The United States comprises approximately 4.5% of the world’s population and consumes 25% of the world resources. According to the US department of Commerce, the 2008 deficit on international trade in goods and services was $677.1 billion. This is down from $700.3 billion in 2007 but still 4.7 percent of GDP. In order to cover the deficit of past years US has borrowed $ 11.338 Trillion from international sources. According to IMF report US Per Capita income for 2008 was estimated to be $ 47,000 compared to Congo with $328.
In an ideal world, with 4.5% of world’s population US should be consuming same amount or at the most 5% of world resources. Higher consumption of world’s resources was justified because of higher GDP and Per Capita income. In fact it was not the real wealth which pushed the US Per Capita income and GDP. It was result of manipulation by creating money which does not involve production of goods or provision of services and still adds up the GDP and Per Capita figures. The very basis of a capitalist economy!
For decades US has been cheating the world with shadow economic system in order to keep consuming more then it produces. The World was made to believe that Capitalism and so called free market economy is the engine behind prosperity. US did produced good, provided services and traded domestically and internationally. But the wealth generated through these activities is not that huge to bring its GDP that high. Based on real businesses their GDP might not sustain the repayment of $11.39 Trillion debts alone.
The US trade deficit being calculated as 4.7 percent of GDP might swell to 50% or even higher, in case calculated on basis of real business. What has sustained this manipulation is genius gambling on their indices. The Super rich, who run the scams like stock markets, hedge funds, currency exchanges and commodity markets managed to inflate the size of GDP and added in Per Capita. They are truly rich; they own private jets and islands. They earned huge profits and also earned big for their depositors to spend. This money is created without producing any goods or providing services. The money made through these activates is real and available to spend, thus adding to GDP.
Money earned from stock market has nothing to do with the real business of the corporation. Still one can make huge profits trading stocks. In fact 300 out of top 500 rich in US in 2007 were ‘traders’. The dividend paid to investors is very small, if the money is invested in real business. If a stock is trading at $ 1 a 10% dividend would be 10 cents. But if stock prices rises due to higher demand and goes to $10, the investor earns huge profits of 900%. Very easy to manipulate if you have money to do so – system provides the opportunity. The money earned from that activity does not involve any economic activity; it is simply a result of artificially created demand or supply or gambling. A stock selling 40 times the price of company’s projected profit is still thought to be normal. The size of markets is several times higher than the real value of the companies listed on stock market.
The fluctuation in stock price has nothing to do with real business being done by corporation. The markets are another type of casinos’. This gambling continuously ‘creates’ money and is available to spend. The money created from these ‘non business’ tactics keeps GDP and per capita figures higher. Hedge Funds are the major players manipulating markets. Around 8,000 Hedge Funds manage a total of $620 TRILLION. With such huge funds in their hands they can manipulate the prices and earn huge profits, thus returning their investors even up to 100% profits. The tax havens exempt them from submitting the accounts of their shady ‘businesses’. The whole system is basically crafted for rich to become super rich on expense of starving weak and poor around the world.
Banking system allows Hedge Funds to borrow 30 times more than the money their investors have deposited with them. Even after paying bank interests, the earnings from 30 times more than the real investor money earns them huge profits. Their investors would not be able to earn with their own money. Banks are allowed to lend more than they actually posses. Sometimes it is ten times more than their deposits money. This enables them to earn much more money than their investor’s deposits. The extra money earned is not real as it is ‘created’ by Banks and hedge funds. As the real wealth would involve the goods and services and economic activity which makes wealth circulate in society like blood circulates in body.
Similarly, banks would lend 30 times for currency trading, another non-business contributor in to GDP of US. This involves trading ‘non-existent’ money. The huge lending enables traders to manipulate price and create huge returns. In a real business the profit s would not be that great. The currency trade is estimated to be 30 times of world trade, so are the profits and manipulation. Then there are pyramid schemes like ENRON and Bernard Madoff, who was only exposed after $ 50 Billion were lost. They pay returns to investors’ money, actually without any business activity. However these ‘profits’ also add in to GDP.
Hedge Funds and Currency Traders can borrow 30 times more than investor deposits they earn huge profits. But so are the losses. The present crisis began when Hedge Funds were out of money as they lost many time more than their assets but were continuously paying their investors with huge returns to get more deposits and borrow 30 times more from banks. The extra losses were from the money borrowed from Banks. The Banks had lent several times more money for gambling than their depositor’s money. This pushed Banks in to Bankruptcy. The insurance companies which used to provide insurance cover to these banks on various instruments also became the victims as the losses exceed their total assets.
This entire cycle of ‘creating money’ out of thin air and adding to Per Capita income and GDP has created a ‘fake demand’ for goods and services. If the profits from these ‘artificial’ money schemes (several times the real GDP) are deducted from GDP figures, per capita income would be considerably lower. Since these profits ‘created’ out of no real activity are disappearing, there is less money available to be spent. This is pushing the legitimate production base to layoffs, which are further adding in to less demand. The entire infrastructure built on ‘plastic money’ through credit cards, which itself is not the money available with banks also fueled the demand. Since it is shrinking, it will further push down the ‘real-business’ as demand shrinks.
In ‘real-business’ world US economy might less than half the stated figures. The Deficit would be more than half of GDP. Since the money ‘creating’ apparatus has come to halt, there cannot be enough lending to cover such huge deficit while US keeps on consuming 1/4th of world resources. With the real GDP, the size of economy might not support debt servicing. Ultimately the manipulated GDP and free market economy is to collapse as it has no real basis. The rescue package might not helpful because of the size of disaster. Change in system might the only alternate, if proposed GM takeover by Workers Union and Chinese corporate succeeds, it might help people to think for a People’s Republic of United States
Comments
7 responses to “People’s Republic of United States”
While parts of what you say are certainly true, and the US economic system does have major flaws, other parts of your arguments are flawed.
Particularly, you seem to have issue with what you consider to be 'unreal' wealth. This is essentially credit. That is, the economy is based on credit. And the financial crisis is a credit crisis. But the thing is, this isn't at all limited to the US. The entire world's economy revolves around credit. Including Pakistan's. Credit based business has been a part of the world's financial system since before there was a US.
And it isn't 'no real activity'. You can't really disregard the role of investors. And it's exactly those investors which got hurt the most by the current credit crisis. Of course, the bailout was stupid, which hurt the US public more than anyone, but that isn't part of what I would call the financial system.
As to the US debts, it's not like they have to pay them back you know. If the US refuses to pay back it's debts, the rest of the world can't really do much of anything, can it? 🙂
You have to admit, they try to maximize benefits to their citizens. And if the rest of the world doesn't like it, from a completely rationalist point of view, why should they care?
Ah, and the free market economy works better than any other type of economy, and it isn't limited to the US. Go read a book on basic finance, or discuss with a finance professor at the nearest university. It isn't rocket science 🙂
Good article and analysis of US-market which in my words is malignant for our health.many not bother to touch that topic. good to see sum1 did touch and almost said right.
when the stock market is plummeting, everyone is panicking. Why? Because when Money is God, an economic downturn becomes a spiritual crisis.
"I believe that banking institutions are more dangerous to our liberties than standing armies." —Thomas Jefferson (3rd US President)
Banking Cartel is literally responsible of mankind woes.USA was, is, will remain an economic and financial colony of UK
Between 1865 and 1913, London bankers led by the Rothschilds used agents such as J.P. Morgan and J.D. Rockefeller to gain control of American industry and organize it into cartels.
In 17th Century, the Jewish-moneylenders and the British-aristocracy made a pact. If the king/queen would make paper currency a liability of the state, the moneylenders would print as much as s/he likes! Thus the Banks of England, France and the Reichsbank came into being but they were all private corporations and remain so today.
According to this nefarious pact, the moneylenders got to charge interest on assets(credit) they created out of thin air. The aristocracy all took shares in the central banks plus they got to finance a burgeoning government and to wage costly wars. WW1-2-3 all wars waged by them.
http://www.threeworldwars.com/
Once i say (credit) i mean our taxes which goes into banks and later goes into our govt hands and banks charge interest from our govts. do you understand? This is a colossal scam of modern history which is the heart what plagues humanity.
Naturally if you can create money out of thin air, your first instinct is to buy tangible assets with it. There is a powerful impulse to use debt to control nations and take over their real assets. This is the essence of the so-called Third World Debt crisis.
The "War on Terror" is part of the banking cabal's plan to consolidate its grip on humanity in a friendly or not so friendly fascist "New World Order." They want to secure their political, economic and social grip on the obstreperous Muslim world, as well as build up a security apparatus in case the docile populations of the West become restive. This is the essence of worldwide recession and depression…
http://www.apfn.org/apfn/reserve.htm
USA is bankrupt and living on borrowed money from China and Japan. This is being said by Mr.Margolis who is trusted insider on American affairs whether be it war or economy.
I do like him despite he got jewish blood in his veins but he's half Jewish and half Muslim as his mother was muslim from Albania and the only US woman who covered Israel-Palestine war in 1950. Mr.Margolis is a courageous journalist like his mother and he spent 10 years in Afpk during Soviet war.
According to his words about Talibans that Talibs were pretty good rulers and they vanished opium production and there was no havoc during their reined, but since USA invaded it in 2001 opium production is record high around 90% and havoc is like Hell.
Pakistan is most effective from Afghan war and it has now turned Afpk war.
Pakistan leaders are wittingly or unwittingly are part of this war on terror who are fighting in order to secure their seats and to gain profit from carnage.$1.2 Billion annually is a meager sum. This sum is for Military.pk not for public and more covert sum goes directly into pols.pk foreign banks nothing for normal public except suffering.
Public.pk is immature religiously, politically, and socially. They are naive and malleable who accept their leaders in turn their leaders accept them and will give them Roti, Kaapra aur Makaan.
These 3 basic things for living are most expensive than ever while fancy items like cell-fones and cars are so cheap. What a sick joke this ruling class of the world.
The world's major intelligence services serve the banking/cabalistic elite. I suspect the Mossad and CIA are responsible for the unprecedented attack on the US Sept 11. The Mossad may be behind the terrorist attack in Spain known as 3/11, exactly 911 days after Sept. 11.
I also suspect that Mossad may be behind the Mumbai attacks because they funnel both sides of the conflict so the war will go on and they keep earn profit from carnage.
The cabal has a modus operandi from which it never deviates. It sponsors both sides of every issue or war in order to grind the population down and control the outcome.
http://www.how911wasdone.blogspot.com/
Well this article certainly throws light on some dark corners of the origin from where all this recession nightmare started.
@waqas
yes credit was certainly age old but that was not consumer credit or credit for consumption…
what US has become is credit for consumption economy so demand that is created due to that becomes artificial and in the longer run result in lesser demand as consumer would use credit available.
what we are witnessing is credit default and it is taking over whole economy.
"Economic crises have been produced by us for the goyim by no other means than the withdrawal of money from circulation."
— Protocols of Zion, 20
For hundreds of years, mankind has been force-fed a diet of materialism, wars, depression, division, depravity and dysfunction by central bankers like the Rothschilds. They want to translate their monopoly over our government's [credit] into a total monopoly over power, culture and religion, i.e. the New World Order.
The Protocols of Zion, which is a blueprint of NWO one of the explicit document many not aware of it
http://www.biblebelievers.org.au/przion1.htm#Tabl…
It has a clear motive of wars, depression, divisions, depravity, schism in religion, mind-control, make-believe, …..credit crunch….
In the Protocols, the author, who I suspect was the Sabbatean Lionel Rothschild, writes that their goal is: "To wear everyone out by dissension, animosities, feuds, famine, inoculation of diseases, want, until the "goyim" sees no other way of escape except by appeal to our money[IMF] and our power." (Protocol 10) [And] "… enable us to absorb without disturbance all the governmental forces of the world and thus form a super-government." (Protocol 5)
Could this be behind the credit crunch also?
We are familiar with the specter of the IMF forcing third world nations to restructure their economies. like Pakistan recently agreed to raise taxes and cut subsidies in return for an IMF loan. How long before the IMF makes similar demands on the US and Europe? (If the government controlled its own credit, it could create money without repaying it, or interest.) Which i explain above.
Economist Michael Hudson reports that 1% of the US population owns 70% of its wealth, a huge increase over earlier periods. This plan aims to increase it. To turn the US and world economies into banana republics. To make its workers de facto serfs. To crush competition and empower corporate giants. Mostly ones in America."
http://www.rense.com/general84/glob.htm
The source of this conspiracy against mankind is the Cabala — "Jewish mysticism" — which dates back to Egyptian and Babylonian mystery religions. The Zionists/Neocons/Bankers are Cabalists, also known as Zoharists or the "Illuminated" or "Illuminati" from their adherence to the Zohar (part of the Cabala) or "book of light." which is Talmud.
Cabalism is true Illuminism. It teaches that evil is transformed into righteousness, and that "Lucifer is Lord. Satan is the true and only god. That is the essential doctrine of Cabalism [and Freemasonry.]"
Cabalism is a satanic cult and the central bankers belong to it. US leading politicians, including George Bush, Barack Obama, and John Kerry also belong.
Mankind is victim of a hoax of unspeakable proportions. All wars are contrived and orchestrated. Our politics, culture and values are similarly contrived and controlled. We are entering in a Doom Age unless we expose the Satanists who are pulling the strings.
It's retards like you who not only are themselves ignorant about the workings of the financial system but also try to feed this ignorance to the lay man.
To understand the benefits of increase in stock market valuations, read the article below by Greenspan.
http://www.ft.com/cms/s/0/e1fbc4e6-6194-11de-9e03…
As for the trade deficits, you need to understand that Asian countries particularly China and Japan rely on exports for most of their economic growth. These countries thus end up with excess dollar reserves. Its not magic and neither a deceiving trick. If you don't like to hold your reserves in dollars that's your choice. But first find a buyer for your exports. The US is the number one destination for exports for countries around the world.
For your information the total assets under management of hedge funds is $2 trillion. Even if they were leveraged 30:1 that would make their power close to $60 trillion. Lately those leverage ratios have come down significantly.
Its people like you who do not understand the first thing about economics, are products of Third Tier Pakistani Universities, that try to tell the world how stupid everyone else it. It's actually you who is stupid.
Shame on the admin of this blog for allowing such a post.