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Home / USA News / The American Empire Is Bankrupt

The American Empire Is Bankrupt

This week marks the end of the dollar’s reign as the world’s reserve currency. It marks the start of a terrible period of economic and political decline in the United States. And it signals the last gasp of the American imperium. That’s over. It is not coming back. And what is to come will be very, very painful.

Barack Obama, and the criminal class on Wall Street, aided by a corporate media that continues to peddle fatuous gossip and trash talk as news while we endure the greatest economic crisis in our history, may have fooled us, but the rest of the world knows we are bankrupt. And these nations are damned if they are going to continue to prop up an inflated dollar and sustain the massive federal budget deficits, swollen to over $2 trillion, which fund America’s imperial expansion in Eurasia and our system of casino capitalism. They have us by the throat. They are about to squeeze.

There are meetings being held Monday and Tuesday in Yekaterinburg, Russia, (formerly Sverdlovsk) among Chinese President Hu Jintao, Russian President Dmitry Medvedev and other top officials of the six-nation Shanghai Cooperation Organization. The United States, which asked to attend, was denied admittance. Watch what happens there carefully. The gathering is, in the words of economist Michael Hudson, “the most important meeting of the 21st century so far.”

It is the first formal step by our major trading partners to replace the dollar as the world’s reserve currency. If they succeed, the dollar will dramatically plummet in value, the cost of imports, including oil, will skyrocket, interest rates will climb and jobs will hemorrhage at a rate that will make the last few months look like boom times. State and federal services will be reduced or shut down for lack of funds. The United States will begin to resemble the Weimar Republic or Zimbabwe. Obama, endowed by many with the qualities of a savior, will suddenly look pitiful, inept and weak. And the rage that has kindled a handful of shootings and hate crimes in the past few weeks will engulf vast segments of a disenfranchised and bewildered working and middle class. The people of this class will demand vengeance, radical change, order and moral renewal, which an array of proto-fascists, from the Christian right to the goons who disseminate hate talk on Fox News, will assure the country they will impose.

I called Hudson, who has an article in Monday’s Financial Times called “The Yekaterinburg Turning Point: De-Dollarization and the Ending of America’s Financial-Military Hegemony.” “Yekaterinburg,” Hudson writes, “may become known not only as the death place of the czars but of the American empire as well.” His article is worth reading, along with John Lanchester’s disturbing exposé of the world’s banking system, titled “It’s Finished,” which appeared in the May 28 issue of the London Review of Books.

“This means the end of the dollar,” Hudson told me. “It means China, Russia, India, Pakistan, Iran are forming an official financial and military area to get America out of Eurasia. The balance-of-payments deficit is mainly military in nature. Half of America’s discretionary spending is military. The deficit ends up in the hands of foreign banks, central banks. They don’t have any choice but to recycle the money to buy U.S. government debt. The Asian countries have been financing their own military encirclement. They have been forced to accept dollars that have no chance of being repaid. They are paying for America’s military aggression against them. They want to get rid of this.”

China, as Hudson points out, has already struck bilateral trade deals with Brazil and Malaysia to denominate their trade in China’s yuan rather than the dollar, pound or euro. Russia promises to begin trading in the ruble and local currencies. The governor of China’s central bank has openly called for the abandonment of the dollar as reserve currency, suggesting in its place the use of the International Monetary Fund’s Special Drawing Rights. What the new system will be remains unclear, but the flight from the dollar has clearly begun. The goal, in the words of the Russian president, is to build a “multipolar world order” which will break the economic and, by extension, military domination by the United States. China is frantically spending its dollar reserves to buy factories and property around the globe so it can unload its U.S. currency. This is why Aluminum Corp. of China made so many major concessions in the failed attempt to salvage its $19.5 billion alliance with the Rio Tinto mining concern in Australia. It desperately needs to shed its dollars.

“China is trying to get rid of all the dollars they can in a trash-for-resource deal,” Hudson said. “They will give the dollars to countries willing to sell off their resources since America refuses to sell any of its high-tech industries, even Unocal, to the yellow peril. It realizes these dollars are going to be worthless pretty quickly.”

The architects of this new global exchange realize that if they break the dollar they also break America’s military domination. Our military spending cannot be sustained without this cycle of heavy borrowing. The official U.S. defense budget for fiscal year 2008 is $623 billion, before we add on things like nuclear research. The next closest national military budget is China’s, at $65 billion, according to the Central Intelligence Agency.

There are three categories of the balance-of-payment deficits. America imports more than it exports. This is trade. Wall Street and American corporations buy up foreign companies. This is capital movement. The third and most important balance-of-payment deficit for the past 50 years has been Pentagon spending abroad. It is primarily military spending that has been responsible for the balance-of-payments deficit for the last five decades. Look at table five in the Balance of Payments Report, published in the Survey of Current Business quarterly, and check under military spending. There you can see the deficit.

To fund our permanent war economy, we have been flooding the world with dollars. The foreign recipients turn the dollars over to their central banks for local currency. The central banks then have a problem. If a central bank does not spend the money in the United States then the exchange rate against the dollar will go up. This will penalize exporters. This has allowed America to print money without restraint to buy imports and foreign companies, fund our military expansion and ensure that foreign nations like China continue to buy our treasury bonds. This cycle appears now to be over. Once the dollar cannot flood central banks and no one buys our treasury bonds, our empire collapses. The profligate spending on the military, some $1 trillion when everything is counted, will be unsustainable.

“We will have to finance our own military spending,” Hudson warned, “and the only way to do this will be to sharply cut back wage rates. The class war is back in business. Wall Street understands that. This is why it had Bush and Obama give it $10 trillion in a huge rip-off so it can have enough money to survive.”

The desperate effort to borrow our way out of financial collapse has promoted a level of state intervention unseen since World War II. It has also led us into uncharted territory.

“We have in effect had to declare war to get us out of the hole created by our economic system,” Lanchester wrote in the London Review of Books. “There is no model or precedent for this, and no way to argue that it’s all right really, because under such-and-such a model of capitalism … there is no such model. It isn’t supposed to work like this, and there is no road-map for what’s happened.”

The cost of daily living, from buying food to getting medical care, will become difficult for all but a few as the dollar plunges. States and cities will see their pension funds drained and finally shut down. The government will be forced to sell off infrastructure, including roads and transport, to private corporations. We will be increasingly charged by privatized utilities—think Enron—for what was once regulated and subsidized. Commercial and private real estate will be worth less than half its current value. The negative equity that already plagues 25 percent of American homes will expand to include nearly all property owners. It will be difficult to borrow and impossible to sell real estate unless we accept massive losses. There will be block after block of empty stores and boarded-up houses. Foreclosures will be epidemic. There will be long lines at soup kitchens and many, many homeless. Our corporate-controlled media, already banal and trivial, will work overtime to anesthetize us with useless gossip, spectacles, sex, gratuitous violence, fear and tawdry junk politics. America will be composed of a large dispossessed underclass and a tiny empowered oligarchy that will run a ruthless and brutal system of neo-feudalism from secure compounds. Those who resist will be silenced, many by force. We will pay a terrible price, and we will pay this price soon, for the gross malfeasance of our power elite. 

Chris Hedges

  • nicola

    Dear Mr. Chris Hedges, I'm writing from Italy.
    Today I read the article in regard to the Ekaterinburg meeting on the russian newspaper "Kommersant" on line. As I could understand, russian journalists reported the proposals of Medvedev to change the monetary system and in particolar to get rid of the dominant rule of the dollar. But, as Kommersant wrote, Medvedev was sustained only by Kazachstan president Nazarbaev. The other members of the Shanghai Organitation, as it is reported from Kommersant, had no intention to discus such a critic matter, in particular China.
    Is it that Kommersant shows a duotfull attitude toward russian president? What's your opinion?
    Thanks very much.. Nicola

  • Ingvar

    Typical left-wing rethoric: "an array of proto-fascists, from the Christian right to the goons who disseminate hate talk on Fox News" – THIS is a real hatred. Hatred of conservative values, morals, Christianity, as well as of those who dare to stand firm in their faith. So typical of liberal "PC brigade".

  • Y

    2 Nicola. Keep in mind that “Kommersant" is too pro-Western to say openly anything against West. At the same time they are more than happy to inflate any "failure" or the current Russian leaders. Then, such thing like stop using dollar as the only world currency is not happenning overnight. It will take time – probably years. The point is that the process began. How successful and fast it will be only time will tell. US, when they really feel grilled smell, can easily start couple of more new wars to mess the whole world.

    Next, only Islam Karimov, the president of Uzbekistan (as usual – too smart ..s trying to sit on multiple chairs) didn't say anything about the need for alternative currency. All rest did. Medvedev, probably, was really talking about it more than others, so what? And also do not forget that "not saying" doesn't mean "not doing", especially in politics and especially dealing with Asians.

    Ingvar's emotional post reveals that even he deep inside realises that author is rather right than wrong.

  • Ingvar

    [quote post="5827"]Ingvar’s emotional post reveals that even he deep inside realises that author is rather right than wrong.[/quote]
    Rather strange logic. Or the lack thereof. Do you mean to say that the author's emotional conservative-bashing article reveals that even he deep inside realizes that author is rather right than wrong? Or do you agree with the author and think that it's OK to call Christians and those who hold to conservative values "fascists"?

  • Y

    Oh, come on! As if you didn't really get what I ment,.. as if nazi didn't go to church (I hope you will not argue that it was Christian chursh, not some muslim mosque) and listen there to Bach music, not to muezzin's singing.

  • Ingvar

    [quote post="5827"]Oh, come on! As if you didn’t really get what I ment,.. as if nazi didn’t go to church (I hope you will not argue that it was Christian chursh, not some muslim mosque) and listen there to Bach music, not to muezzin’s singing.[/quote]
    Excuse me, not only it is irrelevant, but quite stupid. The Nazis had absolutely nothing to do with Christianity – if you care to read the Gospel (at least the Sermon on the Mount) you will see it very clearly. To go to Church and to listen to Bach music does not mean to be a Christian.
    BTW, I have just come across another article by the author – "Why I Am a Socialist". That makes thing clear. Socialists, as well as other left-wingers, have always hated Christianity and persecuted its followers. And still do now – in "politically correct" Britain, for example.
    Just as a reminder – Nazis were National SOCIALISTS…

  • Banthapoodoo

    How about the WW-III? Can it help? Now many people think, that the banking kahal is going to organise a good big war to return the world back into it's hands. Do you expect someting like tis?

  • Banthapoodoo

    To Ingvar, as a reminder: socialism was invented as a way to return christian system of values, as an answer to the legalisation of the loan interest – that was treated as a sin in earlier times. So socialism has wery much to do with christianity. Socialism was thought to be a way of rebilding the spirit of the christian commons from the first ages of this religion. So, nazies were christians – exactly as much, as they were socialists.

  • Ingvar

    [quote post="5827"]socialism was invented as a way to return christian system of values[/quote]Aha. Only the Socialists from the very beginning they claimed to be Atheists, persecuted the Christian Church (everywhere from Communist Russia to Republican Spain) and in the 20th century only murdered more people than anybody else throughout the whole history – "Christian system of values", indeed. And they keep on doing so now in Europe – under the guise of "political correctness" and "multiculturalism". Don't tell me about socialism – I was born in a very, very socialist country and know what it is like!

    [quote post="5827"]So, nazies were christians – exactly as much, as they were socialists.[/quote]It's just shocking. You don't understand what you're saying. Do you have any slightest idea what it means to be a Christian? Did Christ and His Apostles teach to act like the Nazis did?

  • Y

    > Do you have any slightest idea what it means

    > to be a Christian? Did Christ and His Apostles

    > teach to act like the Nazis did?

    No point to continue this "christian" discussion.

    It's like conversation between mute and deaf.

    There are, I assume, plenty of other places/forums

    for such topics. Article was about different things.

  • Ingvar

    Well, it was the author and in this very article who called the "Christian right" fascists. Do I have the right to comment on that and express my opinion? You don't have to comment on what I say and start a discussion. As well as assume what I "realize deep inside".

  • bob

    The terms "Witch" and "Witchcraft" have over a dozen conflicting meanings. The words are mainly used in this essay to refer to a unique belief system: that evil individuals, mostly women, sold their soul to the Christian Devil, worshiped Satan and devoted their lives to harming others. This belief was prevalent in Western Europe during the late Middle Ages and Renaissance. Many tens of thousands of individuals were called "Witches," were convicted of worshiping Satan and were executed during what are now called the burning times. Residual beliefs from that era still exist today among some groups.

  • bob

    Details of the "Burning Times:"

    Current estimates of the total number of executions of innocent people range from 3,000 (by one Roman Catholic source) to 9,000,000 (by many Neopagan sources).

    There have been many outrageous claims, such as a trial that resulted in the execution of 400 women in one day in France.

    The courts did not specifically target only women. The gender balance varied with location. In Iceland, over 90% of the accused Witches were men; in some countries in central Europe, over 80% were women; overall it was probably about 75% women.

    Most of the death sentences were passed by civil courts, not by the Catholic Church. However, the church was indirectly involved, as it provided the theological foundation for the persecution of heretics in civil courts.

  • bob

    Traditional [tolerant] attitudes towards witchcraft began to change in the 14th century, at the very end of the Middle Ages. … Early 14th century central Europe was seized by a series of rumor-panics. Some malign conspiracy (Jews and lepers, Moslems, or Jews and witches) was attempting to destroy the Christian kingdoms through magick and poison. After the terrible devastation caused by the Black Death [bubonic plague] (1347-1349), these rumors increased in intensity and focused primarily on witches and "plague-spreaders." Witchcraft cases increased slowly but steadily from the 14th-15th century. The first mass trials appeared in the 15th century. At the beginning of the 16th century, as the first shock-waves from the Reformation hit, the number of witch trials actually dropped. Then, around 1550, the persecution skyrocketed. What we think of as "the Burning Times" — the crazes, panics, and mass hysteria — largely occurred in one century, from 1550-1650. In the 17th century, the Great Hunt passed nearly as suddenly as it had arisen. Trials dropped sharply after 1650 and disappeared completely by the end of the 18th century. (Gibbons, "Recent Developments in the Study of the Great European Witch Hunt".)

  • bob

    Witch-hunts today

    Few people are aware that witch-hunts still claim thousands of lives every year, especially in the countries of sub-Saharan Africa, and above all in South Africa.

    Witch-hunts in South Africa have become "a national scourge," according to Phumele Ntombele-Nzimande of the country's Commission on Gender Equality. (Quoted in Gilbert Lewthwaite, "South Africans go on witch hunts," Baltimore Sun, September 27, 1998.) The phenomenon is centered in the country's poverty-stricken Northern Province, where "legislators counted 204 witchcraft-related killings [from 1985-95] … Police counted 312 for the same period. Everybody agreed both numbers were gross underestimates." (Neely Tucker, "Season of the Witch Haunts Africa," The Toronto Star, August 1, 1999.) In 1996 The Observer (UK) reported that "the precise statistics are not known, but the deaths from witch-burning episodes number in the hundreds each year and the trend appears to be on the rise." (David Beresford, "Ancient superstitions, fear of witches cast spell on new nation," reprinted in The Ottawa Citizen, June 18, 1996.)

    As with its European predecessor, witch-hunting in South Africa is closely tied not only to prevailing superstitions, but to socio-economic pressures, natural disasters, and personal jealousies. In the Northern Province, "among the poorly educated rural residents, traditional healers and clairvoyants claiming supernatural powers hold broad sway. And hunger, poverty, and unemployment can create jealousies that can quickly turn to anger and vengeance."

  • Chronoscopist

    To Ingvar. Christianity or anybody's religious affiliation have nothing to do with the simple fact of the USA being insolvent if it does not find a way to refinance its debt. Socialism, national socialism, or whatever else -ism have nothing to do with it, either. A fact is a fact.

  • malcontent

    Ingvar:

    Well, it was the author and in this very article who called the “Christian right” fascists. Do I have the right to comment on that and express my opinion? You don’t have to comment on what I say and start a discussion. As well as assume what I “realize deep inside”.

    —————————————-

    Wouldn't calling the “Christian right” fascists be kinda redundant?

    Adding "Christian" to any other word, doesn't change the other words meaning

  • Ingvar

    [quote post="5827"]Wouldn’t calling the “Christian right” fascists be kinda redundant?[/quote]
    No, that would be oxymoron. BTW, what do you have against the right? Don't you guys use the word "fascism" too lightly? Or did it become a label for whatever is not left-wing just to silence the opponents?
    [quote post="5827"]Christianity or anybody’s religious affiliation have nothing to do with the simple fact of the USA being insolvent if it does not find a way to refinance its debt. Socialism, national socialism, or whatever else -ism have nothing to do with it, either. A fact is a fact.[/quote]That's true. But you know, years ago America-hating Socialist Russia predicted the bankruptcy of America (and the whole capitalist system) just as well… You know the story, I guess. Socialists have always criticized the Capitalism (and in a sense they were right), but they themselves have never been able to create anything better. Or even to match it. All they could do is to destroy.

  • Ruslan

    For Russia, it is high time to abandon the dollar. The crisis in Russia, among other reasons, was that the Bank of Russia made an unfavorable credit in rubles (national currency), forced to take loans in the West. That the effects of Gorbachev and Yeltsin, when the refused to think for ourselves, and take on advice from outside the United States.

  • Chronoscopist

    To Ingvar. I am aware that Socialists have been criticizing America for years. But now I am talking about the present time. Tonight I watched a local California TV channel. On TV Governer Schwartzenegger says that if the State does not quickly find 10 billion dollars to cover the budget deficit, then there will be a chance of bankruptcy. Is he a Socialist? Is he a critic of American Capitalism? I think he is just a penniless person. I want to say that the present (dire) situation in the U.S. economy is beyond the ideological contention of the past. It is just a simple bankruptcy case.

  • erd

    Weil der Meister uns gesandt

    Verkünden wir den Untergang

    US has lost any kind or rather any vision of ideology and there is no ideology even visionary one any more. The reason therefor is simple: no ideology at all is possible in this country and so-called ideologies of the past were just simulacres of Baudrillard. Thouse ideologies (conservatism,liberalism,democracy etc.)were just an american show to deceive people. And surprisingly some people still belive… And the most surprising is the fact, that this people are not stupid: any country does need ideology in order to survive. But US dosn't have own nationality, culture, traditions, religion and the lack of these basic values mackes impossible any ideology, becouse any ideology turns into manipulation.

    People, what are you talking about: there are no other conservative values in US, but liberalism and damocracy and freedom from everything, including morality, God and even healthy reason. All of you are complitly free (and first of all from God). No return – you have made your choise.

    People, you sacrificed everythyng you had for the case of ilusions, such as liberalism, democracy or freedom. So, you have got the freedom, but you have lost your free will, you lost yourself; you still have your pride, but you lost your dignity without retrive.

    And another time: I belive: no ideology – no country; no past – no future; no God – no human. Everything you realy have is a dollar, which was substituted for all of material values and the freedom, which was substituted for all of spirit values.

    Leave this Hell-country and come back home to your own and your ancients countries. IMHO US is Hell.

    Lauft, lauft, lauft, lauft, lauft

    Um eure Leben!

  • http://www.exitfromcris.h18.ru/index.php?lng=en Valentin GORIZDRA

    I managed to find ingeniously simple way out: the EXIT FROM the CATASTROPHIC FINANCIAL CRISIS THROUGH INTRODUCTION of the POWER STANDARD. I suggest to create System of the international monetary accounts with use power (rabotnyh) money GORIZDRA, being actually flexible real world reserve currency short): Each state through the central national bank independently establishes an exchange power rate of the monetary unit in kilowatt·hour (in abbreviated form – kW·hr), originally proceeding approximately from a weighted average price of electric energy. The exchange of power money of any two states is made through their declared exchange power rates. Each state — the emitter of the national money supplies the declared exchange power rate of the national money with reserves: Electricity in the natural form, and also in the natural form and other energy carriers (petroleum, gas, coal, uranium, petrol, kerosene, black oil, helium-3, etc.) and precious metals (gold, silver, platinum, a palladium, etc.) and nonferrous metals under the market power prices in kW•hr (advanced at corresponding International uniform exchanges), and also on mutual consent by power money of other states. On territories of each state wages, pecuniary rewards, taxes, duties, budgets, credits, the prices of all goods and services are indicated in kilowatt·hour (in abbreviated form – kW·hr). And cash payments (monetary payments, payments, etc.) Are made by local power money under the current exchange rate. Already has passed almost three months as I have given publicity to the power standard offered by me. On March, 30th, 2009 has registered the address on the Internet for a site under this global project (http://www.exitfromcris.h18.ru/index.php?lng=en). On him the SUBSTANTIATION of necessity of realisation of the power standard offered by me is in details stated. Valentin GORIZDRA

  • Nick

    All Right Children. It's almost supper time. Go Home….

  • Winifred

    I actually like Valentin Gorizdra's post a lot! Not only does he refrain from bickering, blaming the past, political name-calling, but he offers a creative solution, and one which does not involve WWIII.

    I would add that the power system needs to take into account pollution and sustainability issues. And, maybe, add fresh water to the list of valuable commodities.

    On a lighter note, I know Gorizdra would like to immortalize himself with the "Gorizdra," but I think the power unit term should be the "Godzilla." Godzilla would look so good on a power-based world monetary coin.

  • mr.VHY

    Who are the people wrote here? Do they gov't service? This article was cited in russian a lot. Why? That is an interesting question. In the other hand it's too difficult to find its reference in english.

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