Top Economist Warns Of "Serious Breakdown" In World Financial System
Father of Reaganomics warns that massive interest rate cut could undermine dollar's status as world reserve currency
Paul Joseph Watson
Prison Planet
Tuesday, January 22, 2008
Father of Reaganomics and former editor of the Wall Street Journal Paul Craig Roberts today warned that the Fed's shock 75 basis points interest rate cut would only succeed in putting average families through the ringer and could even portend the collapse of the dollar as the world reserve currency.
Speaking on The Alex Jones Show, Roberts said that average hard working families, and not money casino cowboy shareholders, would be the biggest victims of the latest downturn as a recession looms on the back of the surprise rate cut.
"The more important thing is the hardship for the average American family - many of them have not had any real increase in their income for years and they've lost jobs to offshoring, they've lost jobs to work visas for foreigners and now they're confronted with losing jobs to recession," said Roberts.
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"They also are heavily indebted and have used up their home equity in consumption and many of them now have mortgages that threaten them with being homeless and so I think the worst part of this will not be felt by Wall Street and banks and shareholders but by the average American family - I think they're now going to go through the ringer," he concluded.
Roberts speculated on the impact that today's rate cut would have on the dollar, further undermining its position as the world reserve currency.
"It is true that in the long run the decline of the dollar could cause it to lose its reserve currency role and if another currency has a rythm to take its place, it would be very hard to conduct international trade on the basis that it is now where you have a reserve currency that one accepts in payment," said Roberts, adding that the massive interest rate cut today only signalled more inflation despite the tax rebate.
Roberts said that he expected the economic decline to be slow and gradual, but that it was inevitable that the living standards of Americans would drop, similar to when the pound lost 80 per cent of its value during the two world wars and lost its status as a world reserve currency.
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Roberts said that the only solution to the current crisis was to cut the current defense budget in half and halt the offshoring of jobs by U.S. corporations.
"If they can't do anything about that the world is going to conclude that the dollar is not going to be the reserve currency forever and they'll start getting out from under it in larger ways and then that pressure on the dollar will mount and become stronger and it will completely cancel the ability to do anything about the domestic economy - whether it's in recession or depression," said Roberts, adding that a "real serious breakdown," the likes of which have not been witnessed so far, will occur if these issues are not addressed.
Roberts said that it was difficult for ordinary people to diversify and find a safe haven because if they bought gold they would become a target for government theft just as happened in 1933.
Roberts added that a total breakdown of the global economy would take place, "If the destruction of the dollar's role as world reserve currency continues and there's not a clear alternative that arrives to take its place," warning that it was the biggest danger and there would be "no way to survive" its impact.
