End of the American Empire 190

China’s call today for a new global reserve currency to replace the dollar spells the beginning of the end of the American Empire. China holds most of the dollar credit in the world, and that of course gave China a powerful incentive to maintain dollar hegemony. That China now views the risks to world trade from the US’ indebtedness, to outweigh the potential loss in value of its own dollar reserves, is the tipping point that spells the inevitable beginning of the end of the US empire.

The reserve currency system has since 1795 allowed empires to be built on the economic output of weaker powers. If you achieve sufficient economic power and control of resources that yours is the currency everyone holds, you can print as much of it for yourself as you like and the devaluation effects are spread around not just your economy, but everyone else who holds your deposits. Being the reserve currency is a license to print money. Both the British and the Americans used this position to build military forces which could dominate both formal and informal empires. Both eventually experienced overreach, with military expenditure pushing deficit finance to the point of implosion. Then you lose reserve currency status.

It happened to the British and now it is happening to the Americans.

The colossal 4.7% a year of its wealth the US throws away on defence and security expenditure (broadly defined) – more than double the European average – is a huge factor in US indebtedness. There is an extraordinary failure to mention this in the mainstream media. It seems to be an Emperor’s New Clothes thing. It is the one area of expenditure the xenophobic hatemongers of the Tea Party want to see increased, and the existence of Empire causes all career politicians to compete in public displays of patriotism. That has been a political fact since the dawn of time. Defence spending is a sacred cow, unmentionable in the United States. They probably have a couple of decades to come fully to terms with the fact that they will no longer be in a position to invade who they will in order to control their mineral and other commodity resources. As with the British empire, the beetle on its back will kick its legs a while yet. It will be painful for them.

I shall enjoy it. I never claimed to be a good person!

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190 thoughts on “End of the American Empire

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  • JJB

    Yugo behaves as your typical hasbara boy. At least, he uses them the tactics:
    1. Do not be the first to mention Israel
    2. DO not engage with the issues exposed by the critics; instead, build strawmen like there is not tomorrow
    Of late, however, I have identified another type of hasbara internet “operative” that works by posing as a rabid anti-semite, blaming anything and everything on a zionist conspiracy. The purpose clearly is to make leftist look like old racist cranks. Do not fall into the trap. There is NO zionist conspiracy. Israel abuses towards the palestinians are “just” part of the same old western imperialism that never went away.


  • Courtenay Barnett

    Looking at the US actions in Libya – and considering the domestic problems of America – doesn’t it appear a bit like George Carlin described?

    “…can’t educate our young people; can’t get health care to our old people! But we can bomb the shit out of your country, alright! HUH!? We can bomb the shit out of your country, alright—especially if your country is full of brown people!” (George Carlin, from his 1992 special, Jammin’ in New York).

  • John Goss

    Colin, I think that is a shrewd observation, that the Euro is so important in the current crisis. The £ is neither strong against the $ nor the Euro and I suspect there are going to be tough times ahead for everyone. Savers are going to see their savings diminish in real terms. Though I have no affinity to China I am glad they are helping to stabilise the euro. But the whole problem in the west is over-borrowing, indebtedness and banking practice. I have connections with Romania and I learnt last year that Ceaușescu had paid off the country’s national debt (at some cost to Romanians admittedly) by 1989. What a strong position that left a communist country in for growth. Some, and I won’t speculate on who, did not want a communist in such a strong position and he was shot together with his wife (presumably by professing Christians) on Christmas Day, 1989. People in the villages now, and some in the towns, complain about how much better it was under Ceaușescu, when they all had work.
    When the depression comes it is necessary to remove a lot of power from the banks and insurance companies. Liquidity ratio is a nonsense – that a bank can lend out seven times as much money as it has deposited with it is ludicrous. Bankers should be paid for their services. But the claim that all the upcoming stars in the banking industry will leave if they don’t get these equally ludicrous bonuses for getting us into this messy stinking mire is also a nonsense. Let them go! They will be going soon anyway!

  • Suhayl Saadi

    JJB (not the sports shop, I presume?!), thanks for the apt advice re. trolling activity. I think that in its time, this website has probably had ’em all!
    “you continue to speak such hippie crap about all of us loving each other…” Yugostiglitz.

    Yugostiglitz, don’t you love us all, then? Perhaps, then, it’s time for some sake! Or else, some Nesher Malt.
    Azra, thanks – they served it in little jars which had been placed in larger receptacles filled with hot water to keep the drink warm. One drank from small, handleless cups. As well as the Chinese maotai, it reminded me a little of a Portuguese spirit called medronho, which, as though in a fairy story, one sips from thimbles.

  • angrysoba

    Suhayl: … or did I have a little too much warm sake in that pleasant Japanese restaurant? In my relative alcoholic innocence (!), I didn’t realise that while the Chinese beverage, maotai is drunk cold, sake is consumed warm.

    Sake is sometimes served warm but it depends on the type. Most of the sake that I drink is served lightly chilled and if served warm the flavour would be ruined. That said, warm sake is good in winter.
    Azra: @Suhyal, your Sake experience brought back memories of my only Sake Drinking occasion and it was in Kuwait! not cold and freezing, but rather warm and to top it all up, I was not aware that Sake cup is shared.
    Maybe that’s the way it is drunk in Kuwait but I have never seen that happen in Japan except at traditional Shinto weddings where, I think, a flat saucer-like cup of sake is drunk from by the bride and groom.

  • Suhayl Saadi

    Thanks, angrysoba, that’s fascinating. Maybe it was so cold in Edinburgh (and often is), that the restaurant figured it might as well do ‘The Perpetual Temple of Winter Version’! It was one of those lively teppanyaki places where, in some sections, they cook on a surface in front of the customers.

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