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The Great Depression, Part II?
By Dateline D.C.

Sunday, May 7, 2006

WASHINGTON

Learning the good news that, fueled by programs aiming to restore the ravages of Hurricanes Katrina and Rita, our economy grew by a magnificent 4.8 percent this year, we should be as happy as clams. Yet some of us are scared.

We can cheer that our exports, compared to last year, have grown to 12.1 percent. But crossing the page, we see imports -- mostly from China -- are up 13 percent. The symbol for the United States -- once a factory belching smoke -- now is an economy dominated by illegal immigrants living in a mall-dominated culture.

As gasoline prices remain high there is plenty of evidence that "oil shock" has spread throughout the country -- to farmers, construction companies, plastics manufacturers and, of course, delivery and trucking companies. So, in turn, look for higher prices from taxi cabs through school busing programs, trash removal, service calls and deliveries of your favorite pizza.

Farmers are vital to our lives. This year's harvest already is in serious trouble because of the heavy and long rains, flooding and high winds, interspersed by imminent drought. All of which equals price increases. Fuel prices for crop planting are much higher than in 2002, as are fertilizer costs.

Mortgage foreclosures on American homes jumped by 72 percent in the first quarter of 2006 compared with 2005. Easy financing of homes, "no down payment" and adjustable-rate mortgages are difficult to find and housing inventories are larger than they have been since the 1990s.

The middle classes is under attack. Last year, we used our homes as equity and withdrew $600 billion to take care of credit card bills and personal spending. Now, with increased gas prices, a tight housing market and personal debt in the stratosphere, the crunch is on.

Small wonder that the price of gold, around $270 per ounce in 2001, now is more than $660 and expected to move higher still.

The French connection

In July, the G8 will meet in St. Petersburg and there are signs that Alexei Kudrin, Russia's Finance minister, may seek to cause us still more problems.

Last month, he ranted that "the U.S. dollar is not the world's absolute reserve currency," fussed about our "unsustainable" trade deficit and, with the finesse of a suicide bomber, added, "The international community can hardly be satisfied with this instability."

If Kudrin is taken seriously -- and the Chinese certainly consider him a very serious player -- we may then be forced away from our economic underpinning. If Russia, China or the European Community started using euros, rubles or yen instead of greenbacks for oil transactions, the effect would equate to a nuclear bomb on New York City. And, if we stop buying oil, China and India will gulp each drop.

We would have to start paying back our $9 trillion national debt and that is impossible.

The illegals crisis

So that's how the money we don't have may be spent. But we also have an illegal immigration crisis.

Illegal immigrants have taken over agricultural industries from A to Z. They are responsible for cleaning the massive hog and poultry battery farms that provide us with inexpensive food. They work on turf farms, horticulture and lawn services in the suburbs. They are responsible for meat-packing plants, through herding cattle to mushroom farming. Agriculture is permeated by Hispanic labor.

World Perspectives, a consulting firm, estimates that as many as 75 percent of our agricultural labor force is "fraudulently documented." Moreover, the American Farm Bureau Federation claims that a crackdown on illegals would cause production losses of $5 billion to $9 billion a year.

Adding to a sense of fear about the economy are the words of Ben Bernanke, the newly appointed chairman of the Federal Reserve: "If the dollar declined sharply, it would not necessarily disrupt markets."

With our dollar, that sounds like an invitation for China or perhaps Russia to start a sell-off that would drown us in red ink. In the past four years, the dollar has dropped 30 percent against the euro, consumer spending and housing prices are in retreat and energy prices are skyrocketing.

That's why we are scared.

Are we about to face the challenge of another Great Depression, coupled with the ever-increasing costs of the social safety net (health care and pensions), Social Security and education compounded by war and security issues?

And are we willing to remain dependent on illegal immigrant labor filling what President George Bush calls "jobs Americans don't want"?

Dateline D.C. is written by a Washington-based British journalist and political observer.