Geithner and Summers Want More Debt Bubbles: The Result Could Be Catastrophic

By Thom Hartmann, Smirking Chimp. Posted April 16, 2009.

They created debt. As Ellen Brown notes at www.webofdebt.com, according to the Bank of International Settlements, they created and sold at a profit over 900 trillion dollars worth of debt -- and risk-based "instruments." That's a pretty mind-boggling number when you consider that the GDP of the United States is around 14 trillion and the GDP of the entire planet is around 65 trillion.

All of these "products" were made and sold based on the assurance that when "then" became "now" the economy would have grown fast enough for there to be enough dollars to pay it back. But the reality of a debt bubble that exceeds the world's GDP many times over came crashing in on us in 2007 -- and still hasn't fully crested -- producing the "crisis" we currently face.

Are we there yet?

Are we recovering from it all now? Will things soon be back to normal?

If by "normal" we mean like life during the "Great Stability," the answer is: "Not a chance." Back then we had in place tariffs and trade policies, first initiated in 1791 by Alexander Hamilton, that protected our domestic manufacturing industries. We still made things -- in fact, the USA was the world's largest exporter of manufactured goods, and the world's largest creditor. Like today's China, for over 100 years we'd loaned other countries money so they could buy our stuff!

On the other hand, if by "normal" we mean how things were over the past 28 "Reaganomics" years -- a stagnating middle class, disintegrating manufacturing sector, and piles of money being made by bets and debts -- then maybe. After just the first decade of Reaganomics, we went from being the world's largest exporter of manufactured goods to being the world's largest importer; we went from being the world's largest creditor to being the world's largest debtor.

None of that has changed. We haven't repealed Reagan's disastrous tax cuts, which have exploded our nation's budget deficits. We haven't repudiated NAFTA and the WTO and gone back to an international trade policy that puts American interests over those of transnational corporations. We have not re-regulated the banks, and have not brought back 6000-year-old laws against usury (excessive interest rates on debt).

The bankers, in fact, are fighting it tooth and nail -- the financial services industry in whole has spent over $5 billion lobbying Congress over the past ten years -- and their acolytes like Lawrence Summers and Tim Geithner play major and consequential roles in the Obama administration.

It appears that the plan today is not to regulate the amount of debt that banks can create, but instead to both print more money and do everything possible to reinflate the debt bubble. (Lacking a return to Hamilton's national manufacturing and trade policy, as a nation we just continue to slip deeper and deeper into Third World status as an importer and debtor -- this may be our only choice if we don't wake up soon.)

If followed, the Summers/Geithner policy can have only one of two outcomes: inflation or another, more serious crash. It's possible we could have both. Apparently the bankers and Summers/Geithner's hope is that neither or both don't happen for at least three and a half years...

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Thom Hartmann (thom at thomhartmann.com) is a Project Censored Award-winning New York Times best-selling author, and host of a nationally syndicated daily progressive talk program The Thom Hartmann Show. www.thomhartmann.com His most recent books are "The Last Hours of Ancient Sunlight," "Unequal Protection: The Rise of Corporate Dominance and the Theft of Human Rights," "We The People: A Call To Take Back America," "What Would Jefferson Do?," "Screwed: The Undeclared War Against the Middle Class and What We Can Do About It," and "Cracking The Code: The Art and Science of Political Persuasion." His newest book is Threshold: The Crisis of Western Culture.

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