The United States may still be a military superpower, but it is no longer a country that controls its own fate. Shockingly, much of the American public is deluded about this fact. Americans are deceived into believing that they benefit economically from outsourcing, offshoring production and an unprecedented trade deficit. Free trade proponents emphasize the lower prices of imported products to negate the lost incomes and careers destroyed by cheap, foreign labor. They allege that the trade deficit means that we get to consume more of the world’s goods than we produce—with the added benefit of foreign entities paying for our excess consumption by investing in America.
But the truth of the matter is that “foreign investment” in the United States today consists of Asian central banks, mainly from Japan and China. These banks use earnings from massive trade surpluses to prop up the U.S. dollar by purchasing U.S. government bonds.
By doing so, Asia keeps its goods and services cheap, thus worsening the U.S. trade deficit. Washington allows this because these countries use their export surpluses to finance the U.S. budget deficit.
The United States has become the world’s largest debtor. The ratio of U.S. debt to foreign countries and U.S. exports is approaching the crisis ratios of banana republics. It is becoming inevitable that America’s mounting debts will produce a crisis much greater than what we have dubbed “the Great Recession.” The dollar’s value will plummet. U.S. living standards will drop. Goods will become far more expensive for Americans.
What helps to keep the overvalued dollar up is the fact that it is the currency in which the Middle East uses to bill for its oil sales. Every country has to purchase dollars in order to pay for its oil, and these purchases keep the dollar afloat. Just prior to the U.S. invasion, sanctions on Iraqi oil had run their course and were about to be removed. Saddam Hussein intended to bill Iraqi oil in Euros, which could have started the abandonment of the dollar by the oil-producing countries. This was obviously a major factor in the invasion.
Much of the United States is clueless about the treacherous state of our economy. The delusions being sold to the American public are only serving to further hasten our demise. In the meantime, America continues to lose high-paying jobs and entire occupations to foreigners, because U.S. corporations are still outsourcing jobs and producing offshore.
By: Peter Crawford
See original here: http://economyincrisis.org/content/the-truth-about-the-american-condition