June 20, 2009

• Just don't shoot the messenger....

  As Bob Dylan sang, you don't have to be a weatherman to tell which way the wind is blowing...

  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 currency [1].
  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 [2]
  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 [3], “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 [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 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 [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 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.

  © 2009 TruthDig.com

  Chris Hedges writes a regular column for Truthdig.com [6]. Hedges graduated from Harvard Divinity School and was
  for nearly two 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 [7], What Every Person Should Know About War [8], and American Fascists: The Christian Right and the War on America. [9]  His most recent book, Empire of Illusion: The End of Literacy and the Triumph of Spectacle [10], will be out in July, but is available for pre-order.

  
  

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