From: "Wahome, Kimamo" <WAHOMEK@uwec.edu> Date: Wed, 17 Jun 2009 08:53:40 -0500 Subject: 'The American Empire is Bankrupt' Message-ID: <E3F0E607B3CF71418CE725F002B5F6047A540712D4@CHERRYPEPSI.uwec.edu>
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Published on Monday, June 15, 2009 by TruthDig.com
The American Empire Is Bankrupt
by Chris Hedges
This week marks the end of the dollar's reign as the world's reserve curren
cy<http://en.wikipedia.org/wiki/Reserve_currency> [1]. It marks the start o
f 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 m
edia that continues to peddle fatuous gossip and trash talk as news while w
e endure the greatest economic crisis in our history, may have fooled us, b
ut the rest of the world knows we are bankrupt. And these nations are damne
d if they are going to continue to prop up an inflated dollar and sustain t
he massive federal budget deficits, swollen to over $2 trillion, which fund
America's imperial expansion in Eurasia and our system of casino capitalis
m. They have us by the throat. They are about to squeeze.
There are meetings being held <http://www.globalresearch.ca/index.php?conte
xt=va&aid=13707> [2] Monday and Tuesday in Yekaterinburg, Russia, (form
erly Sverdlovsk) among Chinese President Hu Jintao, Russian President Dmitr
y Medvedev and other top officials of the six-nation Shanghai Cooperation O
rganization. The United States, which asked to attend, was denied admittanc
e. Watch what happens there carefully. The gathering is, in the words of ec
onomist Michael Hudson<http://www.michael-hudson.com/> [3], "the most impor
tant meeting of the 21st century so far."
It is the first formal step by our major trading partners to replace the do
llar as the world's reserve currency. If they succeed, the dollar will dram
atically plummet in value, the cost of imports, including oil, will skyrock
et, 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 w
ill 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 t
he qualities of a savior, will suddenly look pitiful, inept and weak. And t
he 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 wo
rking and middle class. The people of this class will demand vengeance, rad
ical change, order and moral renewal, which an array of proto-fascists, fro
m the Christian right to the goons who disseminate hate talk on Fox News, w
ill 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 k
nown 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 disturbi
ng exposé <http://www.lrb.co.uk/v31/n10/lanc01_.html> [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 m
ilitary in nature. Half of America's discretionary spending is military. Th
e 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 A
sian countries have been financing their own military encirclement. They ha
ve 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 t
he 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 f
or the abandonment of the dollar as reserve currency, suggesting in its pla
ce the use of the International Monetary Fund's Special Drawing Rights<http
://www.imf.org/external/np/exr/facts/sdr.htm> [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 worl
d order" which will break the economic and, by extension, military dominati
on 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. cu
rrency. 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 Ti
nto 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-reso
urce deal," Hudson said. "They will give the dollars to countries willing t
o sell off their resources since America refuses to sell any of its high-te
ch 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 d
ollar 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 thi
ngs like nuclear research. The next closest national military budget is Chi
na's, at $65 billion, according to the Central Intelligence Agency.
There are three categories of the balance-of-payment deficits. America impo
rts more than it exports. This is trade. Wall Street and American corporati
ons buy up foreign companies. This is capital movement. The third and most
important balance-of-payment deficit for the past 50 years has been Pentago
n spending abroad. It is primarily military spending that has been responsi
ble 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 Cu
rrent 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 dol
lars. The foreign recipients turn the dollars over to their central banks f
or 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 again
st the dollar will go up. This will penalize exporters. This has allowed Am
erica to print money without restraint to buy imports and foreign companies
, fund our military expansion and ensure that foreign nations like China co
ntinue to buy our treasury bonds. This cycle appears now to be over. Once t
he dollar cannot flood central banks and no one buys our treasury bonds, ou
r empire collapses. The profligate spending on the military, some $1 trilli
on when everything is counted, will be unsustainable.
"We will have to finance our own military spending," Hudson warned, "and th
e 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 mon
ey to survive."
The desperate effort to borrow our way out of financial collapse has promot
ed 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. "Ther
e is no model or precedent for this, and no way to argue that it's all righ
t 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 be
come difficult for all but a few as the dollar plunges. States and cities w
ill see their pension funds drained and finally shut down. The government w
ill be forced to sell off infrastructure, including roads and transport, to
private corporations. We will be increasingly charged by privatized utilit
ies-think Enron-for what was once regulated and subsidized. Commercial and
private real estate will be worth less than half its current value. The neg
ative equity that already plagues 25 percent of American homes will expand
to include nearly all property owners. It will be difficult to borrow and i
mpossible to sell real estate unless we accept massive losses. There will b
e block after block of empty stores and boarded-up houses. Foreclosures wil
l be epidemic. There will be long lines at soup kitchens and many, many hom
eless. Our corporate-controlled media, already banal and trivial, will work
overtime to anesthetize us with useless gossip, spectacles, sex, gratuitou
s violence, fear and tawdry junk politics. America will be composed of a la
rge dispossessed underclass and a tiny empowered oligarchy that will run a
ruthless and brutal system of neo-feudalism from secure compounds. Those wh
o 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.
© 2009 TruthDig.com
Chris Hedges writes a regular column for Truthdig.com<http://www.truthdig.c
om> [6]. Hedges graduated from Harvard Divinity School and was for nearly t
wo decades a foreign correspondent for The New York Times. He is the author
of many books, including: War Is A Force That Gives Us Meaning<http://www.
amazon.com/gp/product/1400034639?ie=UTF8&tag=commondreams-20&linkCode
=xm2&camp=1789&creativeASIN=1400034639> [7], What Every Person Should
Know About War<http://www.amazon.com/gp/product/0743255127?ie=UTF8&tag
=commondreams-20&linkCode=xm2&camp=1789&creativeASIN=0743255127> [8
], and American Fascists: The Christian Right and the War on America.<http:
//www.amazon.com/dp/0743284437?tag=commondreams-20/ref=nosim> [9] His
most recent book, Empire of Illusion: The End of Literacy and the Triumph o
f Spectacle<http://www.amazon.com/gp/product/1568584377?ie=UTF8&tag=com
mondreams-20&linkCode=xm2&camp=1789&creativeASIN=1568584377> [10], wi
ll be out in July, but is available for pre-order.
