The End of the American Empire?

[John Simkin]

All empires collapse by the economic impact of war. The Roman Empire eventually collapsed because it could no longer afford to pay foreign soldiers to protect the outer-regions of its empire. The British Empire went into decline because of the cost of the First World War and its fate was eventually sealed by the debt incurred during the Second World War. The Soviet Empire was destroyed by the economic burden of fighting a war it could not win in Afghanistan and trying to compete with the military spending of the United States.

The US has also been fighting an expensive war that it cannot win in Afghanistan and Iraq. It has also lost control over its own backyard enabling people like the Venezuelan President Hugo Chvez to taunt the US with impunity. These foreign policy problems have been combined by the incompetent management of the US economy. For sometime the US have been unable to provide security for the people living under its control. This will grow worse as the US will have to reduce the cost of running its empire. For example, the success of the “surge” in Iraq, which has been achieved by bribing the Sunnis, will no longer be maintained for economic reasons.

The current crisis in the US does not mean the end of capitalism. However, it is the end of one type of capitalism, the financial laissez-faire system developed by right-wing forces in the western world. What we are seeing at the moment in the US is an attempt to move towards a government interventionist capitalism. This is a difficult process when you have to rely on ideologically driven politicians who do not have a basic understanding of how the economic system works.

The new super-power will be China. It has developed a state capitalist model that overcomes the economic contradictions highlighted by Karl Marx. This state capitalist model will survive for many years. In time, the western world will try to adopt this model. However, it is unlikely to be successful because of the resistance of its people. It will be the resistance of the masses in China and those in its empire that will finally bring down the state capitalist model. Then, hopefully, we will progress to a fully democratic socialist economic system.

[Ron Ecker]

John,

You apparently think or hope that all economic systems will not be eventually destroyed by nuclear weapons. I wish I shared your optimism, but with nuclear proliferation and nuclear weapons inevitably falling into the hands of religious fanatics (possibly including some American like Palin, who believes the earth is 6,000 years old and that man and dinosaurs coexisted) or other nuts (e.g. in North Korea or Iran), I can't see much of a future for the planet, economic or otherwise.

Edited September 30, 2008 by Ron Ecker

[John Simkin]

John,

You apparently think or hope that all economic systems will not be eventually destroyed by nuclear weapons. I wish I shared your optimism, but with nuclear proliferation and nuclear weapons inevitably falling into the hands of religious fanatics (possibly including some American like Palin, who believes the earth is 6,000 years old and that man and dinosaurs coexisted) or other nuts (e.g. in North Korea or Iran), I can't see much of a future for the planet, economic or otherwise.

I admit that a nuclear war is a possibility. We definitely came very close to one in 1962. However, I remain an optimist and hope that eventually we will develop a sane political and economic system. In fact, the current crisis provides an opportunity for people to be educated about the way the economy works.

[Pamela Brown]

It seems that wherever I go lately people are saying "this is just like Rome". So I pulled out my copy of Gibbon's classic and began to read it again. Rome went from a republic to a dictatorship. Where it initially had values and energy, it became burdened with excess. It collapsed inward from its own decay, even more than the external forces that preyed upon it.

As far as the US is concerned, it seems to me that there are two Americas -- the one created by our forefathers, complete with all the lovely phrases about equality and happiness that sound like they are intended for everyone, but in reality were only meant for white men. This system of hypocricy continues today, replete with bullying of the common citizen at every level -- from the banks and financial institutions, from the govt, and even from the press, which tries to push us in whatever direction the govt wants us to go.

Then there is the real America -- the down-to-earth and energetic nation of people of all backgrounds and economic levels who come together to solve whatever problems face us, and do so without threats or bullying. These are the people who barter and share, and give far more than common sense would dictate; who place humanitarian values at a very high level and who take considerable risks to help their fellow citizens here as well as in distant countries.

I believe the two Americas have come into conflict and have created a vortex of energy which as put us into a spiral. This is a tornado of values and spirit, and the upheaval is affecting us in nearly every area of our lives.

What will come out of this? Will we, because of our arrogance and selfishness, forfeit our place as a world power? Or will we revise, renew and regroup, and perhaps find our real voice as a nation? Time will tell.

[Don Jeffries]

I don't worry about other nations using nuclear weapons; America lost the right to monitor Iran, North Korea or any other country when Hiroshima and Nagasaki were destroyed. To date, we are the only nation to actually use nuclear weapons. Maybe someone ought to be monitoring us.

I think we are on the verge of an unprecedented crisis in America. The people are basically being blackmailed into this monstrous banker bailout. Both "opposing" party leaders are singing the same tune: "If we don't push this through, the Dow will drop 2000 points. You'll lose everything you have!" So, we either give these sinfully wealthy plutocrats money, to save themselves from facing the consequences of bad investments, or our own tiny piece of the pie will disappear forever. Some choice.

Meanwhile, as Huey Long pointed out during the Great Depression back in the 1930s, we are swimming in wealth. There is enough for everyone to enjoy true prosperity. But our leaders, then and now, are so incredibly greedy they demand that the average taxpayer save them from losing a fraction of their fortunes by mortgaging their childrens' future. The overriding issue in this election ought to be; better pay for all workers, so that they can meet the dramatically rising costs of living. I don't hear any Republicans talking about that (no surprise), but only a tiny handful of Democrats mention it, either. Until that issue is addressed, and our immense wealth is redistributed to at least some degree, then everything else is a moot point.

We have a wildly volatile stock market, plumetting real estate values, record high gas prices, skyrocketing food and medical costs, and the only solution our corrupt and incompetent leaders can come up with is to feed the people who least need it a trillion dollars, courtesy of those who can least afford it. But we do have a "choice" in the presidential election next month, despite the fact that both candidates support this disastrous and unconscionable bailout.

[John Simkin]

I agree with all above to some extent. Most Empires died at their seemingly most powerful point [followed with a rapid decline and death] due to four factors: economic overreach or unsustainability by the oligarchs; environmental unsustainability; military empires they couldn't any longer support; and decadence/false values/ lies. As for the Big Lies behind the American Myth, I've been re-reading Zinn's A People's History of the United States and I suggest it highly to all. [its been the Wizard of Oz type of false-front all along...!]. I just got back hours ago from my first visit to 'my' country in 8 years and saw it with the insight of an insider and the eyes of an 'outsider' who has not endured the day-to-day changes [even if I kept up with most via internet]. I was shocked by the changes I saw and felt, and felt the country is on the edge of the abyss. I too hope this pain and crisis can awake many, but I also felt the powerful distraction and deflection mechanisms in the USA at work [and working] on many persons. I'll have more to say after catching up on my sleep and jetlag.....

One last comment, before collapsing, most [nearly all] are trying to 'fix/repair/patch' the 'system'....none are suggesting [or thinking] to scrap it as a failed one [i think sadly....]!

NB- I was mostly in remote parts of the USA [mountains] and had limited access to internet and thus have not been posting. I was, however, also in some major metropolitan areas and drove through several states and 'regions'.

I look forward to hearing your account of America in 2008.

Even if Congress approves the bailout of the bankers, the US will never be the same again. There is no doubt that China will replace the US as the world's superpower. They will be the first to reach this position without using its military power. t will be a purely economic takeover.

Wen Jiabao, the Chinese premier has been giving the US some economic advice. In a recent interview with Fareed Zakaria on CNN online, he argues that China's economic success has been based on a market economy with macroeconomic guidance by the government. In other words, state capitalism.

According to Jiabao, his economic ideas are based on those of Adam Smith. He points out that in the Wealth of Nations, Smith writes about the "need for the invisible hand of the market". Jiabao puts forward a model of capitalism without democracy. Jiabao would not have problems getting through any emergency legislation in China.

The Chinese economic model is even worse than the one used in the US. The country has massive inequality and corruption. Their ruling elite is made up of communist party officials and military leaders. What is worse, the ruling elite have far more control over the media, political system, trade unions, etc. than they do in the US. The real test of the American elite is do they bring in a system that is proving so successful in China.

[Pamela Brown]

Perhaps it would be appropriate to ask what involvement China has in these current tumultuous events. As of today, with the passing of this 700B pig, we can no longer call the US a democracy -- it is a socialist state. While I do not want to excuse the excesses of the lending industry and the 'anything goes' DC mentality, why wouldn't there be a strategy in place for China to buy up US assets and weaken the dollar, thus adding to the total collapse of the country?

Edited October 4, 2008 by Pamela McElwain-Brown

[Terry Mauro]

Perhaps it would be appropriate to ask what involvement China has in these current tumultuous events. As of today, with the passing of this 700B pig, we can no longer call the US a democracy -- it is a socialist state. While I do not want to excuse the excesses of the lending industry and the 'anything goes' DC mentality, why wouldn't there be a strategy in place for China to buy up US assets and weaken the dollar, thus adding to the total collapse of the country?

I've never understood references to "capitalism vs "socialism". This is as foolish as seeing things as being"conservative" or "liberal". None of it describes reality.

The United States was founded on "The American System of Political Economy". We are a republic, not a democracy. We broke with the British Empire, and their Free Trade system of "looting". We built infrastructure, made capital improvments and increased the productive powers of labor. We had a "credit system" not a "monetary system". After JFK was murdered (by the British), they turned back the clock on progress, taking down our productive economy and replacing it with a "post industrial economy". They introduced the "sex, rock, drug counter culture"(The British Invasion), along with environmentalism. All this nonsense has worked to destroy our nation.

What happened with the bailout, we tossed out the constitution in favor of a bankers dictatorship. We either go the way of FDR or we will be faced with a dark age like that of the 14th century in Europe.

[John Simkin]

It seems that Congress was eventually convinced that if it did not pass the bailout the system would collapse. However, the stock-markets today suggest that they are not convinced that the measure is enough to save the system. London's key UK share index lost 7.85% - its biggest percentage fall since 1987 and in Paris the Cac-40 suffered its largest fall on record. On Wall Street, the Dow Jones fell below 10,000 points for the first time since 2004.

[John Simkin]

It seems that Congress was eventually convinced that if it did not pass the bailout the system would collapse. However, the stock-markets today suggest that they are not convinced that the measure is enough to save the system. London's key UK share index lost 7.85% - its biggest percentage fall since 1987 and in Paris the Cac-40 suffered its largest fall on record. On Wall Street, the Dow Jones fell below 10,000 points for the first time since 2004.

After dithering for several weeks the collapse in bank shares has forced Gordon Brown into action. This morning the government has announced details of a rescue package for the banking system worth up to £50bn ($88bn). It will initially make the extra capital available to eight of the UK's largest banks and building societies in return for preference shares in them. The banks are resisting the prospect of the government taking control over these companies. They are frightened that the government will insist on controlling the scale of the renumeration of the leaders of these banks. Although in a strong position, the UK government is unwilling to take control of the banks. I imagine the reason for this is that Brown has been offered a generous position as a bank director when he is finally removed from office.

HBOS, Barclays, Lloyds TSB and RBS, the five failing banks, have issued statement welcoming the plan. The problem for Brown is that these measures will not work. The market has lost confidence in the banking sector and the FTSE 100 in London continues to fall. This is to be expected as the banks have still not revealed the true state of their economic affairs. Despite the government money being put in by the US and UK governments it is still not clear if it covers the money lost in sub-prime mortgages.

[Pamela Brown]

I've never understood references to "capitalism vs "socialism". This is as foolish as seeing things as being"conservative" or "liberal". None of it describes reality.

And yet in another thread you refer to Arnold as Hitler. So I can't help but wonder if you're not disagreeing with yourself.

[]What happened with the bailout, we tossed out the constitution in favor of a bankers dictatorship. We either go the way of FDR or we will be faced with a dark age like that of the 14th century in Europe.

FDR was considered a socialist.

[John Simkin]

FDR was considered a socialist.

It is true that those on the far-right considered that FDR was a socialist. He was also a very popular politician winning four presidential elections. If he was a socialist, it seems that the American people wanted socialism. FDR was not of course a socialist, he was a follower of John Maynard Keynes, a liberal.

What is interesting about the 1929 Wall Street crash and the resulting "Great Depression" is that most of the world moved sharply to the right after these events. Only the US successfully moved to the left (Spain elected a left-wing Popular Front government but it was overthrown by the right who received support from the fascist governments in Germany and Italy).

It is interesting to see how the world reacts to what will be the worst economic depression since the 1930s. Hopefully, the people will vote for governments of the left, but I fear that as in the 1930s some countries will abandon democracy and will have to endure military dictatorships.

[Don Jeffries]

Our corrupt and incompetent leaders are seemingly clueless about how to solve this tremendous economic crisis, which is threatening to topple economies all over the world. Their incredibly stupid trillion dollar banker bailout has only made things worse.

Bush and co. can try and persuade the people that "this will take some time," but that ridiculous explanation simply won't cut it. Wall Street always responds to what it perceives to be good or bad news, and rises or falls accordingly. So, when the "good news" about the trillion dollar bailout being passed by Congress arrived, the markets should have soared upwards. Instead, they crashed down and have continued to slide ever since.

I've lost almost half of my 401K since the beginning of the year. With so many people in that situation, eventually even our greedy leaders are going to have to address the real issue here; far too much wealth concentrated in far too few hands.

[John Simkin]

Our corrupt and incompetent leaders are seemingly clueless about how to solve this tremendous economic crisis, which is threatening to topple economies all over the world. Their incredibly stupid trillion dollar banker bailout has only made things worse.

Bush and co. can try and persuade the people that "this will take some time," but that ridiculous explanation simply won't cut it. Wall Street always responds to what it perceives to be good or bad news, and rises or falls accordingly. So, when the "good news" about the trillion dollar bailout being passed by Congress arrived, the markets should have soared upwards. Instead, they crashed down and have continued to slide ever since.

I've lost almost half of my 401K since the beginning of the year. With so many people in that situation, eventually even our greedy leaders are going to have to address the real issue here; far too much wealth concentrated in far too few hands.

The problem for Barack Obama is that he does not want to say anything that provides a danger to his lead in the polls. If he puts forward a plan that will really deal with the crisis, the media will portray him as a left-winger. This is why he is so supportive of the measures taken by Bush.

The reason why shares continued to fall is that without outright natonalization, all the major banks in the US and the UK will become insolvent. Over the last few years financial firms sold credit default swaps (CDSs) - a form of insurance against a company defaulting on its debt - to investors in Lehman's bonds and those betting on the bank's creditworthiness. These companies will now be forced to pay out 91.4 cents in the dollar. This could amount to as much as $440bn. The same thing happened with Morgan Stanley. The bank's shares plunged by 22% in New York, taking their total week-long fall to 60%. Goldman Sachs is also in trouble. If Morgan Stanley and Goldman Sachs go under next week, banks face pay-outs that will bring them down as well.

[Craig Lamson]

Our corrupt and incompetent leaders are seemingly clueless about how to solve this tremendous economic crisis, which is threatening to topple economies all over the world. Their incredibly stupid trillion dollar banker bailout has only made things worse.

Bush and co. can try and persuade the people that "this will take some time," but that ridiculous explanation simply won't cut it. Wall Street always responds to what it perceives to be good or bad news, and rises or falls accordingly. So, when the "good news" about the trillion dollar bailout being passed by Congress arrived, the markets should have soared upwards. Instead, they crashed down and have continued to slide ever since.

I've lost almost half of my 401K since the beginning of the year. With so many people in that situation, eventually even our greedy leaders are going to have to address the real issue here; far too much wealth concentrated in far too few hands.

The problem for Barack Obama is that he does not want to say anything that provides a danger to his lead in the polls. If he puts forward a plan that will really deal with the crisis, the media will portray him as a left-winger. This is why he is so supportive of the measures taken by Bush.

The reason why shares continued to fall is that without outright natonalization, all the major banks in the US and the UK will become insolvent. Over the last few years financial firms sold credit default swaps (CDSs) - a form of insurance against a company defaulting on its debt - to investors in Lehman's bonds and those betting on the bank's creditworthiness. These companies will now be forced to pay out 91.4 cents in the dollar. This could amount to as much as $440bn. The same thing happened with Morgan Stanley. The bank's shares plunged by 22% in New York, taking their total week-long fall to 60%. Goldman Sachs is also in trouble. If Morgan Stanley and Goldman Sachs go under next week, banks face pay-outs that will bring them down as well.

The REST of the story......

"It won't be easy to draw up a quick winners and losers column, however. Buyers of insurance are also sellers and vice versa. The International Swaps and Derivatives Association says all this netting out means the ultimate payout among trading partners may be closer to 2% of the gross outstanding $400 billion, or $8 billion."

(bold mine)

http://www.forbes.com/home/2008/10/10/lehm...010auction.html

Edited October 11, 2008 by Craig Lamson