. They will be worse problems that the ones so well discussed on this program just now by the other guests; I agree with their analysis, but I think we're getting on top of that unresolved problem.
Worse problems: one I mentioned the political instability is growing in Europe as a result of imposing the cost on the average person; and the problem of the American dollar and the monetization of the Federal deficit - this will also be a massive crisis. So I see nothing but crises mounting.
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