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!
I don’t think you’ll really enjoy it. You may be able to feel some pleasure in the sufferings of the rich and powerful but it’s a fair bet that the peopl who suffer first ad most will be those who are already having a pretty hard time: poor people trying to get by, people who are ill, people who already suffer hate and discrimination. It’s often much easier for the powerful to “move on”, as they like to put it.
KathZ,
Not necessarily. The initial period of the same fall from power of the UK was actually marked by increased egalitarianism and the creation of the welfare state.
Let’s not forget, though, that while the military contribution to the USA deficit is indeed large roughly the same amount was caused by the Bush II tax cuts.
http://www.whitehouse.gov/infographics/us-national-debt
What action will China take about the funny American paper money it is holding?
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Foreign ownership
Composition of U.S. Long-Term Treasury Debt held by foreign states, Nov. 2005–Nov. 2010. June figures are results of comprehensive Treasury Department surveys. (graph)
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As of January 2011, foreigners owned $4.45 trillion of U.S. debt, or approximately 47% of the debt held by the public of $9.49 trillion and 32% of the total debt of $14.1 trillion.[40] The largest holders were the central banks of China, Japan, the United Kingdom and Brazil.[42] The share held by foreign governments has grown over time, rising from 25% of the public debt in 2007[43] and 13% in 1988.[44]
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As of May 2011 the largest single holder of U.S. government debt was China, with 26 percent of all foreign-held U.S. Treasury securities.[45] China’s holdings of government debt, as a percentage of all foreign-held government debt, have decreased a bit over the last year, but are up significantly since 2000 (when China held just 6 percent of all foreign-held U.S. Treasury securities).[46]
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http://en.wikipedia.org/wiki/United_States_public_debt
Another question. Will the US keep Israel afloat?
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http://www.ifamericansknew.org/stats/cost_of_israel.html
I fear that the end of empire and reserve currency status is marked by global conflict. That kind of power has to be wrested from the powerful and there will be many who want to break free of its grip while others will want to take over control of the reserve currency. The beetle on its back may not be the right metaphor: more the cornered rat which fights tooth and nail to save the status quo.
Remember your wistful remarks about “fine writing”, Craig? This post of yours is the best description of the advantages of having the reserve currency that I can remember reading. And that is precisely becuase it is couched in plain, simple language.
Fine writing is certainly an art in its own “write”, with poetry as the extreme manifestation. But what you (mostly) do is write to inform and persuade, and I believe that is best done exactly the way you do write. Probably for the same reasons that the most efficient way for a mammal to swim is pretty much exactly the way a dolphin does swim.
Craig, I sincerely hope so that the end of American Empire is close. Considering what they have done (of course do not let us forget role of British gov, they they were complicit in many of these acts), they deserve this and a lot more. Look at their contemporary history since Second World War:
Attempted to overthrow more than 50 governments, most of which were democratically-elected.
Attempted to suppress a populist or nationalist movement in 20 countries.
Grossly interfered in democratic elections in at least 30 countries.
Dropped bombs on the people of more than 30 countries.
Attempted to assassinate more than 50 foreign leaders.
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And I can never forgive them ever for what they did to the people of Diego Garcia, people of Palestine who are made homeless because of their actions and policies. They deserve what it is coming to them and a lot lot more. If few American are made homeless.. in no way it even come close to being made stateless..
As to the matter of your post, I am afraid I don’t see a happy ending. The USA is by far the most powerful military force in the world, with a huge thermonuclear arsenal (and let’s not forget, it still has plenty of chemical and biological weapons too!)
Trying to get back the money and resources the USA owes the rest of the world may turn out like trying to arrest for debt someone armed with a tank, cylinders of poison gas, and a battery of nuclear rockets. It would probably cost far less just to let the matter drop.
Tom,
I agree, but if people simply start dealing in another currency of choice, and being wary of lending them more money denominated in their own currency, the effect on them will be very severe.
@Tom. China will not ‘arrest’ America. It will simply put its $s up for sale, effectively busting the US in one fail swoop.
Tom, I agree with your decription, the death of the Monroe doctrine, the ubiquitous piece of paper responsible for US trade/aid machinations has finally landed were it belonged all the while, on the bonfire.
This does not mean they won’t wriggle, maybe try another war or two in the middle east to ensure that their large oil conglomerates will have some sort of control over the last vestiges of uncontrolled reserves.
I would discount the thermo nuclear options, it would take a right Strangelove to push the button for the last ever playground fight, I think global pressure would be too strong to go along that alley, but I can see those black ops teams, Mary linked to 2 days ago, engaging, subdefuging, sabotaging and killing, for more mistrust and false flagging. As long as the Carlisle trust earns money and Israel gets supported, an unstable future is secured.
Mary, Thanks for the link re whether USA will keep Israel afloat. This debate has been going on for a while (mostly on the net), but quite frankly I think it is Israel who run USA and its politics. I remember in Jerusalem an Israeli man was boasting that it is us who tell America what to do not the other way round. I can 100% believe that..
Quite agree Azra.
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Not a good day for Obomber. 31 ‘special forces’ and seven Afghan soldiers have died in a helicopter crash in East Afghanistan. The Taliban claim to have shot it down.
http://www.bbc.co.uk/news/world-south-asia-14430735
I recall some suggestions at the beginning of the 2nd Gulf war – which I don’t think ever penetrated to mainstream media, but in my opinion had some logic to them – that the reason George W was so determined to get rid of Sadam was that Iraq had been trying to drum up support for the oil currency to be moved away from the dollar. How horribly ironic if that was indeed the case and the US lost the reserve currency because of the countless billions they spent at war in order to prevent that.
The greatest capitalist country in the world in a financial mess! Makes me laugh anyway.
Thought everyone might enjoy a laugh at the Daily Fail
http://www.dailymail.co.uk/debate/article-2020705/LIZ-JONES-The-caring-professions-They-just-dont-care-all.html
“I remember in Jerusalem an Israeli man was boasting that it is us who tell America what to do not the other way round”
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That might as well have been PM Ariel Sharon who, in October 2001, stated:
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“We, the Jewish people, control America. And the Americans know it”
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But I think he was in Tel Aviv at the time.
I have been waiting 40 years for the bill for Vietnam to come in.
I suppose that’s not too bad compared with the Last Supper.
@ Anno ‘Even if Simon Jenkins and Dominic Grieve expose the whole matter,….’ What has Grieve ever exposed? Nothing to those fighting for an inquest for Dr Kelly. Nor do many know that he voted very strongly for the Iraq war.
That comment should have gone on the previous post. http://www.craigmurray.org.uk/archives/2011/08/secret-torture-policy/
Good link, dankeschoen Mary, what a massive annual burden on the US taxpayer. Still this does not include the security and defense arrangements, contingents and other little agreements for funding the latter, which has kept/ backed up each and every one of Israels past wars.
Crunchtime’s approaching.
So is Sir peter Gibson going to talk to himself then? I mean, to get paid a ransom for his ‘public service’?
Could one not define this sort of behavioural soft touching of the establishments underbelly as being not in the public interest, send him home!
China calls for a new reserve currency, which one, and will this too be part of the rise and fall of great powers? I fail to see how replacing China with the US, for example, would be a cause for great celebration. Azra says they, the US, deserves a lot more. Would he like to share his hopes and dreams with us? Generally, why do you guys hate the US qnd Israel so much? I think you need to be more balanced. The US is a source of many good things in the world too numerous to mention. And your comments about Israel never really come to terms with the right of self determination and the crimes comiitted against Israel by its enemies over the years.
Don’t celebrate too quickly Craig.
It’s us next…..
A related issue is one of the preciptating reasons for the American invasion of Iraq. It is little commented upon, but Saddam Hussein was threatening to sell oil in Euros rather than dollars which would have had a devastating effect on the dollar value as the international currency. This, as much as the desire for America to guarantee its long-term oil supply, was the trigger for the American invasion.
For those who have forgotten http://www.energybulletin.net/node/7707
The UK is still the third largest holder of US debt:
http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt
Combine that with the UK’s Euro holdings (and bailout contributions) and its looking like a busted flush,.,..
It’s not just military spending
Dean Baker, ”…….the United States has a broken health care system. Since more than half of health care costs are paid through government programs like Medicare and Medicaid, this translates into a budget problem. If we paid the same amount per person for our health care as any other wealthy country, then we would be looking at surpluses in the long-term, not deficits.”
http://www.counterpunch.org/baker07042011.html
Did PM Sharon say that Israel controlled America? Wow! That’s amazing. I wonder if you could supply a reference or chapter & verse (not just that ‘somebody said that somebody said’).
Meanwhile, I’ll tell you another. I heard it myself straight from the lips of a Mr Haaretz — from Jerusalem, I think, but he could have been from Tel Aviv. A friend of Mr H told him that he had stopped reading Israeli newspapers and only read Arab ones now. “Why ever?,” exclaimed Mr H, “They hate us.” “Yes,” replied friend, “but when I read Israeli papers, it’s all about our problems, troubles here, high taxes there; it’s always bad news. But when I read the Arab papers, everything is so much better: they say we are powerful, and rich, and that we control the world.”
Wow what a boring cliche-slinging fatuous thing to write. Twenty-five years ago, you would have been gloating about how Japan was just about to take over America, and how you’d enjoy watching it happen.
As it is, you think (wrongly) that China is about to take over some sort of supreme U.S. position in the world (invented by people like you and Tea Party folks), and apparently this is something that you’re going to welcome. That you would turn your head away from the reasons why Chinese hegemony would be a really bad thing once again shows how much hatred you have, and how it really only goes one way.
Care to start a thread about China’s massive violations of human rights?
Someone wrote above: “A related issue is one of the preciptating reasons for the American invasion of Iraq. It is little commented upon, but Saddam Hussein was threatening to sell oil in Euros rather than dollars which would have had a devastating effect on the dollar value as the international currency. This, as much as the desire for America to guarantee its long-term oil supply, was the trigger for the American invasion.”
That’s just a dumb conspiracy theory. How incredibly stupid to think that Hussein had such power. How incredibly stupid to think that the U.S. would chose to bolster the dollar through massive deficit spending.