Paul Craig Roberts,
Keynote Address to the Annual Conference of the Financial West Group, New Orleans,
May 7, 2015

The defining events of our time are the collapse of the Soviet Union, 9/11, jobs offshoring, and financial deregulation. In these events we find the basis of our foreign policy problems and our economic problems.

The United States has always had a good opinion of itself, but with the Soviet collapse self-satisfaction reached new heights. We became the exceptional people, the indispensable people, the country chosen by history to exercise hegemony over the world. This neoconservative doctrine releases the US government from constraints of international law and allows Washington to use coercion against sovereign states in order to remake the world in its own image.

To protect Washington’s unique Uni-power status that resulted from the Soviet collapse, Paul Wolfowitz in 1992 penned what is known as the Wolfowitz Doctrine. This doctrine is the basis for Washington’s foreign policy. The doctrine states:

“Our first objective is to prevent the re-emergence of a new rival, either on the territory of the former Soviet Union or elsewhere, that poses a threat on the order of that posed formerly by the Soviet Union. This is a dominant consideration underlying the new regional defense strategy and requires that we endeavor to prevent any hostile power from dominating a region whose resources would, under consolidated control, be sufficient to generate global power.”

In March of this year the Council on Foreign Relations extended this doctrine to China.

Washington is now committed to blocking the rise of two large nuclear-armed countries. This commitment is the reason for the crisis that Washington has created in Ukraine and for its use as anti-Russian propaganda. China is now confronted with the Pivot to Asia and the construction of new US naval and air bases to ensure Washington’s control of the South China Sea, now defined as an area of American National Interests.

9/11 served to launch the neoconservatives’ war for hegemony in the Middle East. 9/11 also served to launch the domestic police state. While civil liberties have shriveled at home, the US has been at war for almost the entirety of the 21st century, wars that have cost us, according to Joseph Stiglitz and Linda Bilmes, at least $6 trillion dollars. These wars have gone very badly. They have destabilized governments in an important energy producing area. And the wars have vastly multiplied the “terrorists,” the quelling of which was the official reason for the wars.

Just as the Soviet collapse unleashed US hegemony, it gave rise to jobs offshoring. The Soviet collapse convinced China and India to open their massive underutilized labor markets to US capital. US corporations, with any reluctant ones pushed by large retailers and Wall Street’s threat of financing takeovers, moved manufacturing, industrial, and tradable professional service jobs, such as software engineering, abroad.

This decimated the American middle class and removed ladders of upward mobility. US GDP and tax base moved with the jobs to China and India. US real median family incomes ceased to grow and declined. Without income growth to drive the economy, Alan Greenspan resorted to an expansion of consumer debt, which has run its course. Currently there is nothing to drive the economy.

When the goods and services produced by offshored jobs are brought to the US to be sold, they enter as imports, thus worsening the trade balance. Foreigners use their trade surpluses to acquire US bonds, equities, companies, and real estate. Consequently, interests, dividends, capital gains, and rents are redirected from Americans to foreigners. This worsens the current account deficit.

In order to protect the dollar’s exchange value in the face of large current account deficits and money creation in support of the balance sheets of “banks too big to fail,” Washington has the Japanese and European central banks printing money hand over fist. The printing of yen and euros offsets the printing of dollars and thus protects the dollar’s exchange value.

The Glass-Steagall Act that separated commercial and investment banking had been somewhat eroded prior to the total repeal during the second term of the Clinton regime. This repeal, together with the failure to regulate over the counter derivatives, the removal of position limits on speculators, and the enormous financial concentration that resulted from the dead letter status of anti-trust laws, produced not free market utopia but a serious and ongoing financial crisis. The liquidity issued in behalf of this crisis has resulted in stock and bond market bubbles.

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