World Crisis Deepening

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This approaches Greece’s deficit ratio of 12.7 percent of GDP, is higher than that of Spain and twice the eurozone average. The US budget, moreover, projects trillion-dollar deficits for years to come.
As in every other industrialized country, the American state responded to the financial crash of 2008 by taking on the debts of its banks and essentially bankrupting its treasury in order to preserve the wealth of its financial elite. The Obama administration, no less than the governments of Europe, is demanding that the cost be borne by the general population in the form of sweeping cuts in basic social programs and a reduction in consumption—i.e., a permanent and dramatic decline in working class living standards.
Unlike in previous international financial crises, such as the Asian debt crisis of the 1990s, the United States cannot play the role of lender of last resort. The United States has irretrievably lost its previous position as the dominant world economic power, and its decline is reflected in growing challenges to the role of the dollar as the world reserve and trading currency.
At last month’s World Economic Forum in Davos, French President Nicolas Sarkozy in his keynote speech said he would use his upcoming presidency of the Group of 20 nations to push for a new international monetary system in which the dollar would no longer be the primary reserve currency. And on Wednesday, Moody’s Investors Service warned that the United States faces the loss of its triple-A sovereign credit rating unless Obama moves to slash the federal deficit by carrying out more draconian spending cuts than he has thus far announced.
It is the erosion of US economic power and solvency that lends to the sovereign debt crises in Greece, Portugal and other European countries such an explosive and universal character.
The recent rise in the dollar is the result of a “flight to safety” by investors who fear a collapse in world asset bubbles and consider US Treasury bonds, along with German government debt, to be a temporary haven. In important respects, the short-term reversal in the dollar’s decline is an expression of a deepening of the crisis on world financial markets.
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