[R-G] [BillTottenWeblog] The American Empire Is Bankrupt

Sun Jul 12 19:50:52 MDT 2009

by Chris Hedges {*}

Truthdig (June 14 2009)

This week marks the end of the dollar's reign as the world's reserve
currency {1}. 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 {2} 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 {3}, "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 expose {4} 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
US 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 {5}. 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 US currency. This is why
Aluminum Corporation 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 US 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 fifty 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 Two. 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. 

Links:

{*} http://www.truthdig.com/about/staff/70

{1} http://en.wikipedia.org/wiki/Reserve_currency

{2} http://www.globalresearch.ca/index.php?context=va&aid=13707

{3} http://www.michael-hudson.com/

{4} http://www.lrb.co.uk/v31/n10/lanc01_.html

{5} http://www.imf.org/external/np/exr/facts/sdr.htm

A Progressive Journal of News and Opinion. Editor, Robert Scheer.
Publisher, Zuade Kaufman.

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