‘US financial crisis deeper than debt ceiling’
Thu Oct 3, 2013 10:2AM
The real crisis is the gap, the wide gap that has appeared between expenditures and revenues and that cannot be closed under present circumstances.”Press TV has conducted an interview with Paul Craig Roberts, a former assistant secretary of the US Treasury from Atlanta, to share his opinions on the shutdown of the US government following the worsening economic situation in the country. Below you are presented with a rough transcription of the interview. Press TV: First of allm, tell us what does this government shutdown in essence mean? Kind of a guide if you can be for us, for non-Americans, as to how many people are affected, what sections of the government, what departments, and if it is a partial shutdown how does that affect the US economy? Roberts: Well, let me say, let me go to the most general level. What this shows is that the superpower, the exceptional country, the indispensable country is not even capable of governing itself and yet it claims to know what is best for Iran, for Iraq, for Afghanistan, for Somalia, for Libya, for Russia, for china, for the whole world and yet it cannot govern itself. Now this so-called debt ceiling crisis, that is not the real crisis, it would be resolved. In fact, if it is not, Obama under all of the directives that have concentrated power in the executive, doing the war on terror, he can simply declare a national emergency and raise the debt ceiling on his own account. Congress knows that and they will not want the executive to exercise that type of power, so I do not think that this would be long-lived.
But the real crisis is not the debt ceiling, the real crisis is that for 20 years American jobs have been moved offshore, which in effect means that the GDP (Gross Domestic Product) has moved offshore, tax pays have moved offshore; therefore, the revenue flow is impacted and doing much of the same ..., Washington has been at war for 12 years and these wars are extremely expensive and distinguished experts have said that the cost of these wars both out of pocket and already incurred future obligations, are in the nationhood of six trillion dollars.So, the real crisis is the gap, the wide gap that has appeared between expenditures and revenues and that cannot be closed under present circumstances. So, all solving the debt ceiling crisis, all that does is let them issue more debt in order to continue to bridge the deficit. Now..., a part of this is that to bridge that deficit, the Federal Reserve is printing one thousand billion dollars a year..., to purchase bonds to finance its deficit and the printing of these dollars is impacting the world’s confidence in the dollar as the reserve currency. So, if you were to see a movement away from the dollar, the exchange rate would fall and this would then import very high inflation into the American economy, the Federal Reserve loses control of the interest rates and the whole house of cards would come down. Now that is the real crisis. Press TV: Paul Craig Roberts, can you explain this a little bit for us? Do you agree with some of the viewpoint there made by our viewers on our Facebook page? Roberts: Well, this is a very popular account in conservative circles. What happened with the Federal Reserve, the reason it was said to be owned by private banks, was that there was a strong opposition to having a national bank. It had been always in the United States; so, they disguised this by saying: Well, it is truly just a big bank owned by the banks and this made it more acceptable to the opponents. I do not think that these owners, as they are called, actually control the policy and if they did, it would not be permitted, there is no reason at all for the United States government to ... a few banks. So, it is true that the Treasury lost its ability to turn up money directly, control the money supply and just transfer it to the Federal Reserve and so now the treasury prints bonds and then use their bonds to Federal Reserve for money, but the interest on these bonds are returned to the Treasury; they do not go to the private owners and the Federal Reserve pays its own expenses out of the interest income, yet, it gets from its holding of Treasury bonds but it returns the rest to the Treasury. So, it is not the system that it was made out to be and I think that the reason that it is in this form, to repeat myself, is that was a form they had to put in to get around the opposition to having a national bank. Press TV: Paul Craig Roberts I like to expand more with you on what has been called ... , many adjectives but “a political bickering” and some of the headlines that have been noted here on some of the publications there in the US, because as an outsider, you know, many people from around the world are really surprised and some shocked at how this could be going on in the United States, but one of the headline that reads “For House Republicans, confrontation is safer that compromise”, another one: “For most Republicans the only greater parallel than shutting down the federal government would have been fighting to keep it open.” I mean is this how deep is this? And then what about the American people who are suffering because of this? Roberts: Well, the American people are suffering for a lot of reasons, and it is true that the right-wing Republicans are being silly and I think that they will end up discrediting themselves. I do not think that this shutdown will last long. It certainly will not be permitted to endanger debt repayment. In fact, the Federal Reserve can always repay bonds simply by printing the money; there is no limit on the ability of the Federal Reserve to print money. You have to keep in mind that during the financial crisis, the Federal Reserve extended over 16 trillion dollars in loans to the US and European banks and they did this on their own authority, so I assume that they can do this as well for the Treasury. I do not really think that the debt ceiling is important because, as I have already said, Obama has the power to declare a national emergency and raise it by himself and so people do not really understand that and so if this sort of impacts were to last too long and start causing the kinds of problems that people talk about, I think that the executive branch would simply act independently. So, if they can throw somebody in prison for the rest of their life without due process of law, without evidence, if they can murder American citizens under the authority of the executive branch without due process of law, they can certainly set aside whatever the debt ceiling law is. So, I am not in any way worried about that and I think that my main point was missed. The main point is that the real crisis is not the fact that the debt ceiling has been delayed from being raised, it is the fact that there is a huge imbalance now between the expenditures and revenues. When you offshore a good segment of your economy, you have really hurt yourself. You have deprived yourself of revenues in the long run and when you build in the costs of 12 years of war, you have really hurt the expenditure side. So, the real crisis is that the gap is so wide, there is really nothing they can do ..., they would have to be able to bring the jobs home, they would have to be able to get rid of these ... costs and there are powerful vested interests defending both things. So, that is the real crisis, it is not the debt ceiling that is the crisis. Press TV: Paul Craig Roberts, in less than 30 seconds give us your reaction to what Sean O’Grady (other guest of the show) was saying there. Roberts: Yes, jobs offshoring has nothing whatsoever to do with trade. It is not trade, it is when the American corporation locates the production for its domestic markets offshore and uses foreign labor to produce the goods it sells in the United States. So, it is a substitution of foreign labor for US labor; so, it affects the employment, income, tax-based GDP in the United States. It has nothing whatsoever to do with free trade, it has no relation to trade. Free trade is based on the comparative advantage. Offshoring is based on the pursuit of absolute advantage, which is an antithesis of free trade. It is amazing that people do not know this. They obviously mouth ‘free trade,’ but they do not know what it is. Anyhow, to repeat myself, jobs offshoring is not trade, it is the movement of the production for your home market to a foreign country. MY/NN