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The American Empire Is Bankrupt

Chris Hedges

 by Truthdig

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.


© 2020 TruthDig
Chris Hedges

Chris Hedges

Chris Hedges is a Pulitzer Prize–winning journalist who was a foreign correspondent for fifteen years for The New York Times, where he served as the Middle East Bureau Chief and Balkan Bureau Chief for the paper. He is the host of the Emmy Award-nominated RT America show On Contact. His most recent book is "America: The Farewell Tour" (2019).

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