The American Empire Is Bankrupt
by Chris Hedges
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
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
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.
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