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Tuesday, 05 December 2006 01:50

Danny Schechter: Will the Fall of America Follow the Fall of Baghdad?

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by Danny Schechter, Mediachannel.org

An Economic Crunch is Coming While Media Coverage Lags

New York, New York: If the economy is going so great, why do I sense it's so lousy? At the risk of being dismissed as a Chicken Little or the Grinch of Christmas Coming, or even worse, as some Al Gore wanabee ridiculed for warning of too many glaciers melting away in the global warming sun, I am amazed at why our media is looking away from economic bubbles bursting at home, and more focused on the war than our own economic crisis.

I certainly understand the concern about withdrawing from Iraq. I have been supportive of getting out before we went in. Yes, it's a mess and getting worse and I am sure we will soon be hearing about the Fall of Baghdad the way we woke up one morning to discover The Fall of Saigon.

When are we going to start worrying about the Fall of America? Our prestige has certainly fallen worldwide. Our dollar is in the dumps. And the American economy is headed the same way.


You would think that everyone knows that what goes up comes down. That's the law of gravity and it is not to be trifled with.

And yet, across the spectrum of American life, on the left and the right, among Dems and Repugs alike, there is an ostrich-like unwillingness to deal with it. Denial festers on both sides of the aisle.

To the sound of "Jingle Bells," consumers are spending and "charging it" as if money grows on Christmas trees. The TV networks and all media outlets are hyping this buy now, pay later mania. The stock market is booming away and the average wage of a financial sector employee is now over $8000 a week, up three grand in just three years. Economic inequality deepens as the rest of us become dependent on credit.

To quote Mad Magazine coverboy Alfred E Newman, what John Kenneth Galbraith labeled "the conventional wisdom" is now three words: "What Me Worry?"


When shoppers were fighting over PlayStation 3s, financial analyst John Rubino wrote, "While the rest of us were watching TV and blissfully pigging out, our economic policy makers spent two anxious days contemplating Monday's open and the possibility that, with global trade imbalances at unsustainable levels, China actively diversifying out of dollars and Iraq dissolving into civil war, the dollar has finally entered its death spiral."

People focusing on our real situation are quietly freaking out with 6 out of every 10 Americans in debt. In my new film In Debt We Trust (InDebtWeTrust.com), former Georgia Governor Roy Barnes states in despair: "it is shocking to me that intelligent people ... educated people have not taken time to think about this. We cannot sustain over an extended period of time these high levels of debt ... particularly at high rates of interest. Because what it will ... what will happen is that whenever it comes to an end ... and there is an end to the amount of credit ... in other words, when it gets so leveraged it will create an economic crisis so deep that it will threaten us as a nation."


That economic crisis may be here sooner than we thought. Economist Paul Krugman, hardly an alarmist, is beginning to hit the alarm button, writing in the New York Times: "Here's the bad news: this kind of confusion about what's going on is what typically happens when the economy is at a turning point, when an economic expansion is about to turn into a recession (or vice versa)."
He adds: "If that sounds ominous, it should: the bond market, which has a pretty good record of forecasting recessions, is pointing toward a serious economic slowdown next year."

But Krugman is a liberal, so the media can ignore him, right?

But what about President Bush's own Treasury Secretary Hank Paulson, formerly of Wall Street's Goldman Sachs. He is reported believing "a financial crisis is overdue." He has contingency plans in play, according to the Comstock Funds, "He has ordered his chief of staff, Jim Wilkinson, to oversee the creation of a Treasury command center to track markets world-wide and serve as an operations base in a crisis."

Jim Wilkinson? That's a familiar name and a shadowy presence. It is significant that such a skilled right-wing GOP operative has been tasked to the problem. He is the top crisis manger for Team Bush. He was moved to Treasury in July 2006 after serving as senior communications strategist to Condi Rice when her star was getting clouded. Earlier, he ran the Coalition media propaganda operation in Doha during the early days of the Iraq War. And before that, he was behind that team that stopped the Miami-Dade recount during the election of 2000, and then ran media at the 2004 GOP convention in New York.

Fred Barnes, a conservative journalist and fellow Nieman Fellow of mine, now of Fox and Weekly Standard "fame," explains: "Paulson's fear of a significant Chinese recession dovetails with another of the major tasks assigned to him by Bush: crisis management. Paulson believes a financial crisis is overdue -- a serious crisis that would be a body blow to the U.S. economy."

Later when Ben Bernanke, the Chairman of the Federal Reserves admitted that "Washington does not know how bad housing really is," he set off another day of wild gyrations on the currency markets, according to the Financial Times.


This housing slump is serious, more serious than is let on because in America realty is spelled realty. This one sector has driven the whole economy. While upscale New York City properties may still be booming, there is a "train wreck" coming according to Michael J. Dorff, a mortgage broker with Trans World Financial.

He explains, "I am talking about all the sub prime loans for refinances as well as purchases that were taken out 2 to 3 yrs ago and are now all coming due to reset. My guess is that 99% of all sub prime loans are all done on a 2 or 3 yr fixed interest only type program. People thought that it made no sense to take a 30 year fixed loan for those homes when the short term rates were a lot lower, but they were all wrong. The time bomb is about ready to go off."
LEAP, a European Think tank concurs about the coming crisis, reporting that it "is currently happening throughout all the United States and constitutes a catalyst of the impact phase of the global systemic crisis. The US consumer, i.e. the US middle class, basically becomes insolvent victim of overwhelming debt, a negative rate of saving, the bursting of the real estate bubble, the rise of interest rates. All these elements are dependent, and mutually reinforcing, to plunge the United States, starting from the end 2006, into an economic, social and political crisis without precedent."

Listen to this use of scary language by serious people: "crisis," "chaos," "time bombs," "train wrecks" etc. etc. And yet, business goes on as usual with more media attention paid to Paris Hilton than the economic pain that we are witnessing including increasing economic inequality and instability as evidenced by hike in joblessness, foreclosures, credit card rates, student loans, late fees, adjustable rate mortgages, the outsourcing of jobs, the growth in the prison population, the implosion of the auto industry, etc. etc.


Recently readers of my Mediachannel.org News Dissector blog are translating the statistics offered up by the "dismal science" -- e.g. economics -- into human terms. Shebar Windstone writes, "This issue has been flitting on the fringes of my consciousness for a long time. It's something important that's gotten little, if any, attention domestically. (We've seen how it works abroad.) If consumerism is the force that invades & conquers our lives & dreams, then debt is the occupying power, overseer, slave driver, prison warden & torturer -- ensuring/enforcing our obedience, compliance, complicity, cooperation & fear."

Susan Taft adds: "When you first began writing about debt, my attention veered off a bit. But now I think it's a contribution to the greater good, deeper than I could have imagined."

Yes, some of us are waking up. If history is any guide, it takes awhile, or a serious 9/11-like jolt to the system to raise awareness.

Reuben Caine who sold stocks back in 1929 told a PBS documentary about the financial geniuses he worked for then. "When they say it can't go down or if it does go down today, it'll go back tomorrow. you think, well, they really are like God. They know it all and it must be the way it's going because they say so."


Writer Michael Nystrom who has studied that unexpected great crash that brought on the depression in the 1930's then asks:

"Who are our God's today? Alan Greenspan, Ben Bernanke, and the institution of the Fed itself come to mind. 'They know it all,' we think. They won't let the collapsing housing market kill the economy. We know this to be true 'because they say so.'"

And it is likely none of the economic gurus who have carried the water for the rich for so long will be held accountable. The Economic Dreams, Economic Nightmares blog carries a prediction by Jim Willie.

"Expect blame to be put on speculators, blame to be put on the mortgage industry (maybe even Fanny Mae & Freddie Mac), blame to be put on reckless consumers, blame to be put on past administrations, blame to be put on Congress, blame to be put on outsourcing corporations, blame to be put on the Chinese. Do not expect much blame to be put on the high priests Greenspan or Samuelson or Friedman. They are untouchable."


News Dissector Danny Schechter edits Mediachannel.org and is the director of a new film, IN DEBT WE TRUST: America Before the Bubble Bursts (InDebtWeTrust.com) Comments to This email address is being protected from spambots. You need JavaScript enabled to view it.