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By Lars Schall
The distinguished US American economist Dr. Paul Craig Roberts has had careers in scholarship and academia, journalism, public service, and business. Today he is the founder of The Institute for Political Economy and a regular commentator on world events (http://www.paulcraigroberts.org).
Dr. Roberts was educated at the Georgia Institute of Technology (B.S.), the University of Virginia (Ph.D.), the University of California at Berkeley and Oxford University, where he was a member of Merton College. He has been associate editor and columnist for The Wall Street Journal and columnist for Business Week and the Scripps Howard News Service. In 1992 he received the Warren Brookes Award for Excellence in Journalism, in 1993 the Forbes Media Guide ranked him as one of the top seven journalists in the United States. During his time of public service he was Assistant Secretary of the US Treasury in the early 1980s. In January 1982 he resigned to become the first occupant of the William E. Simon Chair, Center for Strategic and International Studies, Georgetown University. He held this position until 1993. He was a Distinguished Fellow at the Cato Institute from 1993 to 1996 and a Senior Research Fellow at the Hoover Institution, Stanford University.
During the 21st century, Roberts wrote extensively about the effects of the Bush (and later Obama) administrations related to the War on Terror, which he says have destroyed the US Constitution's protections of Americans' civil liberties, and he has taken positions very different from former Republican allies, opposing both the War on Drugs and the War on Terror.
Chris Floyd (Empire Burlesque) wrote about Dr. Roberts:
I must say there are few people out there today speaking truth about power with the unblinking, unvarnished ferocity of Roberts. (And as Ive noted here before, it is speaking truth about power not the old cliché of speaking truth to power that we so desperately need. Theres no point in speaking truth to power power already knows the truth of its monstrous crimes, and it doesnt give a damn.) Time and again, Ive started to write a post about some outrage only to find that Roberts has already been there, laying into the issue with a flaming brand.
Dr. Roberts has testified before congressional committees on 30 occasions on issues of economic policy. He has contributed chapters to numerous books and has published many articles in journals of scholarship, including the Journal of Political Economy, Oxford Economic Papers, Journal of Law and Economics, Studies in Banking and Finance, Journal of Monetary Economics, Public Finance Quarterly. He has written or co-written more than eight books , among them: How the Economy Was Lost: The War of the Worlds, published in January, 2010 by CounterPunch/AK Press, and the highly recommended The Failure of Laissez Faire Capitalism and Economic Dissolution of the West, published in February 2013 by Atwell Publishing.
In 1987 the French government inducted Roberts into the Legion of Honor. He is listed in Whos Who in America and Whos Who in the World.
Please listen to this outstanding interview or read the full transcription below the audio podcast.
For German listeners:
Als Abonnent der Metallwoche haben Sie ebenfalls Zugriff auf die vollständige deutsche Übersetzung dieses wahrlich einzigartigen Interviews.
Interview with Paul Craig Roberts
Europe is not really an independent entity
Lars Schall: Hello Ladies and Gentlemen, my name is Lars Schall, and I'm now connected in the United States with Dr Paul Craig Roberts. Hello, sir, fantastic to have you with us.
Paul Craig Roberts: I am pleased to be with you, Lars.
LS: Thank you very much! -- Dr Roberts, this month will see the 100th Anniversary of the US Federal Reserve System. Did it perform well during those 10 decades?
PCR: (laughter) Well, Lars, that depends on who it performed for. It performed the wealth of the banks; it provided them with liquidity that they wanted. For the general public is performed dismally. We've had massive inflation; you know a dollar today won't come close to buying what ten cents would buy when I was a child. We had a series of inflations, and the Federal Reserve gave us the Great Depression. It gave us the financial crash in December of 2007. It gives us the current, unprecedented printing of the US dollar. So, from the public standpoint it is demonstrable a failure, but for the banks, as a provider of endless liquidity, it's been successful.
LS: Is part of the problem that the Federal Reserve is owned in part by private banks who have a share in the regional banks?
PCR: Well, I dont think -- that was a just a cover for the opponents of the Federal Reserve when it was formed. They did not want a central bank and so they disguised the Federal Reserve so that it wouldn't look like a central bank. I don't think that's the problem. The problem is that the Federal Reserve was set-up to serve the banks. And the banks wanted a lender of last resort and over time they have succeeded in turning the Federal Reserve more and more and more into their direct functionary.
Initially, it had to be disguised because the public was opposed to the banks, but as time progressed, the banks were able to use the Fed more and more openly. Even though they still can't be completely open, for example, we're told that the current purpose of quantitative easing is to stimulate the economy, right? To provide very low interest rates and in order to stimulate credit to consumers and investment by investors in order to bring about the recovery, which seems to still be lacking after five years of quantitative easing. But the real purpose, of course, is not to bring a recovery; the real purpose is to support the balance sheets of the big banks that have been declared too big to fail. The purpose of the thousand billion dollars of bonds bought annually by the Federal Reserve is to drive up the prices of bonds. All debt prices rise together, so if they can get the US Treasury bond at a very high price and a very low interest rate, it raises the prices of the debt related derivatives on the balance sheets of the books or the balance sheets of the banks and makes them solid. So, the real purpose of quantitative easing is to support the solvency, the balance sheets of the banks.
LS: When will QE ever end, and how in your view?
PCR: Well, I can think of two ways it could end. One is, if the stock and bond markets collapse because they're bubbles, they're artificial. They're inflated by the enormous purchase of bonds at a very low interest rate. You can get no return from a debt instrument, and so it drives people into the stock market and this drives up the share prices. So, they're both bubbles, and they could crash for that reason alone. At some point some of the hedge funds, the pension managers, the money managers could come to the conclusion to take profits because this is a bubble in which case there would be a huge crash and then that would cause the Fed to lose control, and they might just be glad to get out of it with the cover that the market did it and not them.
Another way it can end is if the dollar collapses because if the dollar collapses the Fed would lose control of interest rates. The Fed can create all the dollars it's need to buy all the bonds it needs, but it cannot prep foreign currencies with which to purchase dollars. So if there was to be some major run on the dollar, some major move away from the dollar that would cause the Fed to lose control and QE would come to an end.
I cant think of any other reasons. If the Fed abandons the policy, then it will crash the markets, and it would rather have a future crisis than a crisis right now. So, I think it will tend to continue QE. I wouldn't be surprised if they have to expand it, because I don't believe the propaganda about the recovery, and if the economy turns down more they would increase the QE. In fact we have seen, Lars, with the recent address that the former Treasury secretary, Larry Summers gave to the IMF Conference about a month ago, when he argued that the natural rate of interest today is negative. If you make that argument, what you're saying is that the Fed has purchased enough bonds to give you a more or less a zero interest rate, but it hasn't purchased enough to drive the price of bonds above their face value so that you would have negative interest rates. I think that in that particular speech Summers was setting up a case for increasing quantitative easing and, like I say, if the economy really does come back or takes another leg down, that is an argument for doing more bond purchasing.
LS: But is there really a chance in the US for good recovery, a sustainable growth recovery?
PCR: No, because there's no growth in real consumer income except for so-called 1 percent. The real medium family income is lower now than it was in 1972. When you don't have real income growth the only way you can increase consumer spending or aggregate demand is by credit expansion, but they've already done this. This is what the Greenspan Fed did and it resulted in the real estate bubble and in very high debt levels for Americans both in their mortgages and their credit cards and in student loans. So, the population is really not positioned, it doesn't have the income for any significant credit expansion, so there's no way to expand aggregate demand. There's no real income growth and the ability to expand credit is now severely limited and so the reserves are just piling up in the banks, they're not finding their way into loans and credit expansions. So there's nothing to drive aggregate demand.
Now, they can produce a sort of a virtual recovery because of various factors, one is the way they measure inflation. They devised inflation measures that substantially understate the real rate of inflation and therefore when they deflate nominal gross domestic product they can show positive growth, but if they were actually measuring inflation the way they measured it, for example, 1990 or 1980 we would not see any real growth since the downturn.
Another way they produce the image of recovery is the way they measure unemployment. The original measure that they released, the headline rate is called U3 and is the 7 point something percent rate. That rate does not include any discouraged workers and does not include any works who have to take part-time jobs because they can't find full-time jobs, so that rate only includes people who are currently searching for jobs. If they become discouraged and dropped out of the labor force, they're not included in that rate.
Now, the government has a second measure of unemployment called the U6, you seldom hear of this. This rate includes workers who have been discouraged for less than one year. They're people who have searched for a job sometime in the past year, they're not stopped looking for a job beyond the one-year period. So that rate is double the U3 rate but that rate, itself, does not include the long-term discourage, the people who have been discouraged for more than year. There is a statistician, John Williams, of ShadowStats.com who estimates that rate according to previous methodology used by the US Government and he says that rate of unemployment is over 23 percent.
So, you can see that officially the Government's U6 is double the U3 measure; in other words nobody would think that a 13 to 14 percent rate of unemployment show a recovery. But John Williams, when he includes all discouraged workers (short- and long-term) finds the rate is three times the announced rate. So, obviously, there's no recovery. We don't see it and the growth real retail sales is really no growth in real retail sales. There's no growth in real consumer income. Consumer confidence is still low. There's just no size of recovery, except in the manipulated GDP number. (1)
LS: Can you give us a comparison? How much was the unemployment during the Great Depression?
PCR: Well, that's not an easy question to answer because many people could return to farms; there were many people who could go back to family farms. I think John Williams' has estimated that the unemployment rate in those kinds of circumstances was about 30 to 35 percent as opposed to the generally given of 25 percent. So, right now if John Williams estimate is correct with about 23.5 percent, we're essentially at the common measure of the unemployment in the Great Depression which was 25 percent. Williams says that that is an underestimate that was really actually higher.
But still, whether it is a Great Depression or merely a middle sized-Depression hardly matters, because the point is that we have far more people unemployed and unable to find jobs and this is also reflected in the declining labor force participation rate. The percentage of the workforce of the population that's actually in the workforce has been falling and it's falling because if you can't find a job and you give up and don't look for one, you are no longer considered to be in the workforce. That's how they keep the U3 measure of unemployment low. They simply say, "Well, all these unemployed people are not in the workforce and we only measure unemployment of those who are in the workforce". So that's how they get the phony 7 percent or something figure.
LS: A part of the perception management is the rigging of the precious metal markets. Now, taking a look at the rigging of the precious metal markets I would like to ask you: How likely it is that the Exchange Stabilization Fund which is part of the US Treasury, but also intertwined with the New York Fed is involved in this? (2) And, moreover, could you tell our listeners what the Exchange Stabilization Fund is, please?
PCR: The Exchange Stabilization Fund was created, I think, in 1934 as a response to President Roosevelt having ended the convertibility of the dollar into gold for US citizens for the domestic money supply. There was concern that by no longer having the US dollar backed by gold for the population of Americans that its exchange value in currency markets could be adversely affected, so the Exchange Stabilization Fund was created in order to support the stability of the dollar's exchange value.
The money to create the fund came from the paper profits that the Government made by calling in gold at $20 an ounce and then once it had all of that gold, revaluing it to $35 an ounce. Government made $8 billion of that transaction which at that time was a huge sum of money, and they allocated almost all of it to the Exchange Stabilization Fund. Now, the Exchange Stabilization Fund also was affected by legislation following when Nixon closed the gold window and no longer allowed foreign central banks to convert their dollar holdings into gold. So, more legislation came and then, I think, again later in the 70s when the IMF created the Special Drawing Rights. So, the Exchange Stabilization Fund now consists of dollars, foreign currencies and Special Drawing Rights which I think make up more than half of that basket.
The Exchange Stabilization Fund has the legal authority to deal in gold and so it would provide legal cover for manipulating the gold markets and certainly the very rapid rise in the price of gold in terms of dollars that occurred up through part of 2011 when the dollar price in gold hit $1900 an ounce, that would certainly be considered destabilizing the dollar and therefore they would have this legal authority for intervening in the gold market to drive down the price to stabilize the dollar.
Now, I don't know to what extent the resources of the Exchange Stabilization Fund are used in the gold price manipulation. The New York Federal Reserve Bank, I think, now has quite an extensive trading floor. I think they can just about intervene in anything including stocks. And the bullion banks, of course, can intervene in the gold market themselves and certainly they could do so as agents for the Federal Reserve and it certainly would be tolerated by the Federal Reserve, because keeping the price of gold from rising so rapidly is a way to protect quantitative easing from undermining the dollar's exchange value.
I don't really know exactly how the manipulation works, but certainly the bullion banks, if they go in and sell naked shorts at COMEX, they'll drive down the price. That will set-off stock loss orders, so there will be more sales and this will also cause margin calls. There will be more sales, so price will go below whatever they put in the futures contracts if they're sold, and they can then buy the shares below their contract price and redeem for gold, loot the ETFs in gold and then they can sell the gold to the Asians at the substantial premiums of the spot price that existed in the Asian markets. So it essentially becomes a money-making operation to sell naked shorts in gold. It serves the banks' profits and it serves the Fed's policy of protecting the dollar from exchange rate devaluation from quantitative easing.
LS: Do you think in the long-term this will end up in a catastrophe for the West?
PCR: I think it can end in a catastrophe for the dollar because if the Federal Reserve is creating, as it is, a thousand billion new dollars annually as part of quantitative easing. That's a huge increase in the supply. Is the demand for dollars rising by a thousand billion annually? Apparently not. We don't see any massive GDP growth rate. We see on the part of other countries more and more moves to settle their trade imbalances without reference to the dollar, without the use of the dollar.
Everyone now knows about the BRICS Brazil, India, China, Russia, South Africa that they are now making agreements to settle their trading imbalances in their own currencies, and Japan and China have this arrangement. Japan and Australia have this arrangement. So, if the demand for the dollar as a means for settling international trade imbalances drops but the supply of dollars is growing is growing by a thousand billion a year you would expect to see a drop in the dollar's exchange value; it's just supply and demand. Supply is increasing; demand is decreasing, so the price of the dollar has to go down.
I don't know how long it would take this to occur because there are many support mechanisms in place for the dollar. The Federal Reserve, first of all, has the Exchange Stabilization Fund. It can use the Special Drawing Rights to purchase dollars in the market. It has swap agreements. It has Japan printing money and so if the Japanese are printing yen then that takes any pressure off the dollar/yen exchange rate. Apparently, the European Central Bank is printing money as part of bailing out the private banks in Europe, that over-lent to Greece, Italy and Spain and so forth and so, also of course, the small Eastern European countries which retained their own currencies even though they joined the EU to let them keep their own currencies. They're told they have to print, while their currency will appreciate relative to dollar and hurt their exports.
So, you got a situation where so many countries are printing as well that this allows the Fed to continue, and we also have the Trans-Pacific Partnership and the Trans-Atlantic Partnerships. These partnerships are said to be some kind of free trade agreements, that's just cover. Their main function is to keep Asian and Europe locked into the dollar support system. If you're within this partnership with the United States you're basically committed to support the dollar and that's the function of them. So, we may have a situation where supply and demand can't correct the price for a very long time because there's so many manipulations and support mechanisms for an inflated price of the dollar.
LS: On the front that mixes finance with geopolitics, whats your opinion on the plan of the Shanghai Futures Exchange to establish an oil futures contract priced in yuan? (3)
PCR: Well, I think this is just common sense for the Chinese. Why? Its their own territory. If they want to have an oil exchange, why should they price it in dollars or Euros or Rubles? I mean why shouldn't they use their own currency? Their currency is probably the strongest in the world in terms of the extent of foreign reserves backing it. The Chinese have by far more extensive foreign exchange reserves than the United States, and not only that, they don't have a massive budget deficit. If their banking system is broke, the Chinese Central Bank has not announced quantitative easing to bail it out.
So, financially they seem to be much stronger than Washington or Europe or Japan, so it just makes sense that they're going to have a futures exchange that they price it in their own currency. Why pay commissions to go in and out of dollars it serves no purpose for them. So, I think these types of developments will increase. There are many, you see with the dollar took away the reserve currency role from the British Pound after World War II. I think really there was no other country capable of making anything, you know, Russia and China were, not only hurt by the wars but they were hurt by the communist regimes. Europe was devastated. Nobody could produce anything, so clearly the dollar made sense as a payment mechanism.
Well today, there are many economies that are doing as well or better than the United States so why should they deem the dollar in order to settle their trade imbalances? The currencies are valued in markets, just as the dollar is. Look in the short time since 2006 and despite the Chinese supporting the dollar the Chinese Yuan has risen 25 percent to the dollar since 2006 and thats with China using its currency to purchase dollars to support the dollar price. Now, a week or so ago the Chinese announced they don't need to do this anymore. They don't need to accumulate foreign reserves. They don't need to purchase anymore dollars, so that's almost a statement of they're going to let their currency appreciate faster.
Now, the one danger that China faces in that, it seems to me, perhaps I'm wrong, that they should certainly think about if they let their currency be freely traded; they opened it up to manipulation by Wall Street, by the Federal Reserve, by the Exchange Stabilization Fund. People can short it, try to drive it down or to create the volatility, or they could direct huge capital inflows driving it up then yank them out to drive it down and they could create such volatility in the currency as to make its use as an alternative to the dollar difficult. It's seemed to me that given the mendacity of Washington it is a risk for China to open its currency to manipulation by Wall Street and the Federal Reserve and the Treasury.
LS: Do you think that China and Russia will challenge the US someday via backing their currencies with gold the one way or the other?
PCR: I don't think either has a plan of accumulating gold so that they can challenge the dollar. Furthermore, it's not even necessary for them to have gold for their currencies to challenge the dollar. They don't even need a plan if China continues the kind of success that it has had its currency will automatically become a challenge to the dollar. It doesn't require any plan or activity on the part of the Chinese government. It just because it is, as I've already said, it just becomes a stronger currency by virtue of the Chinese position, their financial position. The same with Russia, if Russia can avoid destabilization by all of the Western financed non-governmental organizations and it can continue to make economic progress, and because it is resource rich, oil rich, gas rich, its currency should just become valued for its own reasons and it wouldn't require a goal. So, I do think that these other currencies will rise relative to the dollar, as I said, the Chinese currency managed to do that even during the period while China was supporting the dollar by purchasing it.
So, I expected that this process would continue and accelerate especially given quantitative easing which is increasing the supply of dollars at such a fantastic rate. You know it was only a few years ago, Lars, that the balance sheet of the Federal Reserve was less than a trillion dollars. Now it's what nearly close to four isn't it? Just in other words an entire history of the Fed, a hundred-year history of didn't reach a trillion dollars until quantitative easing and then it quickly jumped to three or four trillion.
What quantitative easing does, it dilutes dollars, so everyone who holds dollars everywhere in the world and they have massive quantities being held in the world because it's been the reserve currency since Bretton Woods -- so, if you have massive amounts of dollars and people are holding them and looking, they're saying, "Now look how our holdings of dollars are being diluted by quantitative easing. So, at some point you expect people to say, "I don't think I want these dollars" or "I don't want as many. I've got to hedge against having so many", and so you would see increasing sales of dollars or dollar or movement out of dollar denominated assets. You would think that would be a market response.
Now, as I said earlier, there are many mechanisms in place to support the dollar but I don't think it could be supported if there was any massive exit from the dollar. The quantitative dollars that exist are just too high. So, again, to answer your question, I don't think it requires any plan by the Russians or the Chinese to accumulate gold in order to challenge the dollar. I think the currencies will rise in value just because they're in a better financial situation.
LS: Yes, but do you think that the Chinese and Russians are doing the right thing by accumulating huge amounts of gold?
PCR: I see that as their realization that the dollar is over-valued and has a limited life. They probably don't know any better than I do what the life of the dollar is, but what they have been doing with their balance payment surpluses is keeping them in dollar denominated assets. That's why the Chinese have such huge stock of US Treasuries, and if the dollars reserved currency you naturally accumulate your balance payment surpluses in dollars or in dollar denominated financial instruments. Now, the fact that they don't want to do that anymore and are instead putting their surpluses into gold, or at least some the surpluses, is an indication that they have lost confidence in the dollar and are not adding to their holdings of dollars. So, I see it simply as realization on the part of Russia and Chinese of what I've been discussing with you in this interview.
LS: Yes. I have two more topics left and one would be to ask you: Why did it come in the US to the madness of offshoring industrial manufacturing and tradable professional service jobs. How did it come that the US was turned from an income driven economy to an asset price driven economy and can the disastrous effects of these things ever be reversed?
PCR: Offshoring was a result of the collapse of the Soviet Union and the rise of the high-speed internet. You see when the Soviet Union collapsed it was unexpected, by most people. I had predicted it, but when the Soviet Union collapsed it caused a socialist India and Communist China to re-think the situation, and had all of this end of history talk that there was no alternative any longer to American democratic capitalism. So the Indian and the Chinese opened their economies to foreign capital and the foreign capital saw opportunity in very low labor cost, because the unemployed Indians and Chinese were in enormous overhang in the labor markets and made it possible to hire labor at a wage far below labors contribution to profits.
So, Wall Street looked at this and said, "Okay we want you to increase your profits. All you've got to do is move the jobs off-shore and it started with manufacturing" and Wall Street said, "If you don't move the jobs offshore and get more profits. We're going to finance takeovers and we'll finance people that will take over your company and move the jobs offshore". So the profits go up and, of course, Congress contributed to all of this by limiting the tax deductible pay of executives and American firms to $1 million unless it was performance related that is unless you could say, "Well, look how much I drove up profits so I get all of these bonuses."
So that began the offshoring of manufacturing jobs, and with the rise of high speed internet it became possible to move tradable professional services offshore. Professional skills like software engineering, information technology or research, design, essentially just about any kind of engineering that didn't require presence on the site; architectural plans, accounting, all kinds of jobs could be moved off-shore, performed much cheaper and sit in on the high speed internet.
This is the source of American corporate profits for a decade and a half. It's not that the markets are expanding. There's no growth in consumer income, real retail sales are doing nothing. And so they get their profits by letting off American workers and hiring much cheaper labor abroad, and they also now bring them in on H1B work visas. They all want work visas and they have the American employees train the foreigners and then they dismiss the Americans. So the foreign, the people on LB1/HB1 work visas working for about one-third less than the going American salary, so the profits of American corporations are driven by the low labor cost. In other words its labor arbitrage across national borders, that's what offshoring is. It hasnt anything to do with free trade, it's not any kind of trade, it's just labor arbitrage.
Now, the American economists have helped cover this up. They claim all this as free trade. This is benefitting us. Free trade benefits us and they talked about, "Oh we'll have this new economy. These new kinds of jobs," but, of course, as I pointed out, for a decade each monthly payroll jobs' report that comes out, you can't find a single one of these new jobs there. The only jobs the American economy can create now are non-tradable, low paid, domestic services; retail clerks, waiters, bar tenders, waitresses, hospital orderlies. These are the jobs of the American economy.
So that's how it came about. Theoretically there are ways to reverse it. The United States could change the way it taxes corporation. It could tax them according to where they produce their products. If they produce the products that they sell to Americans like goods and services here domestically they have a low tax rate. If they produce them in China or India they a higher tax rate, but of course you wouldn't be able to get that past the corporations because they're now off-shored. So, there's not much that you could do to change that; it's in their interest and their interest prevails, so I doubt it could be changed.
LS: One final topic. What do you see as a future alignment of Germany? Do you think Germany would serve best as an intermediary in the Eurasian integration, and how could Germany possibly do this without causing too much damage to its Western relations?
PCR: I don't know why Germany should worry about its relations to the Western countries. For Germany the choice is whether it's going to be a sovereign country or not, and under the present arrangements, Germany is not going to be a sovereign country because it is being enmeshed in EU and, as we have seen, the EU has used the sovereign debt crisis to attack the sovereignty of the individual member governments such as Greece and Italy. And Germany cant sit there and think, "Oh, well they can't/won't attack our sovereignty. They'll just attack the sovereignty of other member states. That never happens that way. Unless the EU becomes a front for a Germany empire, Germany will lose sovereignty like everybody else.
What are the consequences of Germany losing sovereignty other than they lose sovereignty? It also means that as they are the only real strong economy in the EU that they be exploited to pay the bills. This is the reason Germany did not want the European Central Bank to have the ability to print money to bail debtor governments in the EU, but Germany is succumbing to this. They're under pressure from the Americans. You know, a year or so ago, an American official announced that it was not in the US interest for Britain or Germany to talk about leaving the EU. In other words, we Americans are not going to tolerate your sovereignty. It's not your business whether you're in the EU, we want you there. So, that takes a strong leader to stand up to these pressures. Germany doesn't seem to have strong leaders, they seem to be American puppets.
As long as Germany's ruled by American puppets and the German people don't care, Germany will be gradually extinguished as an independent country, and the success that Germany has achieved will be taken from the German people and divided up among the various members of the EU.
Now, what should Germany do? Germany should simply leave the EU immediately. Leave NATO immediately. Provide the mark and enter into trade partnership with Russia. This would completely re-orient all of Europe because that is the only thing that makes sense for Germany. We had the combination of Russian natural resources, the German technology know-how and fiscal discipline. You would see a real economic union and it would draw the rest of Europe into it and it would also breaking up NATO, it would stop all the American war of aggression, because Washington wouldn't any longer have a cover. It couldn't pretend that NATO has some kind of international legal authority to justify Washington's war crimes, and so it would be a huge change in the world and if would stop all this talk about American hegemony, talk about America being the exceptional, indispensable country that doesn't have to obey its own laws or international laws.
It would simply create the alternative power that the Soviet Union used to represent to constrain the empire of the Americans. So it would be a huge boom to the world and to Germany and to Europe, but as I said there's no sign of this realization in Germany and, of course, Washington is very adept at creating huge fears of Russian among Europeans and we see all that in all of the NATO war games - the ones that took place, I think, what was it last month in Poland and the Baltic States. We see it in the American missile basis, located in former parts of the Russian empire. So it looks like Europe is really not an independent entity that it's part of the American empire and its military is being incorporated within the American militaries, given where European armies and navies cannot operate independently of the United States because the whole operating system is set up that way. Almost like the Spanish Navy now is equipped with these Aegis missiles so that means they can't operate independently of the Pentagons system.
So, I think what you're seeing here is the growth of the American empire, but the destruction of its economic base, both through the off-shoring of the economy and through the apparently unlimited printing of its currency. So, what do you do when you have the ambitions of an empire but you lack the economic base, you're destroying your own economic base. So, that's the dilemma that I think the United States faces and I think it's a dilemma also for its European puppet states, and if they were intelligent and they had leadership, they would start doing what the Russians and Chinese are doing, and that is moving away from these networks and trying to find something that would actually serve their purpose instead of some foreign country's purpose.
LS: Thank you very much for this interview!
PCR: Well, you're welcome. I appreciate your interest and the opportunity.
(1) For more on this see Paul Craig Roberts: More Misleading Official Employment Statistics, published on December 10, 2013 here: http://www.paulcraigroberts.org/2013/12/10/misleading-official-employment-statistics-paul-craig-roberts/
(2) Compare Lars Schall: The Organized Crime / Banking At Its Finest Show, published September 28th, 2013 here: http://www.larsschall.com/2013/09/28/the-organized-crime-banking-at-its-finest-show-4/
(3) Compare China's planned crude oil futures may be priced in yuan SHFE, Reuters, published
November 21, 2013 here: