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A Shattering Moment in America's Fall From Power
The global financial crisis will see the US falter in the same way the Soviet Union did when the Berlin Wall came down. The era of American dominance is over
Our gaze might be on the markets melting down, but the upheaval we are experiencing is more than a financial crisis, however large. Here is a historic geopolitical shift, in which the balance of power in the world is being altered irrevocably. The era of American global leadership, reaching back to the Second World War, is over.
You can see it in the way America's dominion has slipped away in its own backyard, with Venezuelan President Hugo Chávez taunting and ridiculing the superpower with impunity. Yet the setback of America's standing at the global level is even more striking. With the nationalisation of crucial parts of the financial system, the American free-market creed has self-destructed while countries that retained overall control of markets have been vindicated. In a change as far-reaching in its implications as the fall of the Soviet Union, an entire model of government and the economy has collapsed.
Ever since the end of the Cold War, successive American administrations have lectured other countries on the necessity of sound finance. Indonesia, Thailand, Argentina and several African states endured severe cuts in spending and deep recessions as the price of aid from the International Monetary Fund, which enforced the American orthodoxy. China in particular was hectored relentlessly on the weakness of its banking system. But China's success has been based on its consistent contempt for Western advice and it is not Chinese banks that are currently going bust. How symbolic yesterday that Chinese astronauts take a spacewalk while the US Treasury Secretary is on his knees.
Despite incessantly urging other countries to adopt its way of doing business, America has always had one economic policy for itself and another for the rest of the world. Throughout the years in which the US was punishing countries that departed from fiscal prudence, it was borrowing on a colossal scale to finance tax cuts and fund its over-stretched military commitments. Now, with federal finances critically dependent on continuing large inflows of foreign capital, it will be the countries that spurned the American model of capitalism that will shape America's economic future.
Which version of the bail out of American financial institutions cobbled up by Treasury Secretary Hank Paulson and Federal Reserve chairman Ben Bernanke is finally adopted is less important than what the bail out means for America's position in the world. The populist rant about greedy banks that is being loudly ventilated in Congress is a distraction from the true causes of the crisis. The dire condition of America's financial markets is the result of American banks operating in a free-for-all environment that these same American legislators created. It is America's political class that, by embracing the dangerously simplistic ideology of deregulation, has responsibility for the present mess.
In present circumstances, an unprecedented expansion of government is the only means of averting a market catastrophe. The consequence, however, will be that America will be even more starkly dependent on the world's new rising powers. The federal government is racking up even larger borrowings, which its creditors may rightly fear will never be repaid. It may well be tempted to inflate these debts away in a surge of inflation that would leave foreign investors with hefty losses. In these circumstances, will the governments of countries that buy large quantities of American bonds, China, the Gulf States and Russia, for example, be ready to continue supporting the dollar's role as the world's reserve currency? Or will these countries see this as an opportunity to tilt the balance of economic power further in their favour? Either way, the control of events is no longer in American hands.
The fate of empires is very often sealed by the interaction of war and debt. That was true of the British Empire, whose finances deteriorated from the First World War onwards, and of the Soviet Union. Defeat in Afghanistan and the economic burden of trying to respond to Reagan's technically flawed but politically extremely effective Star Wars programme were vital factors in triggering the Soviet collapse. Despite its insistent exceptionalism, America is no different. The Iraq War and the credit bubble have fatally undermined America's economic primacy. The US will continue to be the world's largest economy for a while longer, but it will be the new rising powers that, once the crisis is over, buy up what remains intact in the wreckage of America's financial system.
There has been a good deal of talk in recent weeks about imminent economic armageddon. In fact, this is far from being the end of capitalism. The frantic scrambling that is going on in Washington marks the passing of only one type of capitalism - the peculiar and highly unstable variety that has existed in America over the last 20 years. This experiment in financial laissez-faire has imploded.While the impact of the collapse will be felt everywhere, the market economies that resisted American-style deregulation will best weather the storm. Britain, which has turned itself into a gigantic hedge fund, but of a kind that lacks the ability to profit from a downturn, is likely to be especially badly hit.
The irony of the post-Cold War period is that the fall of communism was followed by the rise of another utopian ideology. In American and Britain, and to a lesser extent other Western countries, a type of market fundamentalism became the guiding philosophy. The collapse of American power that is underway is the predictable upshot. Like the Soviet collapse, it will have large geopolitical repercussions. An enfeebled economy cannot support America's over-extended military commitments for much longer. Retrenchment is inevitable and it is unlikely to be gradual or well planned.
Meltdowns on the scale we are seeing are not slow-motion events. They are swift and chaotic, with rapidly spreading side-effects. Consider Iraq. The success of the surge, which has been achieved by bribing the Sunnis, while acquiescing in ongoing ethnic cleansing, has produced a condition of relative peace in parts of the country. How long will this last, given that America's current level of expenditure on the war can no longer be sustained?
An American retreat from Iraq will leave Iran the regional victor. How will Saudi Arabia respond? Will military action to forestall Iran acquiring nuclear weapons be less or more likely? China's rulers have so far been silent during the unfolding crisis. Will America's weakness embolden them to assert China's power or will China continue its cautious policy of 'peaceful rise'? At present, none of these questions can be answered with any confidence. What is evident is that power is leaking from the US at an accelerating rate. Georgia showed Russia redrawing the geopolitical map, with America an impotent spectator.
Outside the US, most people have long accepted that the development of new economies that goes with globalisation will undermine America's central position in the world. They imagined that this would be a change in America's comparative standing, taking place incrementally over several decades or generations. Today, that looks an increasingly unrealistic assumption.
Having created the conditions that produced history's biggest bubble, America's political leaders appear unable to grasp the magnitude of the dangers the country now faces. Mired in their rancorous culture wars and squabbling among themselves, they seem oblivious to the fact that American global leadership is fast ebbing away. A new world is coming into being almost unnoticed, where America is only one of several great powers, facing an uncertain future it can no longer shape.
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179 Comments so far
Show AllThis could be a good thing if americans WAKE UP to their real needs and let go of imperialism, greed, and aggression.
Never happen. Its what American lives on. It can't survive with imperialism, greed and aggression.
Ever since 9/11, America has been thrashing around wildly, like a snake--striking at anything while using all its venom in the Pentagon and on Wall Street.
Its strike is becoming less and less deadly.
At best, our debtor (China--and others) will use our military--though indirectly--for their own purposes. American: No longer the World's Policeman, but the World's Hired Thug for the rich.
We may already be serving that purpose.
Never happen. Its what American lives on. It can't survive with imperialism, greed and aggression.
Ever since 9/11, America has been thrashing around wildly, like a snake--striking at anything while using all its venom in the Pentagon and on Wall Street.
Its strike is becoming less and less deadly.
At best, our debtor (China--and others) will use our military--though indirectly--for their own purposes. American: No longer the World's Policeman, but the World's Hired Thug for the rich.
We may already be serving that purpose.
Well, if idiot Bush had not DOUBLED the US national debt in just 8 years, this nightmare would not be as bad. NEVER, NEVER again vote for a phony conservative called a Republican.
How about NEVER, NEVER again vote for a phony Liberal called a Democrat?
Seems to me they apples and apples.
"Crack open a cynic and you will find an angry idealist!"
Democrats cave again. No mention of who pays, means YOU PAY.
Time for a tax-payer revolt.
Visit http://ThanksHank.org
Send your unpaid debts to the Treasury and spineless citations to Congress.
Excellent article. These developments are not altogether surprising to anyone who read Gray's 'False Dawn' ten years ago. This article is worth holding on to and rereading, if, at the end of this week, the stock exchange is up 800 points and we start hearing about how 'the bailout worked'.
I totally agree. Once "we"- the stock market- recovers, we will soon forget. I hate to see it, but things will have to get a lot worse before the American middle class wakes up.
It is the American capitalistic culture that is the root problem. The USA worships money and capitalism, period. Until we are forced to understand that money is not everything, which is a spiritual awakening, American society will not change.
Unfortunately all expectations are that the housing market will continue to plummet, another 15% or so into next year. Thus those worthless securities we just purchased can be used to wallpaper the Treasury Dept. walls.
I noted, while watching the McGloughlin Report yesterday, that Mort Zuckerman ( one of the panelists on that excellent show) whose net worth is about 4 billion, noted that most had forecast this thing coming and he had taken his (not inconsiderable) portfolio and put it into currency and precious metals..and he did it about one year ago!...So they saw it coming and they are well positioned not to get hurt at all...Comforting thought for the rest of us....
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We see things, not as they are, but as we are.
Anais Nin
"A new world is coming into being almost unnoticed, where America is only one of several great powers, facing an uncertain future it can no longer shape."
Duh, the "New World Order" has been the agenda for decades, publicly known since Reagan. The multinationals and international banks care nothing about individual nationalistic concerns, beyond their ability to subvert those individual nationalistic interests to their ultimate benefit.
To realize their ultimate goal requires first the destruction of the American Ideal and diminishment of a strong middle class. With the middle class desperate for change, the stage is set.
All part of the grand scheme to make Uhmerka into a Third-world basket case. You'll work your peon job for whatever corporation owns it, and be given just enough to survive on...unless of course you join the ranks of parasites who manage the corporations.
I never thought, in my wildest imagination, that I would see the time that would mark the beginning of the end of America's power on the world stage, and yet, here it is.
Sadly, I do not expect most of the 54 million people who voted for George Wanker Bush in the last rigged election to understand what is happening to them or their country. The gross stupidity and chicanery, the mentality of The Scam and The Flim Flam, that got us here, now appears to be a permanent part of our national character. The USA will cut off its nose to spite its face. Central to our dilemma is this: we have crossed the horizon where the unfathomable amounts of money needed to run The American Empire will keep flowing in. But the Emperor and his people and all pretenders to the throne will not, under any circumstances, give it up. Utter and complete financial and social ruin is inevitable if these remain the rules of the game. Or perhaps the nations who are surpassing us will subsidize our military and America will become mercenaries-for-rent who will do their dirty work for them.
It is breathtaking how quickly the Bush wrecking crew has been able to ruin this country. Even Nero would be envious.
This will be painful, but it may also enable a genuine spiritual awakening, beyond materialism. There is also a darker alternative: Sinclair Lewis wrote, "When fascism comes to America it will be wrapped in the flag and carrying a cross."
Bless em' the smelly raggedy little anarchist punkers that resist the police at our DEMONSTRATIONS and Republican national conventions. While you bloggers bravely bicker and quote eachother, Kids you wouldn't give half a sandwich to, get tasered, gassed, beaten and arrested doing what? Standing up for YOUR CONSTITUTION.
The fact is the only people with real courage DROPPED out or were PUSHED out of your "economy" a long time ago.
Good bye to all that. now that AMERIKKKA is sliding and the BUCK is BROKE we will see what power REALLY looks like, authoritarian style.
Maybe then you will be GLAD that those little punkers refused to be cowed and fought for YOUR domestic freedoms and even offer one half a sandwich.
Tell them to organize their own events and to stop hanging onto the coattails of peaceful protesters.
Fifty thousand people march and who ends up on tv? Rock throwing punks in black bandanas.
Not all gutter punk anarchists are violent that is gross stereotype and smear worthy of the worst Rush Limbaugh listening neo-con. When I was in Humboldt county doing forest defense we had days long non violence training sessions and adhered to a non violence pledge scrupulously even when confronted with screaming loggers and heavy handed police abuse. Although our front line people were multigenerational (including myself in the late 30s at the time) I'd estimate over half of them were anarchist gutter punks right off the streets. IMO you owe all these non violent anarchist gutterpunks an apology for slander. They have done FAR more to resist the depredations of globalist empire than most of you here even dream of, risking their lives sleeping night after night in cold wet tree sits and dodging private goons and cops hiking heavy backpacks up steep mountain trails. Slandering anarchist gutterpunks smacks of narcissistic classicism of the worst sort. Hint not everyone looks like you, or dresses like you, nor do they want to.
hootowl
The only time I've seen anarchists is at protests they had no hand in organizing. I've seen them try to change protest routes and I've seen them confronting cops to cause incidents. I've been to peaceful marches and gone home to news coverage of anarchist violence afterward.
As far as I can tell they are incapable of doing anything more than piggy-backing on the efforts of others to steal press coverage. The media eats it up and Joe six-pack dismisses the march of 50 thousand people as a bunch of rock throwing loonies.
If there are non-violent anarchists who are doing good stuff, my ire isn't directed at them, just at the ones I've seen.
That was a weak apology, apologies generally contain words like "I'm sorry," "I didn't mean to stereotype and will reconsider my position," etc.
It's not an apology at all. Hint - not everyone thinks like you.
You don't get it at all. You completely missed the point.
According to Mordechai Shiblikov, "...those are the ONLY people who can change all this because that's most of the citizenry of the USA". And it's obviously totally true. When the vast majority has had it and demands change, change will happen as sure as day follows night.
A small bunch of stone-throwing, violent, adrenalin junkies with dilusions of revolutionary grandeur have never accomplished anything positive, and routinely do just the opposite. And half the time they're infiltrated by the police for the most obvious reasons. A very strong peaceful demonstration of regular, decent people ends up in violence and chaos for the last 15 min. and guess what is all over the evening news...discrediting the whole thing in the minds of many.
When Bush, the Mexican pres., etc., met in Canada last year, a few of those were unmasked (brick in hand, causing trouble and about to cause much more) as... You guessed it, police officers. The demonstration was fairly strong, lots of older well-behaved people amongst the younger peaceful crowd and it looked good on TV. Those cops almost turned it into the usual police attack with beatings and arrests, and the blame on the demonstrators.
Yes, progressiveparty! It is weakness to grab from others--shows we don't bother to plan or act with our own resources and probably don't believe we can go it on our own.
Let's turn from our swaggering cowards and their think 'Tankers'
Take inventory of what we have and what we need to do
Roll up our sleeves
Get to work taking care of Americans and America
Pay off the debt run up by executives, legislators on the corporate payroll
End corporate welfare
"Privatizing" government magnifies expense, eliminates responsibility
Use the Golden Rule at home and abroad
Stay out of other people's fights
We do not need 737+ bases in other countries when we can't take care of our own country. Bring our people home and let's get to work.
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VOTE NADER 2008 !!!!!!
End the wars
Bring the troops home
http://www.votenader.org/index.html
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The subjects of the following article and much more are covered in "After The Empire" by Emmanuel Todd who predicted the fall of the Russian economy a decade before it happened based upon practical economics and other objective factors.
The scary question is whether or not America's elite and corporate interests will continue on the same course in an attempt to preserve thier wealth through black gold petrodollars subsidized by our military and the taxpayer. Thus far they appear more than willing to sacrifice the well being of the nation to serve their delusional goals.
progressive party is dead on. posters here on CD get it, but it might not hurt for members of the public to pick up a history textbook and reread about the Progressive Era and the Gilded Age. Additionally, they might benefit from Robert Wiebe's "The Search for Order" and Gabriel Kolko's "The Triumph of Conservatism".
toylit:
While you bloggers bravely bicker and quote each other, Kids you wouldn't give half a sandwich to, get tasered, gassed, beaten and arrested doing what? Standing up for YOUR CONSTITUTION.
The fact is the only people with real courage DROPPED out or were PUSHED out of your "economy" a long time ago. //////
Millions upon millions of Americans who don't read about politics or economics, have no overall interest in them, who follow the rules, who fly the flag in front of their homes, who know Republicans and Democrats are thieves and liars and yet keep voting for them, who really, really get their backs up at anyone or anything slightly out of the ordinary, who sputter and fume and get their blood pressure up about forces and individuals larger and infinitely more cunning than themselves . . . those are the ONLY people who can change all this because that's most of the citizenry of the USA. They won't be going out to demonstrate because it's not in their nature, not even to protect their own economic way of life or their children's. They will not stand in front of McCain and Obama and give them the finger because when push comes to shove, they will always bow to authority. If there is to be the radical (go-to-the-root-cause) change needed to survive the losing game of chicken the USA is playing with itself and the rest of the world, it's going to have to start with them.
Amen
There a reason Americans will not stand up to the rape that is going on, outside of a small handful. It is evidenced by the continual platitudes one hears of America being a force of good, and the one indispensable nation.
THAT is at the heart of the matter. It takes courage to stand up to all those myths and recognize them for what they are.
Dropping bombs on countries half ways around the world is not an act of virtue, or of good, nor is it defending freedom, or free speech or giving Americans the right to vote.
It as an act of murder. It shows a callous and wanton disregard for life.
Democracy and freedom do not go hand in hand with Capitalism and free markets. Again this a fabrication. Capitalism as practiced is exploitation of the masses, the organized theft of the resources of others.
It shows a callous and wanton disregard for the well being of others. The every man for them self .
Virtue is not to be found in an economic system or a political ideology. It is found in how we treat one another as human beings all sharing the same planet. A nation that arms itself to the teeth spending more then the rest of the world combined on arms, with Military bases the world over and claiming the right to attack and kill whomever it pleases when it pleases in defense of its "values" hardly exemplifies a "force of Good".
There was certainly that opportunity to be a force for good. That was thrown away in the mad rush for wealth and power.
Brilliant comment, all of it.
"It is an act of murder", not a force of good. This is something neither presidential candidate really gets, though I think Obama clearly leans closer to understanding it, in a very muddled way. His saber-rattling attitude toward Afghanistan, the Taliban, and al-Qaeda is horrifying, a mistake almost equal to invading Iraq. (Since attacking anybody except in clear self-defense, will create more enemies.) Yet he also speaks honestly about negotiating with everyone and toning down our aggressive stance in the world in general. There is always some hope for redeeming a country. As you said, it starts with personal virtue, how we treat one another as human beings. Sorry to refer to politics again, but McCain just appears to be an empty shell, parroting the talking points of a dying empire-- just like Bush Jr. There is very little of that sort of virtue apparent and that has sent our nation on a course of ruin.
And if I understand anything about history and real change, it's not about notions that sound right. 'Necessity' is the mother, the father and most relatives of way more than 'invention'. When people hurt enough that the consequences of taking action are not likely any more painful than the alternative, people will move. And then organizing becomes pretty straightforward. "Where do we meet"?
I have always been amazed with what I consider to be reckless abandon as to how China and other countries have been lending money. An argument can be made that they may not be repaid 100% of principal not to mention accrued interest. A time will soon come when debt re-negotiation and forgiveness could be on the table. And if/when that happens the standard of living will take a huge hit just as it happened with the third world debtor nations of Sub-Saharan Africa, Latin American, and others.
Nature abhors a vacuum. The mother of all bubbles: Our trade deficit plus government spending and borrowing abroad, and the loss of value adding work in America is growing faster than ever. When it pops, it will be too big for a bailout.
There is a very good reason why China has been taking on so much US debt, and it is not because they want to collect the interest. At the crucial moment, China will have the power to call in their loan and bring the American economy to its knees. That power is what they have been buying. You think the won't do it because they will lose their investment? America spent $1 trillion to get rid of Sadam Hussein. Don't you think China would spend a few trillion to get rid of the US? And they won't have to fire a single bullet. While the US has been playing chess, China has been playing 'go'.
Very wise comment I hope people paid attention to that. That is why IMO if we really ACTUALLY want to see a more decentralist, Green, co-op, CSA, farmers market based economy we are going to have to talk to paleo-cons and Ron Paul supporters because they ALSO want an end to concentrated Federal power, police state and empire abroad. That doesn't mean accepting any racism, homophobia, or corporatism on their part but it does mean starting a dialog because in the long run I think they have a more sustainable vision for America than Dims that some of ally with IMO. They understand for example that accruing Chinese debt is unsustainable unlike Dims. And yes I may vote for Obama to keep Palin from getting too close to the nuclear trigger but in the long run I think Joe Bageant has more to teach us than any mainstream Dim
http://www.joebageant.com/
Lending for China is anything but reckless. Sure the way our administration has been borrowing...now that's reckless.
Shouldn't persons responsible for bringing this country nearly to the point of collapse be considered traitors and terrorist?
Yes. Yes they should.
Yeah, these people are DOMESTIC terrorists, the ones that when you take a military, Constitutional, oath you swear to protect America from; all enemies foreign and DOMESTIC.
Doesn't matter how much money is thrown at it now, the damage has been done.
Robbing Peter to Pay Paul who turns around to bail out his buddy is not a good loan. It's a big gamble.
Just the loan is bad for the economy.
I don't think this is a fabrication, I think they were trying to stall this till after the election.
Good analysis and insight.
A whole lot of wishful thinking, both in the article and in some of these posts. Why some here want our country to fail is beyond me, but you won't get it.
Almost all Americans love their country Thomas, it is the hegemony and hubris of America that they want to fail. It is the perdition of our Constitution that they want to fail. It is the exculpatation of Wall Street that they want to fail. It is killing our brave soldiers in Iraq that they want to fail. To sum up: it is the "oderint dum mutant" that they want to fail.
Paul Revere,
You should really take the word "Almost" out of the first sentence. I think all Americans love their country. What they don't like is what you have so eloquently mentioned. Thanks
What I meant by ALMOST, was there are pretenders that say they love America and wrap themselves in the flag but are traitors to the country that I and the rest of Americans love. Hope that clarifies it.
Exactly. Tell me Cheney/Bush/Rove/Dumsfeld/Rice love the country that much, and that they weren't the least bit aware that they're wreaking havoc so that some can profit hugely...themselves.
Even the most bitter radicals who hate the system likely love this country and the vast majority of its people as much as I do... as we all do. My life is loaded with great people. Nobody I know starts wars, tortures people, or tries to justify torturing people.
I don't think there is anyone here who really wants the country to fail the way you fear. The message is clear. Let's tear down the current system and rebuild our society from ground zero up. As I pointed in another topic, what's the point of having a "large economy" when it is all nothing but borrowed money and borrowed time? We're going to be forced to pay back one way or another, be it raising taxes or those countries taking over American companies, ports, manufacturing, and even the military. China and other nations are already getting it that the US really has no intentions of paying off its debts so they are using the capitalist and military secrets given to them to force America to come to her knees and turn to a humble heart.
The country 'failing' is ridiculous hyperbole. The article doesn't claim that at all, and most reasonable people here don't talk that way, although some....???!!!
If it did 'fail' there would be such incredible suffering and mayhem as a result...
But that's not at all the subject. The topic is disappearing US global economic and financial hegemony. It's as real as a toothache my friend. Those glory days that started after WWII of the US controlling the global economy, with the Fed and the Treasury pretty much dictating World Bank and IMF policy, etc., are done. Like dinner.
It's not going to appear in public dramatically like in a football game where the defence leaves the field and the offence comes on. It won't be overnight. But it's done. The centre has begun to shift and the nasty bitch-slap that Putin served to Cheney/Bush/Rove/McCain, etc., is as good an illustration as you need for the time being. (Yeah, obviously if the economic/financial house of cards comes down, there are repurcussions militarily and elsewhere.)
And it didn't start last week.
World breathes sigh of relief!
The tyrannical US is finally brought down, and by its own greed nonetheless. I guess deepest thanks and congratulations to the Bush Family are in order.
May the planet see an end to American genocide and cowardly attacks against defenseless nations soon, though desperate despots do desperate things and there's enough power left in the beast.
Hopefully, the US will become another Russia and the Chinese bastards won't be able to reign free and become themselves the planet's bully for the next 100 years.
So how many guillotines would 700 billion buy?
How many do we need?