Pen Meets Paper, Sept 8, 2008

Pen Meets Paper
Opinion by Helge Nome
Another milestone was reached in the downward spiral of the U.S. economy when Fannie Mae and Freddie Mac was taken over by the U.S. Government last weekend September 6/7. Together, Fannie Mae and Freddie Mac form the cornerstones of the U.S. mortgage market and own or guarantee almost half the home loans in the country's roughly $12 trillion mortgage market. Over the past year, the companies have recorded combined losses of around $14 billion and their share values have now fallen to junk levels (less than $1). The common folk in the U.S. are now on the hook for propping up these banks as the Treasury pumps new magic dollars into them. These dollars, created out of thin air by the Federal Reserve Bank, go into circulation, increasing the total money supply and so make each dollar worth less. That means that people with savings, and those on fixed incomes, effectively have their wealth robbed from them by the state. It is called inflation (inflated value of goods and services). That is also the way the Cheney/Bush gang and their associates have financed their wars in the Middle East: Printing dollars to cover the cost, making each dollar worth less as they do so.
There is another worrying aspect to this scenario: To date the world's trade in energy (oil,gas,etc) has been carried out in U.S. Dollars. That has given Americans a financial advantage over other people because everybody has needed their dollars to be able to buy energy. So they have exchanged tons of their dollars, at virtually no cost to themselves apart from the printer's ink, in return for all kinds of goods and services, including energy, from abroad. This is now changing with more energy trade taking place using the Euro as currency, instead of the dollar. Iran has threatened to set up some kind of energy exchange which does not utilize U.S. Dollars.
If the U.S. looses its strangle hold on the energy trade, its currency could become almost worthless, in comparison to other currencies. That is what happened in Germany before the Hitler administration got into power during the Great Depression. In spite of its economic woes, the United States has arguably the most powerful war machine in the world today and has shown a willingness to use it whenever it is perceived to be necessary. From their perspective it only makes sense to hang on to power as long as possible, using whatever means are available. The alternative for them is very unpalatable.