Tiger Woods Inc. will be bigger than ever

NEW YORK (MarketWatch) -- Following the apology heard 'round the world last week, people everywhere promptly suggested that the disgraced Tiger Woods' days as a marketing symbol had ended.

Don't make me laugh.

Rest assured, America, Tiger Woods Inc., the empire of the best and most talked-about golfer on the planet, is actually in dandy shape. In fact, its prospects have never looked rosier -- assuming Woods can, indeed, recover from the hubris and demons that recently drove to him to seek counseling for what has been called a sexual addiction.

Tiger Woods during his televised apology

Dr. Timothy Fong, an assistant clinical professor in psychiatry at the UCLA Impulse Control Disorders Clinic in Los Angeles, said the recovery rate for sex addicts can be in the neighborhood of 30% to 40%. While every case is unique, this remains an encouraging assessment for Woods.

"They get better," Fong asserted.

Reviled and loathed
How can I predict that Woods will be bigger than ever? Isn't Tiger reviled now from coast to coast? Don't people loathe him for his extramarital affairs? Yes, but ...

It's simple, really. Let's consider his saga. Before he had his post-Thanksgiving meltdown last year, he'd achieved universal acclaim as a championship golfer and the best Madison Avenue pitchman around.

And now? He has a new kind of status in sports and society. Woods is now notorious. It translates into even greater fame for Woods -- and Madison Avenue covets famous symbols and pitchmen. It has a lot to do with the 21st century media world, thanks largely to tabloid magazines and TV shows as well as ESPN's /quotes/comstock/13*!dis/quotes/nls/dis (DIS 30.92, -0.20, -0.64%) "SportsCenter."

ESPN is the bible of impressionable sports fans. ESPN invariably rewards bad or outrageous behavior with a blizzard of images on its "SportsCenter" broadcasts. Ultimately, all publicity is ultimately good publicity. Or, as Mick Jagger of the Rolling Stones reportedly once put it: Just spell my name right.

Mr. Comeback
Woods, having fallen from grace, has a juicy opportunity to do what America loves most from disgraced heroes: Make a comeback. Celebrities in the sports world over the years have won over the public after all sorts of scandals.

Basketball star Michael Jordan had to deal with gambling hassles in the early 1990s but subsequently regained his status as the favorite son of advertisers. Marv Albert and Kobe Bryant have each had to deal with headlines related to sexual assault allegations. They've both come back. Albert, as he had been doing before the charges, handles play-by-play duties on television and radio. For his part, Bryant graces GQ's cover in its current issue.

Oh sure, it will take time for Woods to repair the public-relations destruction. The tide will turn for Woods when he begins to show more self-awareness and appeals to ordinary people. Tiger has not been able to control the message on his own terms. And now he must play ball with the media. If he's going to be bankable again, he needs to humanize himself, be a nice guy.

Greek Unions Stage Second Strike Over Budget Cuts

Feb. 24 (Bloomberg) -- Greece’s unions shut down transportation, medical and educational facilities today in a second 24-hour strike aimed at resisting Prime Minister George Papandreou’s drive to cut the European Union’s biggest budget deficit.

Air-traffic controllers, customs and tax officials, train drivers, doctors at state-run hospitals and school teachers walked off the job to protest government spending cuts that will freeze salaries and hiring and cut bonuses. Journalists also joined the strike, creating a media blackout.

“People on the street will send a strong message to the government but mainly to the European Union, the markets and our partners in Europe that people and their needs must be above the demands of markets,” Yiannis Panagopoulos, president of the private-sector union GSEE, told NET TV yesterday. “We didn’t create the crisis.”

Half a million civil servants already held a one-day strike on Feb. 10. Today they joined forces with GSEE, which represents 2 million workers, after EU warnings that Papandreou’s government needs to bring in new taxes and make more spending cuts if it fails to rein in the largest budget gap of all 27 EU member states. Unions will hold rallies later today in Athens and other cities and towns.

Greek bonds have slumped, driving up borrowing costs, as investors fear that government plans outlined so far will fail to reduce the gap this year to 8.7 percent of GDP from 12.7 percent. Papandreou’s government needs to sell 53 billion euros ($72 billion) of debt this year, the equivalent of 20 percent of gross domestic product.

Bailout Concern

Greece’s fiscal woes have stoked concerns that it may need a bailout and helped spark a rout in global stocks. The premium that investors demand to buy Greek debt over comparable German bonds ballooned on Jan. 28 to the highest since 1998 amid worries that Papandreou’s deficit plan relied too much on one- off measures for revenue and not enough on expenditure cuts.

“We haven’t yet seen anything of the fiscal contraction that Greece has to go through if it wants to avoid a sovereign default,” Fredrik Erixon, director of the Brussels-based European Centre for International Political Economy, said in a phone interview. “The main problem is that the Greek government and the prime minister himself have not yet realized the depth of the mess.”

Flights Canceled
Almost 500 international and domestic flights have been canceled today, a spokeswoman for Athens International Airport, Greece’s biggest, said by telephone. The Athens metro, which carries 650,000 commuters to work each morning, isn’t running nor are the capital’s trams. Passenger ferries and other vessels will remain docked until the end of the strike.

Groups of hotel workers picketed the five-star Grande Bretagne Hotel and others on the city’s central Syntagma Square this morning, holding up banners reading “the crisis should be paid for by the plutocracy.” The three luxury hotels on the square were open for business with closed shutters to protect against protests.

Yesterday, the PAME union group, aligned to the Communist Party of Greece, blockaded the Athens stock exchange headquarters, preventing staff from entering the building.

The Athens benchmark general index fell 1.8 percent to 1,922.69 yesterday, bringing losses so far this year to 12 percent, the second-worst performance in western Europe. Greek government bonds extended their decline after Fitch Rating downgraded the country’s four largest banks, pushing the yield on the 10-year bond up 7 basis points to 6.49 percent at 6 p.m. in London.

Budget Shortfall
Ratings companies, which cut the country’s grades in December after Papandreou revealed the country’s budget shortfall was more than four times the EU limit, have warned the government’s three-year budget plan must be implemented to the letter.

EU governments are looking for guarantees that Papandreou, elected in October, will slash spending before they spell out what help they may offer.

Under proposals adopted by finance ministers from the 16 nations that share the euro, the Greek government will have to take additional measures to cut its deficit if it fails to satisfy the European Commission next month. These may include higher value-added tax, a levy on luxury goods, higher energy taxes and spending cuts, they said.

Merkel
German Chancellor Angela Merkel, in a speech in Hamburg on Feb. 22, said a solution to the Greek crisis is the “core element” in re-establishing confidence in the single currency.

“The mistakes have to be dealt with at their roots,” Merkel said. “In the case of Greece, we need to do everything to support the Greek government, which of course has taken this path, in formulating a true consolidation program.”

Greek Finance Minister George Papaconstantinou has resisted calls for deeper spending cuts and said Feb. 16 the government was “ahead of the target” set out in its deficit-reduction plan. He said yesterday the government will do “everything it needs” to meet the budget targets.

Ta Nea newspaper reported today that the European Commission is pushing Greece to remove restrictions on firing workers, abolish collective labor agreements and other measures to make the labor market more flexible.

Most Greeks support the measures outlined so far, which include an increase in the retirement age and a freeze on increases for public-sector workers, according to opinion polls.

“New measures may be needed,” said George Mikonyiatis, 42, who has watched civil servants protesting cuts in their income rally outside the Finance Ministry for weeks from his camera shop in central Athens. “They need to be just. If you can prove the measures are just then the strikes won’t have mass support. They need to be targeted at those who aren’t paying their way.”

Book Review : Malaysian Maverick

"In 1984 or 1985, when I was an Asian Wall Street Journal correspondent in Malaysia, an acquaintance called me and said he had seen a US Army 2-1/2 ton truck, known as a "deuce-and-a-half," filled with US military personnel in jungle gear on a back road outside of Kuala Lumpur".

Since Malaysia and the United States were hardly close friends at that point, I immediately went to the US Embassy in KL and asked what the US soldiers were doing there. I received blank stares. Similar requests to the Malaysian Ministry of Defense brought the same response. After a few days of chasing the story, I concluded that my acquaintance must have been seeing things and dropped it.

It turns out he wasn’t seeing things after all. In a new book, "Malaysian Maverick: Mahathir Mohamad in Turbulent Times," launched Dec. 4 in Asia, former Asian Wall Street Journal editor Barry Wain solved the mystery. In 1984, during a visit to Washington DC in which Mahathir met President Ronald Reagan, Defense Secretary Caspar Weinberger and others, he secretly launched an innocuous sounding Bilateral Training and Consultation Treaty, which Wain described as a series of working groups for exercises, intelligence sharing, logistical support and general security issues. In the meantime, Mahathir continued display a public antipathy on general principles at the Americans while his jungle was crawling with US troops quietly training for jungle warfare.

That ability to work both sides of the street was a Mahathir characteristic. In his foreword, Wain, in what is hoped to be a definitive history of the former prime minister’s life and career, writes that "while [Mahathir] has been a public figure in Malaysia for half a century and well known abroad for almost as long, he has presented himself as a bundle of contradictions: a Malay champion who was the Malays’ fiercest critic and an ally of Chinese-Malaysian businessmen; a tireless campaigner against Western economic domination who assiduously courted American and European capitalists; a blunt, combative individual who extolled the virtues of consensual Asian values."

Wain was granted access to the former premier for a series of exhaustive interviews. It may well be the most definitive picture painted of Mahathir to date, and certainly is even-handed. Wain, now a writer in residence at the Institute of Southeast Asian Studies in Singapore, is by no means a Mahathir sycophant. Advance publicity for the book has dwelt on an assertion by Wain that Mahathir may well have wasted or burned up as much as RM100 billion (US$40 billion at earlier exchange rates when the projects were active) on grandiose projects and the corruption that that the projects engendered as he sought to turn Malaysia into an industrialized state. Although some in Malaysia have said the figure is too high, it seems about accurate, considering such ill-advised projects as a national car, the Proton, which still continues to bleed money and cost vastly more in opportunity costs for Malaysian citizens forced to buy any other make at huge markups behind tariff walls. In addition, while Thailand in particular became a regional center for car manufacture and for spares, Malaysia, handicapped by its national car policy, was left out.

Almost at the start of the book, Wain encapsulates the former premier so well that it bears repeating here: Mahathir, he writes, "had an all-consuming desire to turn Malaysia into a modern, industrialized nation commanding worldwide respect. Dr Mahathir’s decision to direct the ruling party into business in a major way while the government practiced affirmative action, changed the nature of the party and accelerated the spread of corruption. One manifestation was the eruption of successive financial scandals, massive by any standards, which nevertheless left Dr Mahathir unfazed and unapologetic."

That pretty much was the story of Malaysia for the 22 years that Mahathir was in charge. There is no evidence that Mahathir himself was ever involved in corruption. Once, as Ferdinand Marcos was losing his grip on the Philippines, Mahathir pointed out to a group of reporters that he was conveyed around in a long black Daimler – the same model as the British ambassador used – that the Istana where he lived was a huge mansion, that he had everything he needed. Why, he asked, was there any need to take money from corruption? Nonetheless, in his drive to foster a Malay entrepreneurial class, he allowed those around him to pillage the national treasury almost at will, which carried over into Umno after he had left office and which blights the country to this day.

Wain follows intricate trails through much of this, ranging from the attempt, okayed by Mahathir, to attempt to rescue Bumiputra Malaysia Finance in the early 1980s which turned into what at the time was the world’s biggest banking scandal.

In the final analysis, much as Lee Kuan Yew down the road in Singapore strove to create a nation in his own image and largely succeeded, so did Mahathir. Both nations are flawed – Singapore in its mixture of technological and social prowess and draconian ruthlessness against an independent press or opposition, Malaysia with its iconic twin towers and its other attributes colored by a deepening culture of corruption that has continued well beyond his reign, which ended in 2003. Mahathir must bear the blame for much of this, in particular his destruction of an independent judiciary, as Wain writes, to further his aims.

Mahathir, as the former premier said in the conversation over his mansion and his car, had everything including, one suspects, a fully-developed sense of injustice. He appears to this day to continue to resent much of the west, particularly the British. Wain writes exhaustively of Mahathir’s deep antagonism over both British elitism during the colonial days and the disdain of his fellow Malays (Mahathir’s parentage is partly Indian Muslim on his father’s side), especially the Malay royalty. That antagonism against the British has been a hallmark of his career – from the time he instituted the "Buy British Last" policy for the Malaysian government as prime minister to the present day.

Robert Mugabe, in disgrace across much of the world for the way his policies have destroyed what was one of the richest countries in Africa, remains in Mahathir’s good graces. Asked recently why that was, an aide told me Mugabe had driven the British out of Zimbabwe and was continuing to drive out white farmers to this day, although he was replacing them with people who knew nothing of farming. That expropriation of vast tracts of white-owned land might have destroyed Zimbabwe’s agricultural production. But, the aide said, "He got the Brits out."

For anybody wishing to understand Mahathir and the nation he transformed, Wain’s book is going to be a must – but bring spectacles. The tiny type and gray typeface make it a difficult read. And a disclaimer: Wain was once my boss.

Soros More Than Doubled Gold ETF Stake in 4th Quarter

Feb. 17 (Bloomberg) -- Billionaire George Soros’s Soros Fund Management LLC more than doubled its holding in the biggest gold exchange-traded fund in the fourth quarter after bullion advanced 8.9 percent to a record.

The $25 billion New York-based firm became the fourth- largest holder in the SPDR Gold Trust, adding 3.728 million shares valued at $421 million, according to a filing with the U.S. Securities and Exchange Commission yesterday. Its investment was worth about $663 million, the fund’s largest single investment, as of Dec. 31.

Soros joined China Investment Corp. and central banks including those in China and India in acquiring gold. China Investment, the $300 billion sovereign wealth fund based in Beijing, took a 1.45 million-share stake in the SPDR Gold Trust worth $155.6 million, according to a SEC 13F filing posted on Feb. 5.

“The dollar is weak and people are just shifting their money into a safer haven,” Tetsuya Yoshii, vice president for derivative products at Mizuho Corporate Bank Ltd., said from Tokyo today. “Central banks are adding gold to their reserves and we’re going to see more people adding gold to their investment portfolio as they shift into safer stuff.”

Gold for immediate delivery traded little changed at $1,118.35 an ounce at 2:48 p.m. in Singapore. It rose for a ninth straight year in 2009, reaching a record $1,226.56 an ounce on Dec. 3, as the dollar dropped 4.2 percent against a basket of six major currencies.



‘Ultimate Bubble’



India bought 200 metric tons from the International Monetary Fund in October, while China’s holdings have expanded 76 percent to 1,054 tons since 2003, it said in April.

SEC filings are done quarterly, with a 45-day lag, so Soros could have sold some or all of the position since then. Soros, speaking last month at the World Economic Forum in Davos, called gold the “ultimate asset bubble” and said the price could tumble, according to a report in the U.K.’s Daily Telegraph newspaper.

Money managers who oversee more than $100 million in equities must file a Form 13F listing their U.S.-traded stocks, options and convertible bonds. The filings don’t show non-U.S. securities or how much cash the firms hold.

Michael Vachon, a spokesman for Soros, declined to comment on Soros’s investments.

Assets held by the SPDR Gold Trust have expanded 2.2 percent this year after surging 24 percent in 2009. They stood at 1,109.42 metric tons yesterday.

Institutional investor Paulson & Co. held the largest number of shares in the fund as of Dec. 31, with 8.65 percent, or 31.5 million shares.

Gold demand grew 2.6 percent in the fourth quarter from the previous three months as investment and jewelry consumption climbed amid record prices, the World Gold Council said in a report today. Global consumption increased to 819.7 metric tons as prices averaged 15 percent more than the third quarter, the London-based industry group said.

Disease has infected national education system

There has been a lot of discussion about Professor Khoo Kay Kim's remarks about the Chinese school system and how it's potentially detrimental to nation-building. It's obvious that a single school system which caters for the all the races would be an appropriate outcome but the current political climate does not allow for such a solution.

The current crop of teachers who are joining the government schools are not interested in teaching. They see it as an ‘easy way out’. You go to university and you can't get a job when you graduate but there's always the teaching profession which is somewhat rewarding.

The pay is decent, and you work for only half-a-day and get a lot of leave. No one really cares about moulding the leaders of tomorrow. What I’m saying is that you can change the curriculum and the syllabus all you want but if the teachers themselves are not committed, then what is the point?

I'm not saying that every teacher is like this but most of them are. The really good ones are nearing retirement age. They grew up in a different era and had different ideals. They are dedicated towards ensuring excellence in education but their time is up.

The checks and balances in today's education systems is highly politicised. No one actually believes that government schools can provide an adequate education for our young which is why you see our over-reliance on tuition.

If the education system is successful, the tuition centres would be the exception instead of being the norm. Have we not seen tuition centres proudly proclaiming their achievements when their students get all ‘As’ in the PMR and SPM examinations? Should not that the be the sole domain of the national schools?

As parents, we recognise that a disease has infected our education system. Most of us have no option but to continue with the government school system and hope that with tuition, our children make it to university and a better life thereafter.

Those of us who have the means, resort to vernacular schools or international schools or even home schooling. It's all a matter of trust. We want to safeguard our children from the ever declining standards in education.

We want them to be educated overseas because we know that even our universities are infected with the same disease. What that disease is, I leave it to your imagination.

When you do not trust the government to provide your child with the education that he or she deserves, then as parents you must do what you can. Fostering ‘1Malaysia’ is not just about racial politics - it's about putting trust in the hands of others so that your children are able to reap the same benefits as everybody else.

Greek Debt Threatens the Euro

Josef Ackermann, the CEO of Deutsche Bank (DB), has given the all-clear signal many times in the past. He has repeatedly said that the worst was over, only to see the financial crisis strengthen its grip on the world economy.

Last week, however, Ackermann was singing a completely different tune. Although many indicators are once again pointing skyward, he said at a Berlin summit on the economy, Chancellor Angela Merkel, the assembled cabinet ministers, corporate CEOs and union leaders should not to be deluded. He warned emphatically that the financial situation could deteriorate once again. "A few time bombs" are still ticking, Ackermann told his audience, noting that the growing problems of highly leveraged small countries could lead to new tremors. And then, almost casually, Ackermann mentioned the problem child of the European financial world by name: Greece.

Ackermann isn't alone in his opinion. Practically unnoticed by the public, an issue has returned to the forefront in recent weeks—one that was a cause for great concern at the height of the financial crisis but then, as optimism about the economy began to grow, was eventually forgotten: the fear of a national bankruptcy in the euro zone. And the question as to whether such a bankruptcy, should it come about, could destroy the common European currency.

Greece was always at the very top of the list of countries at risk. But now the danger appears to be more acute than ever.

Insuring Against Default

The seismographs in the trading rooms at investment banks detected the initial tremors weeks ago. Today, when the code "Greece CDS 10Yr" appears on Bloomberg terminals, a curve at the bottom of the screen points sharply upward. It reflects the price that banks are now charging to insure 10-year Greek government bonds against default.

The price of these securities has jumped dramatically since Greek Finance Minister Giorgos Papakonstantinou announced three weeks ago that his country's budget deficit would reach 12.7 percent of gross domestic product this year, instead of the 6 percent originally forecast—and well about the 3 percent limit foreseen by European Union rules.

A second curve is the mirror image of the first. It depicts the price of government bonds from the euro-zone country. It points sharply downward.



Greece already pays almost 2 percent more in interest on its debt than Germany. In other words, at a total debt of €270 billion ($402 billion), Greece will be paying €5 billion more in annual interest than it would if it were Germany. And, with rating agencies threatening to downgrade the country's already dismal credit rating, the situation is only likely to get worse.

The finance ministers and central bankers of the euro-zone member states are as alarmed as they are helpless. "The Greek problem," says a senior administration official in Berlin, "will be an acid test for the currency union."

No Buyers Can Be Found

Greece has already accumulated a mountain of debt that will be difficult if not impossible to pay off. The government has borrowed more than 110 percent of the country's economic output over the years, and if investors lose confidence in the bonds, a meltdown could happen as early as next year.

That's when the government borrowers in Athens will be required to refinance €25 billion worth of debt—that is, repay what they owe using funds borrowed from the financial markets. But if no buyers can be found for its securities, Greece will have no choice but to declare insolvency—just as Mexico, Ecuador, Russia and Argentina have done in past decades.

This puts Brussels in a predicament. European Union rules preclude the 27-member bloc from lending money to member states to plug holes in their budgets or bridge deficits.

And even if there were a way to circumvent this prohibition, the consequences could be disastrous. The lack of concern over budget discipline in countries like Spain, Italy and Ireland would spread like wildfire across the entire continent.

America’s economic crisis is not over — Paul Craig Roberts

FEB 4 — Is the financial crisis over? Is the recovery for real and, if not, what are Americans’ prospects? The short answer is that the financial crisis is not over, the recovery is not real, and the US faces a far worse crisis than the financial one. Here is the situation as I understand it:

The global crisis is understood as a banking crisis brought on by mindless deregulation of the US financial arena. Investment banks leveraged assets to highly irresponsible levels, issued questionable financial instruments with fraudulent investment grade ratings, and issued the instruments through direct sales to customers rather than through markets.

The crisis was initiated when the US allowed Lehman Brothers to fail, thus threatening money market funds everywhere. The crisis was used by the investment banks, which controlled US economic policy, to secure massive subsidies to their profits from a taxpayer bailout and from the Federal Reserve. How much of the crisis was real and how much was hype is not known at this time.

As most of the derivative instruments had never been priced in the market, and as their exact composition between good and bad loans was unknown (the instruments are based on packages of securitized loans), the mark-to-market rule drove the values very low, thus threatening the solvency of many financial institutions.

Also, the rule prohibiting continuous shorting had been removed, making it possible for hedge funds and speculators to destroy the market capitalization of targeted firms by driving down their share prices.

The obvious solution was to suspend the mark-to-market rule until some better idea of the values of the derivative instruments could be established and to prevent the abuse of shorting that was destroying market capitalization.

Instead, the Goldman Sachs people in charge of the US Treasury and, perhaps, the Federal Reserve as well, used the crisis to secure subsidies for the banks from US taxpayers and from the Federal Reserve. It looks like a manipulated crisis as well as a real one due to greed unleashed by financial deregulation.

The crisis will not be over until financial regulation is restored, but Wall Street has been able to block re-regulation. Moreover, the response to the crisis has planted seeds for new crises.

Government budget deficits have exploded. In the US the fiscal year 2009 federal budget deficit was US$1.4 trillion (RM4.7 trillion), three times higher than the 2008 deficit.

President Obama’s budget deficits for 2010 and 2011, according to the latest report, will total US$2.9 trillion, and this estimate is based on the assumption that the Great Recession is over. Where is the US Treasury to borrow US$4.3 trillion in three years?

This sum greatly exceeds the combined trade surpluses of America’s trading partners, the recycling of which has financed past US budget deficits, and perhaps exceeds total world savings.

It is unclear how the 2009 budget deficit was financed. A likely source was the bank reserves created for financial institutions by the Federal Reserve when it purchased their toxic financial instruments. These reserves were then used to purchase the new Treasury debt.

In other words, the budget deficit was financed by deterioration in the balance sheet of the Federal Reserve. How long can such an exchange of assets continue before the Federal Reserve has to finance the government’s deficit by creating new money?

Similar deficits and financing problems have affected the EU, particularly its financially weaker members. To conclude: the initial crisis has planted seeds for two new crises: rising government debt and inflation.

A third crisis is also in place. This crisis will occur when confidence is lost in the US dollar as world reserve currency. This crisis will disrupt the international payments mechanism. It will be especially difficult for the US as the country will lose the ability to pay for its imports with its own currency.

US living standards will decline as the ability to import declines.

The financial crisis is essentially a US crisis, spread abroad by the sale of toxic financial instruments. The rest of the world got into trouble by trusting Wall Street. The real American crisis is much worse than the financial crisis.

The real American crisis is the off-shoring of US manufacturing, industrial, and professional service jobs such as software engineering and information technology.

Jobs off-shoring was initiated by Wall Street pressures on corporations for higher earnings and by performance-related bonuses becoming the main form of managerial compensation. Corporate executives increased profits and obtained bonuses by substituting cheaper foreign labour for US labour in the production of goods and services marketed in the U.S.

Jobs off-shoring is destroying the ladders of upward mobility that made the US an opportunity society and eroding the value of a university education.
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For the first decade of the 21st century, the US economy has been able to create net new jobs only in domestic non-tradable services, such as waitresses, bartenders, sales, health and social assistance and, prior to the real estate collapse, construction. These jobs are lower paid than the jobs were that have been off-shored, and these jobs do not produce goods and services for export.

Jobs off-shoring has increased the US trade deficit, putting more pressure on the dollar’s role as reserve currency. When off-shored goods and services return to the US, they add to imports, thus worsening the trade imbalance.

The policy of jobs off-shoring is insane. It is shifting US GDP growth to the off-shored locations, such as China, thus halting growth in US consumer incomes. For the past decade, US households substituted an increase in indebtedness for the lack of growth in income in order to continue increasing their consumption.

With their home equity refinanced and spent, real estate values down, and credit card debt at unsustainable levels, it is no longer possible for the US economy to base its growth on a rise in consumer debt. This fact is a brake on US economic recovery.

Stimulus packages cannot substitute for the growth in real income. As so many high value-added, high productivity US jobs have been off-shored, there is no way to achieve real growth in U.S. personal incomes. Stimulus spending simply adds to government debt and pressure on the dollar, and sows seeds for high inflation.

The US dollar survives as reserve currency because there is no apparent substitute. The euro has its own problems. Moreover, the euro is the currency of a non-existent political entity. National sovereignty continues despite the existence of a common currency on the continent (but not in Great Britain).

If the dollar is abandoned, then the result is likely to be bilateral settlements in countries’ own currencies, as Brazil and China now are doing. Alternatively, John Maynard Keynes’ bancor scheme could be implemented, as it does not require a reserve currency country.

Keynes’ plan is designed to maintain a country’s trade balance. Only a reserve currency country can get its trade and budget deficits so out of balance as the US has done. The prospect of US default and/or inflation and decline in the dollar’s exchange value is a threat to the reserve system.

The threats to the US economy are extreme. Yet, neither the Obama administration, the Republican opposition, economists, Wall Street, nor the media show any awareness.

Instead, the public is provided with spin about recovery and with higher spending on pointless wars that are hastening America’s economic and financial ruin. — www.counterpunch.org