The US Faces Ignored Challenges

August 1, 2023 | Categories: Articles & Columns | Tags: |  Print This Article

The US Faces Ignored Challenges

Paul Craig Roberts

For the longest time, Bureau of Economic Analysis jobs reports show that industrial and manufacturing jobs–jobs that have high value added and produce good incomes–are declining in the United States. For some time US corporate profits have been based on sending Americans’ jobs to Asia where labor  costs are lower.  The stock market boom was a product of low interest rates, which meant Federal Reserve liquidity, and reduced labor costs from offshoring.  It was not a sign of a vibrant US economy.

Today and for a couple of decades the US exists as a market for foreign made or offshored goods of US corporations.  Americans have been separated from the income associated with the production of the products that they consume.  This is the avenue to Third World Existence.

US corporations, always short-term in their outlook because of quarterly performance bonuses, have destroyed America’s economic future. 

For years I reported the payroll jobs reports, pointing out that there were never any jobs gains of noticeable magnitude in industrial and manufacturing jobs where wages are good.  Year after year US job gains, if they were real, occurred in retail sales, social assistance, waitresses and bar tenders, and government where high value added is not present.

The neoliberal economists, termed correctly “junk economists” by Michael Hudson, could not be bothered to notice the ongoing destruction of the US economy.  Instead the bought-and-paid-for-economists promised that there would be higher paying jobs for US workers who lost their livelihood by the movement of their manufacturing jobs–called “dirty fingernail jobs by neoliberal economists–to Asia.

As I pointed out repeatedly in my columns and in my book, The Failure of Laissez Capitalism, the promised better jobs never showed up.  America’s neoliberal economists simply lied through their teeth to the American work force and left them struggling for existence. 

The next step in the economic disaster that is becoming the United States is the US dollar.  Serving as the reserve currency since World War II, the dollar as reserves for foreign central banks has meant that US trade and budget deficits are easily financed by foreign central banks’ holdings of US Treasury debt. Foreign central banks kept their reserves not in gold but in liquid US Treasury bonds.  This removed all financing problems from the US government, and the US never had to be concerned about its growing trade (due to offshored manufacturing and industry) and budget deficits.  In effect foreign central banks financed Washington’s wars as well as its deficits.

Washington, in an act of unbelievable stupidity, is driving foreign central banks away from keeping their reserves in US Treasury bonds by weaponizing the reserve currency. Washington destroyed its hold on power with economic sanctions, by seizing Russia’s dollar central bank reserves, and by blocking international clearance of payments by sanctioned countries.

The result is that a growing number of countries are ceasing to use the US dollar for their international payments, instead using  their own currencies or those of their trading partners.  Russia and China are also keeping their reserves in gold,

So, what has happened is that the demand for US dollars for international payments is declining, but the supply of US dollars from growing trade and budget deficits has not.  The implication is a falling exchange value of the dollar as supply exceeds demand.

As a result of offshoring its manufacturing, the US is import dependent, so a decline in the dollar’s exchange value means a rise in price of imported goods and services ( for example, Apple’s imports of computers and iPhones made in China come in as imports when they are marketed to US customers). Apple’s imports worsen the US trade imbalance. 

A rise in inflation from dollar devaluation means a reduced standard of living for US residents.

What the Biden Regime has managed to accomplish is the reduction of US power. The incompetent regime is destroying the world currency role of the US dollar, thus threatening the US government with the inability to finance its trade and budget deficits. 

The dollar’s decline might be slow.  The Russian sanctions have wrecked European economies, and Washington and its allies can organize attacks on currencies that are traded in foreign exchange markets.  Nevertheless, the dollar’s use in settling international payments has already declined substantially.

Instead of paying attention to the eroding basis of US power,  the ideological Democrats are focused on delegitimizing white Americans and constructing on this delegitimization a  one-party rule of “equity,” which means a revolution against a society based on merit.

I do not see any organized group defending the founding document of the United States from repudiation by the Democrat Party.

My conclusion is that the United States is on a road to economic decline as it is being unmoored  from its founding document and is undergoing a revolution.