After some careful consideration and dot-connecting, I'm beginning to think that this just might be the right thing to do. Follow me after the jump.
We know that America's manufacturing base is gone. We became a "primarily service-based economy" during the Reagan Administration. Most of America's manufacturing capacity has moved to foreign soil.
We also know that our service economy is moving offshore as well. More and more we find our credit card processing, IT support and other services are relocating to foreign soil.
As of this year, America is also, for the first time, a net importer of food.
What this adds up to is a trade deficit that we cannot ever grow our way out of. With foreign investors supporting our habit of overconsuming by buying our Treasury debt, we find ourselves at the mercy of our creditors.
The final straw was Saddam Hussein's threat of breaking the underpinnings of the global economy: The Petrodollar. Saddam's threat to sell oil denominated in Euros would allow him greater profit than selling in dollars. This would break the petrodollar by forcing the rest of OPEC to follow suit. Add in the impending peak in global oil production and there really was no other option available to the US administration.
The result was the war in Iraq. In order to keep the entire US economy from collapsing, the Bush Administration had no choice but to attempt to sieze Iraq's oil reserves.
The privatization of Social Security is the Bush Administration's final capitulation in Iraq. They know the war is lost. They know that we failed to gain unfettered access to twenty percent of the world's proven petroleum reserves. It will now be impossible to defend our currency.
So we allow the currency to fall, in order to inflate away the debt. But China refuses to co-operate. They continue to peg their currency to the dollar. So our debt remains. The last gasp is to default on the treasury bonds owned by the foreign investors.
Unfortunately, the Social Security Trust Fund is fully invested in the same securities. Defaulting on the treasury debt is to default on Social Security. The Bush Administration is preparing for the collapse of the dollar.
So by creating private investment accounts, the Administration is trying to create an exit for retirees. The private investment accounts, if they permit investment in euro-denominated securities, may be the only way to keep retirees from starving to death.