Can You Really Run an Empire on Borrowed Money?
“Can you really run a great empire on borrowed money?” asked Richard Russell recently.
We can give you the answer here…or you can simply read the news headlines. Either way, the answer is the same: yes, for a while.
America has been the world’s leading imperial power for only three or four generations. It took over from the British in WWI. Since then, American military and commercial power have dominated the planet.
But the empire business, like any business, has its good points and its bad points. On the good side, you get to boss people around and feel important. On the bad side, it can be costly – especially if you don’t know what you are doing. And on the really bad side, it almost always ends in bankruptcy and military disaster.
As was explained tin the book, Empire of Debt (with Addison Wiggin)…and Mobs, Messiahs and Markets (with Lila Rajiva). Empires – like other grand public spectacles – make the news twice, as they say, coming and going. Most likely, the U.S. empire is on the ‘going’ side of the news. That is the meaning of Mr. Xu Jian’s comment…that the U.S. currency is yesterday’s world money.
The empire business is fundamentally a protection racket. The imperial power provides political stability and military protection. In return, the tributary or vassal states pay. But that is the fly in America’s imperial ointment. No one pays. The United States invaded Iraq. Cynics say it did so to get Iraq’s oil. At least, that would have made sense from an imperial finance point of view. Nothing uses more oil than the pentagon. And nothing is more costly than garrisoning troops all over the world and fighting ‘insurgents’ you’ve stirred up.
How to pay the expenses? Typically, an imperial power either forces subject nations to render up some form of tribute – gold, slaves, wheat – or, in the more modern variety, it insists on certain favorable trading terms.
But America never got the hang of empire; it invades countries but forgets to steal the treasure. It is so impressed with its own claptrap – “making the world safe for democracy”…“fighting terrorists” – that it forgets it has to pay the bills.
In its most modern form, the U.S. empire has one great advantage: the rest of the world looks to the dollar as a universal currency. Until now, the United States has been able to finance its imperial aspirations largely by paying in dollars, which other nations accepted at par. But no law says they have to continue to take them. And now, fashion models and foreign governments – including an up-and-coming rival, China – are beginning to raise questions. And now the U.S. dollar is in the news – going, along with the empire.
