Not Just Conservative Libertarians

Rand Paul's filibuster may have uncovered an issue that resonates with more than his core conservative base. It's the overweening reach of the executive branch, especially the President's use of drones, and his claim that he has the power to kill citizens if he determines--without proof--they are "enemy combatants" involved in terrorism against the US. This is a real danger: any President unchecked could become like a King or dictator, with no limits to his power.

Paul's protest is consistent with the conservative-libertarian view that government must be limited. Progressives, like Democratic Senator, Ron Wyden, who supported Paul's filibuster, could make common cause on the issue of war powers, but not on the government's role in the domestic economy.

Conservatives and progressives might collaborate on cutting back the overreach of imperial powers, and ultimately, on reducing, or withdrawing support from the United States as empire.

Back in the Interwar Period, this impulse was first labeled isolationism; then it was short-sighted. The rising powers of Togo's Japan, and Hitler's Germany had to be stopped: they were determined to dominate everyone. Their hegemony could have created a terrifying world. The dominance of the US after WWII was relatively benign in comparison.

However, US super-power status has been fraying for years, and although the US is still by far the most powerful militarily, and largest economically, trends are against its maintaining preeminence for long. First of all, as Vietnam and then Iraq and Afghanistan demonstrated, military might is limited: it cannot impose American control over an unruly world, despite the US spending more on its military than all other major powers combined. Often, our "adversaries" have been able, like a judo master, to use our strength against us.

In Vietnam, the Viet Cong gained a goodly proportion of its arms from a vibrant black market, because of the flood of weaponry sent by the US. In Afghanistan, we created our own enemies: the Taliban and al Qaeda, when intervening against the Soviet takeover. In Iraq, we destroyed a relatively stable dictatorship, a sometime ally (Saddam worked with the CIA until invading Kuwait). Instead, we created an unstable "democracy" naturally allied with Iran.

In addition to the limits to military power, there is America's relative economic decline, caused by the dramatic rise of the BRIC nations, especially China, and by our trade debt. The US will not have the largest economy for long, and will not be able to afford the luxury of its huge military establishment. This is especially true as the US Dollar's reserve status weakens and we have to pay our debts with dollars earned!

It's likely we're seeing the beginning of the decline of the American Empire. I hope we can manage it more benignly than did the Romans, Spanish, or Soviets. So, Rand Paul has a point.

Maybe we can become like Monty Python's post-imperial Britain. We could have more fun!

Money Trumps Empire

"We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act." On Page 4 of the official Standard & Poor's "Research Update."



Republican obstructionism on behalf of their constituency, the wealthy and selfish (cf. the Selfish Class on this site), has done what the debt-ceiling agreement narrowly averted: brought into question the financial credibility of the US Government.

This is a big deal. Whether S&P used questionable measurements, whether it acted out of its own political agenda, it still did what no one had done since the US dollar became the reserve currency of the world. A credit downgrade from AAA to AA+, unless it is quickly reversed (unlikely), will lead, first of all, to higher borrowing costs for all of us.

Take that, barely whimpering economy!

But the decision will also hasten the day when the dollar will no longer be The reserve currency. That's an even bigger deal. It could mean the beginning of the end of the American Empire, because how can the US pay for its bloated military in 120+ countries, when borrowing costs really begin to rise? It can no longer just continue to borrow and expect the rest of the world to lend to us at rock bottom rates. Of course, the US can continue to borrow, and to inflate the value of the dollar, since it still owns its own printing press (the Treasury), and supposedly controls its own reserve bank (the Fed).

But then the US would be acting like any banana republic, except that US debt far exceeds the debt of any other country, or combination of them. There is no one who could bail us out, and most economies--including the US, of course--would be driven into such a Depression that the 1930's would look like an early rehearsal.

The world economy would have good reason to collapse. If it doesn't do so, then political leaders will have finally come together to save our civilization, but, on the evidence of the last 12 years, cooperation is not a great bet.

America's fall may come a lot faster than Rome's.

Rome had terrible credit and was continually diluting (inflating) its currency. But during Rome's long expansion it was also robbing the wealth of the peoples it conquered; it paid off its debts with the proceeds: gold, other treasures, and most of all, slaves. In the US, the considerable profits of empire are pocketed not by the US government, but by private, effectively stateless, global corporations. Maybe that's why they pay so little in US taxes, even with billions in profits--profits are earned abroad. Corporations avoid declaring profits in those nations, also. It's easy to find an island/city-state with nearly zero taxes.

Deficit-mongering Endangers Dollar

If you scream about the deficit, but then don't do anything about it, or pass tax cuts that increase it, you actually endanger the nation more than the deficit, itself. The Republicans are forcing this to happen. They are shortening the time before the world's nations will jettison the US Dollar as the world's reserve currency, because US fiscal policy will lose credibility even faster, while the nation will be mired in non-recovery. However, the dollar is likely to lose its special status, anyway, sooner more likely than later.

What matters is not the government deficit, but the trade deficit: the two are not necessarily related. Deficit spending that enhances US jobs, productivity and creativity would actually cut the trade deficit and delay a move away from the dollar. Deficit spending that simply increases our national debt, like the tax cut for the wealthy, will bring us closer to the time when the US Dollar becomes just another currency; it increases our trade deficit and makes the US poorer.

The dollar losing international reserve status will be a very big deal. It will be a disaster for the US, unless the way has been carefully prepared. What's the likelihood of that?

This is what will happen: the US can no longer so freely borrow on international markets: the Fed can't blithely create money as it is doing now with Quantitative Easing. The bigger problem would be: how do we repay (by far) the largest trade deficit in the world? We won't be able to just print dollars for payment. We'll have to earn Renminbi, or Marks or Rials to buy from those places.

Imports will cost much more. Three-dollar gas will be a faint memory: prices would be comparable to Europe's ($5-7 per gallon now), or much higher.

We also won't be able to continue our military mission to control every corner of the globe. That, to me, would be a positive outcome, both for the US and the world. Who would lend to us at the low interest our bonds now pay? Interest costs to maintain our military could bankrupt us, something that happened not only to the Romans, but also led to the overthrow of the Bourbons, ushering in the French Revolution.

Any dollar-denominated asset would be worth much less outside the US. Americans would have to produce more, at lower cost--through subsistence wages, perhaps, or greater efficiency, or probably both--and import less.

Perhaps, an increasingly impoverished majority would demand Equality, as rebelling masses did on the streets of Paris, but it might come too late. The billionaires may have decamped, with their tons of gold (not dollars), just like Tunisia's Ben Ali!

Loss of reserve status could end the American empire. While temporarily poorer, Americans could end up freer and better off--if they throw out the corporate octopus impoverishing us all.