201. F. WILLIAM ENGDAHL: YET ANOTHER DOOMER STOOGE
F. William Engdahl is another shit-talking bear who has been predicting the demise of the U.S. economy for years. Last year, he published an article called "Is the USA Economic Collapse Due in 2005?" which made the rounds in peak oil doomer circles, and had everybody quaking in their boots and saying "See! See!" It makes for pretty amusing reading now that 2005 is over:
On the surface, world growth appears to be expanding finally, after severe recession and the 60% fall of the US stock market in 2000-2001. The Federal Reserve says it is so confident that growth in the US economy is taking firm hold, that it raised its key interest rate from a record low 1% to 1.25% last month, signaling it would slowly bring rates up to "neutral" levels of 3.5-4.5% over coming months. Around the world, strong growth of exports are being reported from Brazil to Mexico to South Korea. Growth in China is so strong the government is worried it is overheating. In Europe, the UK is expanding at the fastest pace in 15 years. France expects GDP to grow by 2.5%, and even Germany is talking about stronger export growth. The driver is US economic growth.Keep your eyes peeled. Engdahl will soon be publishing a new article called "Is the USA Economic Collapse Due in 2006?" You go girl!
The problem with this optimistic picture is the fact it is entirely based on the dollar and unprecedented creation of cheap dollar credit by Greenspan and the Bush Administration. Their only short-term goal has been to keep the US economy strong enough to assure re-election for George Bush in November. Washington reports are that Bush made a deal to re-appoint Greenspan on the promise Greenspan would keep the economy growing until the elections. They have done this by a combination of historic low interest rates, rates only seen before in times of war or depression, and by stimulating the economy by record budget deficit spending, issuing government bonds to finance it. The world has been flooded with cheap dollars as a result.
What is clear now is that this unsustainable effort is likely to come to an end sometime in 2005, just after the elections, regardless of who is President. Given the scale of the money-printing by the Fed and the US Treasury since 2001, it is pre-programmed that the "correction" of the latest Greenspan credit binge will impact the entire global financial and economic system. Some economists fear a new Great Depression like the 1930's. The world today depends on cheap US dollar credit. When US interest rates are finally forced higher, dramatic shocks will hit Europe, Asia and the entire global economy, unlike any seen since the 1930's. Debts that now appear manageable will suddenly become un-payable. Defaults and bankruptcies will spread as they did in the wake of the 1931 Creditanstalt collapse.Source
-- by JD