In These New Times

Cailean Bochanan

21st Septemebr, 2013

I’ve already been called mad for my assertion over the last nine months or so that Obama is actually engaged in some kind of peace process involving a historic compromise with Russia in working a resolution of the Syria crisis as well as a broader Middle East settlement. I seem to be the only one who doesn’t know that Obama is a bad guy and that bad guys do bad things, like rocketing Syria at the first available opportunity. My detractors assessment of my mental health is about to become a lot worse since I now propose to suggest that Obama is readying to pit himself against Wall Street- yes, that’s right. Obama, the Manchurian Candidate with a chip in his brain. is about to take on the financial oligarchy of whom he is nothing other than a puppet! What could be the basis for such an exorbitant thesis?

Apparently, nothing. Bernanke has just stunned the markets by announcing the continuation of quantitative easing shortly after Larry Summers withdrew as contender for head of the Federal Reserve. Summers is skeptical about QE and a close ally and friend of Obama. But Obama never confirmed his nomination and left Summers to step down in the face of Democrats in congress who see him as weak on Wall Street regulation- he was after all behind the repeal of Glass -Seagle, the New Deal era legislation which protected commercial bank deposits from being made available for high risk investment. So once again Obama dithered over backing his own man and after indicating his seeming wish to taper QE has permitted instead a full steam ahead. To taper or not to taper: that is the question.

The answer for now is not to taper. This will delight Wall Street: what is QE after all if not bail-out without end. It keeps the big banks afloat and gives them opportunities to run carry trades at great profit to themselves. It allows them to keep on concealing accounting realities and keep blowing bubbles in the property market and elsewhere. It offloads Wall Streets crisis onto the people who see their savings eroded and earnings devalued by inflation and onto the rest of the world who are inundated with potentially worthless dollars. So Obama has decided to swim with the tide of worthless dollars and run with the lobby of lobbies, the Wall Street gang, and everyone else can just go to hell. What else could Obama have done?

He could have moved to end QE, provoking panic in Wall Street and precipitating a sudden rise in interest rates: he could have triggered a crash in full view of the world and taken the blame for the ensuing chaos. How would he explain to the American people his decision to destroy what little remains of their prosperity? If he unpopular now over a whole range of issues what kind of support would he have left then? But surely the crash is inevitable and QE just postpones for a bit longer the day of judgement. Yes, but Obama isn’t going to carry the can for that: Wall Street is.

Obama is leading from behind again. Bernanke has a decided on continuation of QE to the plaudits of the bankers. QE will be left to run its course until it is clear to every last American that it is simply untenable.

The American people have never understood that their prosperity over the last thirty years stems not from their economy but simply from imperial privilege: the privilege of having their own fiat currency as the  global reserve currency in which most of the world’s transactions, such as buying oil, commodities or precious metals or settling trade deficits must take place. That they have never grasped this is not surprising given that the “anti-capitalist” left have also failed or purported to fail to grasp this. Professor Michael Hudson has been a lonely voice in explaining this key aspect of contemporary reality for forty years along with some libertarians like Ron Paul. So the American people have a lot of catching up to do and what better way than a crash course (literally) in dollar collapse. This crash course is, of course, nothing other than QE.

As a hyper inflationary recession takes hold of America Obama will be waiting to call a halt to the process. He will then be in a position to explain the necessary steps to counter economic collapse. The American people will have grasped the relationship between their “economy” and geo-political realities. They will understand that a new globe trading currency system will have to be put in place. They will understand that the weight of the dollar within such a system must reflect to some extent America’s real economy. They will understand that Wall Street is essentially bankrupt and that a new financial system must be put in place, one which can be centred on reconstruction. They will understand that endless consumption must give way to fairness and a decent minimum for everyone. They will understand the importance of forming partnership with China, Russia and others, including the Americas as a whole. They will draw hope from Chinese investment and  Chinese companies who sell into the US market anyway relocating to the US. They will understand that as a quid pro quo America will drastically scale down its military commitments and see the benefits of national diplomacy over imperial aggression. The pain will be terrible but with leadership that will see a glimmer light of light going forward. They will know that “there is nothing to fear but fear itself”.

Are these perspectives simply mad? Perhaps, but I contest that there is method in it. Prepare for Obama to astonish as all.