WWIII on the Horizon. The American Empire Is Bankrupt.

The American Empire Is Bankrupt

Posted on Jun 14, 2009

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 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.

http://www.truthdig.com/report/item/20090614_the_american_empire_is_bankrupt/