How Did America Fall So Fast?

George Washington's picture

Washington's Blog.

In 2000, America was described as the sole remaining superpower - or even the world's "hyperpower". Now we're in real trouble (at the very least, you have to admit that we're losing power and wealth in comparison with China).

How did it happen so fast?

As everyone knows, the war in Iraq - which will end up costing $3-5 trillion dollars - was launched based upon false justifications. Indeed, the government apparently planned both the Afghanistan war (see this and this) and the Iraq war before 9/11.

And the financial system collapsed last year due to looting and fraud.

How Empires Fall

But Paul Farrel provides a bigger-picture analysis, quoting Jared Diamond and Marc Faber.

Diamond's book 's, Collapse: How Societies Choose to Fail or Succeed, studies the collapse of civilizations throughout history, and finds:

Civilizations share a sharp curve of decline. Indeed, a society's demise may begin only a decade or two after it reaches its peak population, wealth and power...


of the choices has depended on the courage to practice long-term
thinking, and to make bold, courageous, anticipatory decisions at a
time when problems have become perceptible but before they reach crisis

And PhD economist Faber states:


How [am I] so sure about this final collapse?


all the questions I have about the future, this is the easiest one to

Once a society becomes successful it becomes arrogant,
righteous, overconfident, corrupt, and decadent ... overspends ...
costly wars ... wealth inequity and social tensions increase; and
society enters a secular decline.


[Quoting 18th
century Scottish historian Alexander Fraser Tytler:] The average life
span of the world's greatest civilizations has been 200 years
progressing from "bondage to spiritual faith ... to great courage ...
to liberty ... to abundance ... to selfishness ... to complacency ...
to apathy ... to dependence and ... back into bondage"


[Where is America in the cycle?] It is most unlikely that Western
societies, and especially the U.S., will be an exception to this
typical "society cycle." ... The U.S. is somewhere between the phase
where it moves "from complacency to apathy" and "from apathy to

In other words, America's rapid fall is not really that novel after all.

How Consumers, Politicians and Wall Street All Contributed to the Fall

the individual level, people became "fat and happy", the abundance led
to selfishness ("greed is good"), and then complacency, and then apathy.

if you think back about tv and radio ads over the last couple of
decades, you can trace the tone of voice of the characters from Gordon
Gecko-like, to complacent, to apathetic and know-nothing.

the political level, there was no courage in the White House or
Congress "to practice long-term thinking, and to make bold, courageous,
anticipatory decisions". Of course, the bucket loads of donations from
Wall Street didn't hurt, but there was also a religion of deregulation
promoted by Greenspan, Rubin, Gensler and others which preached that
the economy was self-stabilizing and self-sustaining. This type of
false ideology only can spread during times of abundance and
complacency, when an empire is at its peak and people can fool
themselves into thinking "the empire has always been prosperous, we've
solved all of the problems, and we will always prosper" (incidentally, this type of false thinking was also common in the
1920's, when government and financial leaders said that the "modern
banking system" - overseen by the Federal Reserve - had destroyed
instability once and for all). 

as for Wall Street, the best possible time to pillage is when your
victim is at the peak of wealth. With America in a huge bubble phase of
wealth and power, the Wall Street looters sucked out vast sums through
fraudulent subprime loans, derivatives and securitization schemes,
Ponzi schemes and high frequency trading and dark pools and all of the

Like the mugger who waits until his victim has made a
withdrawal from the ATM, the white collar criminals pounced when
America's economy was booming (at least on paper).

Given that the people were in a contented stupor of consumption, and
the politicians were flush with cash and feel-good platitudes, the job
of the criminals became easier.

A study of the crash of the Roman - or almost any other - empire would show something very similar.


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SWRichmond's picture

Sobering review of American competitiveness:

USA global ranking in:

  1. Quality of overall infrastructure: 14th
  2. Quality of Roads:  11th
  3. Quality of Railroads:  17th
  4. Quality of Ports:  13th
  5. Quality of Air transport:  20th
  6. Quality of Electricity supply:  17th
  7. Government budget Balance:  122nd
  8. National Savings Rate:  109th
  9. Government debt as a percentage of GDP:  114th
  10. Infant mortality:  36th
  11. Quality of Primary education: 30th
  12. Extent and effect of taxation (level of impact on incentive) 59th
  13. Total tax rate:  42nd
  14. Number of procedures required to start a business: 26th
  15. Prevalence of trade barriers:  44th
  16. Business impact on FDI:  68th
  17. Burden of Customs procedures:  39th
  18. Ease of access to loans:  33rd
  19. Restriction on capital flows: 54th
  20. Soundness of banks: 108th
  21. Effectiveness of Securities Exchange regulation: 47th
  22. Protection of property rights: 30th
  23. Diversion of public funds:  28th
  24. Public trust of politicians:  43rd
  25. Judicial independence: 26th
  26. Government favoritism:  48th
  27. Wastefulness of government spending:  68th
  28. Burden of government regulation:  53rd
  29. Transparency of governmment policymaking:  31st
  30. Organized crime:  72nd
HCSKnight's picture

"Quality of Air transport:  20th"... this alone tells one the quality of the report...



SWRichmond's picture

USA ranked first in quantity of air transport

Anonymous's picture

America is not a 'civilization'. that notion, in the global economy, is at this time not valid.

Anonymous's picture

America's not America. It's a cabal of vampires ruling over 300 million helpless taxpayers (not to mention helpless villagers in Asia) by rigging the political system. If you reframe the question into "why did the vampires ruin themselves" the answer is quite simple: because they are vampires.

Should we feel bad that the vampire coven is going to collapse? Not really, unless it collapses on someone innocent.

Anonymous's picture

In "Collapse", Diamond also pointed out that the decline begins when the interests of the ruling elite become entirely disassociated from the interests of the rest of the population. I'd say that's another tick.

Anonymous's picture

These morons always have 20/20 vision when looking in the review mirror. Show me one who predicted the calaminty.

I wonder if he practices weather forecasting on the side?

Anonymous's picture

watch this week' PBS Frontline about the de-fanged Clinton era regulator that warned about fraud happening in the emerging, unregulated, secret swaps/derivative markets but had her agency gutted by the likes of Greenspan, Rubin, Summers.

read ND Senator Dorgan's statements in 1999 about the Gramm bill repealing the depresion era regulations that limited the risks banks could take.

There were many many people predicting a huge crash in US economy in late 90s...things were starting to get bad even before 9/11...but a war and Greenspans money from helicopters for housing kept the party going ...once this happened many others were flashing big warnings about economy, housing in 2005, 2006...Peter Schiff is commonly known guy to have predicted this on cable shows in 2006, and the talking heads looked at him like he was CRAZY

Only if you watch CNBC all day would you not have seen this coming

Anonymous's picture

"Historically, the financialization of society has always been a symbol that a nation's economic position has entered a phase of deterioration."
~ William Wolman and Anne Colamosca, The Judas Economy 1997

Aside from the financialization of the economy, the other major culprit:

"Back when I lived on Canada’s frozen prairies, I had a friend who was pretty convinced there were only two secrets to avoiding hangovers: the first was to stay awake until the effects of the alcohol wore off; the other, was simply to stay drunk.

"The latter of these basic principles is the one followed by the United States when it comes to war and international relations. Rather than having to deal with the effects of large numbers of troops coming home and putting a drain on domestic jobs or slowing the economy with reductions in the manufacture and sale of weaponry, the US has decided to stay at war. For a long time."

phaesed's picture


"It is certain that if people do not understand a true political economy, they will make a false one of their own" ~ W.S. Jevons - The Theory of Political Economy

- I suggest you read that book. It truly is the best political economic work I've read, and Jevons is one of the better mathematicians to move into the realm. While he's no Augustus Cornout or a Wicksell, he's one of the best.

Now, I agree with GD in that Americans have become weak, lazy, irresponsible, selfish, egotistical, soft, stupid and shallow. I also agree that public zoning fees have become ridiculous. However, I disagree that the business environment is bad. I think it's great... if you've got a USEFUL and HELPFUL service. Hiring employees is certainly easy with the selection and if you've got your OWN money, it's easy to get all the supplies you need. What I don't agree with are business owners who pay minimum wage, who hire illegal help to avoid paying an extra 2 dollars for a legal citizen per hour (even if that wage is ridiculously low), skimp on medical coverage and a multitude of other sins. But the truth is... they aren't the problem.

The SOCIAL aspects that Faber and Washington are referring to would be entirely true if it weren't for the fact that, as a race, we are about to evolve. Destruction (a.k.a. a depression) of weak, old, inept industries MUST occur if that is to happen. The idea of patents that last for 15 years or intellectual property laws MUST be reformed. The idea that any one idea, no matter how fucking stupid it is (read snuggie, coke snorting product promoters who look like gay carpenters, 15 seconds on a reality tv show), can make a person rich for the rest of their life is ridiculous, as well as inheritance laws over $2 million. Because I'm smart with my money doesn't mean my spoiled brat of a kid is actually capable of utilizing it correctly. The idea that going to war with ANY civilization in a declaration of protecting the peace is ridiculous, especially when it's obviously fiscally and religiously motivated (read: 3 religions, 3 avatars, the US, Israel, Iran).

The longer we allow these dead ideas that "you pay people what they deserve" when they only apply to the rich and not the poor is stupid. Sure, anyone can dig a ditch, but are you going to do it with your $50,000 Omega watch and your $2,000 loafers? Bull fucking shit, and please don't tell me that inflatable chested trophy on your arm provides proper intellectual stimulation (although less nagging is intellectually stimulating).

America WILL come back, but in order to do that....




All I can do is wait around and pray for the collapse to save our collective souls from this shallow disillusionment with the concepts of "bling bling" and "proper society". Give me a mountain top, a shotgun, and a case of beer. I'll wait for the government on my porch.

(and be promptly shot down by the Thinkspeak politzi)

kevinearick's picture

once a center of gravity reaches maximum efficiency of internal components ...

Anonymous's picture

And of course those that were at the start of the empire's rise knew all of this best.

We who benefitted greatly from their struggle and the constitution and culture of deomocracy and checks and balances, we now have so little care or respect for what they left us...not something perfect, but a union we could and did make more perfect and we who benefitted from the struggle for liberty of many others later (slaves, women, civil rights movement) and the struggle for a strong middle class and workers rights, consumer protections and fair and free markets by the trust busters, state AGs, grassroots orgs.

Now we squander all that those before left us because we did not treat the constitution and democractic rights with respect and with the plan we would continue to make a perfect union. Instead we chose to harshly imperialize the world. Rather than admitting our sins of native people genocide and slavery of Africans and then move to better place, we just change form and used our Marines to enslave people in neo colonies banana republics and live lavishly largely because of their cheap labor and too cheap natural resources stolen from their country. Now it has all come to roost, and what we did to others is now being done to us, we are now the banana republic and we are now corrupted beyond repair and we will now have just rich and poor, no middle.

Our founder knew what dangers lay ahead when we forgot the struggles for liberty and justice of those before us and fell into spoiled, selfishness.

Patrick Henry:
"Bad men cannot make good citizens. It is when a people forget God that tyrants forge their chains. A vitiated state of morals, a corrupted public conscience, is incompatible with freedom. No free government, or the blessings of liberty, can be preserved to any people but by a firm adherence to justice, moderation, temperance, frugality, and virtue; and by a frequent recurrence to fundamental principles."

Thomas Jefferson:
"It is in the manners and spirit of a people which preserve a republic in vigor. . . . degeneracy in these is a canker which soon eats into the heart of its laws and constitution."

James H. Thornwell:
"No polity can be devised which shall perpetuate freedom among a people that are dead to honor and integrity. Liberty and virtue are twin sisters, and the best fabric in the world."

John Adams:
"Public virtue cannot exist in a nation without private, and public virtue is the only foundation of republics."

Samuel Adams:
"The diminution of public virtue is usually attended with that of public happiness, and the public liberty will not long survive the total extinction of morals."

Jim B's picture

I don't think collapse is meant to be taken literally.

I agree with the essence of his argument, it actually took the Roman empire a very long time to completely collapse.  Our political and financial leaders are digging us into a deeper hole which will be very difficult to get out of.  We have/are moving our industrial base overseas and the knowledge and know-how is moving with it.  We are borrowing or printing fiat dollars at a mind boggling rate.  Our leaders have the hubris to act like everything is just fine, they can do as they please and there will not be a price to pay for being irresponsible.  I am glad not to be part of the next generation, their standard of living will certainly be much lower unless we change our behavior pretty quickly. LOL

Anonymous's picture

Just like the late, degenerate stage of the (Western) Roman Empire, the US Empire has virtually lost whatever social cohesiveness that previously existed. The sense that we are all in this together no longer exists, at least to the extent that it ever did.

The Battle of Cannae is a measure of the degree of social cohesiveness exhibited by the early Roman Republic. According to Eutropius: "20 officers of consular and praetorian rank, 30 senators, and 300 hundred others of noble descent, were taken or slain..." Of those with the biggest stakes in society, much was asked. Eventually however, the elite of Roman society detached themselves from the rest of the population.

In modern day parlance, the gains were increasingly privatized; accruing to a smaller and smaller (upper) segment of the population. The losses of course were increasingly socialized, eventually to such a degree that joining the "barbarians" began to look more and more like an attractive proposition.

Renfield's picture

"it actually took the Roman empire a very long time to completely collapse"

A quibble: Let's not forget the Roman empire lasted at least a couple of hundred years (or about a thousand, depending on how you date it). But either way, it was a much, much longer empire than the American one, whose dates would run only from, say, 1945 to 2015 (? roughly?). Maybe 70 years or so.

Proportionately, the American descent will occur much faster, for a much shorter-lived empire.

If you extend the British empire to include the American one as, say, the Anglo-American Empire, then you'd get about four centuries out of it. But in that case US rule should be seen only as part of the British (or Anglo) decline. Thus you could say that now at last, the sun is setting on the British Empire....

Jay's picture

The public education system can be given much credit for the fall of the US. We are not taught the basics of economics in schools. Quite the contrary, we are taught misinformation in economics and in history in general. Americans today have no sense of history nor any sense of the principals that made the country great.

Radio and television are the partners in the public education system's crime. Television has done more to mishape opinions and short-circuit critical thinking than any invention in history.

HCSKnight's picture

Nothing new.  And how doesnt explain why. 

The why can only be found in the soul, and the soul of the "America" is dying.

If you do not think so, then consider this: America's single most defining economic principle is not about liberty but the right to kill the most innocent Americans for solely material reasons.

Everything else is scenery along the road to death.


Anonymous's picture

I look at it a bit differently:

Just like price behavior in markets, after a huge move up (or down) there is always a pause while the market "consolidates" (price moves in a somewhat sideways direction).

That's what's happening here. It is not the beginning of the end for Western Civilization, but is simply the pause before the next move up.

The factors that will trigger the next move are technological, social and financial. The Internet, social networking, increased saving rates, and a gradual understanding that we are just at the start of our journey will literally catapult our civilization into the next historical phase.

Just try to stay alive long enough to see it ...

mkkby's picture

We are declining.  For the first time, young adults will have a lower standard of living than their parents. 

We won't turn into a banana republic in the next 20 years.  But our standard of living will continue to decline, as long as jobs/manufacturing head over seas. We may still be the only super power because Europe and Japan are declining just as fast.  But we may need to replace the word "super" with something like "mediocre".

As for the military... the secret is out.  We can only field 200k troops at a time and barely hold our own against a rag-tag band of cave dwellers.  Not so "super".

Anonymous's picture


Maybe it has to do with righteousness not being on our side? Perhaps the morale is low because they don't believe in the fight.

Truly what the hell do they tell the military out there? We're going to transform this survival based society to be like ours? With a weak economy, different values, and religious ethic? Tada we got a ballot box!

Even Brezinkski is saying is calling it straight up
- "we need to seek objectives that are short of perfect rather than being in a fatalistic engagement". Basically the project manager is cutting scope lol, let's FIND A PURPOSE THAT FITS OUR CONSTRAINTS 3:00-
- "populations are politically awakened" 4:15-

Joe Sixpack's picture

"But our standard of living will continue to decline, as long as jobs/manufacturing head over seas."


They won't. They can't. We will bring them home. Even dirty politics will accomplish that.

Anonymous's picture

America will have to remember where it came from and go back to those roots.

Anonymous's picture

The discussion really is a silly one. I remember the sense of outrage back in the 70s/80s when Japan was going to overtake the US and become the worlds biggest economy.

Two things: first, it didn't happen that way; second, so what if it had?

Great Depression Trader's picture

The discussion was about the dollar silly. It has to do with exporter nations subsidizing US gov bonds. They dont need us, we need them now.

time123's picture


Nobody should underestimate America. It will come back stronger than ever. I believe it is time to take our destiny in our own hands and recover at least some of the losses in our portfolios through trading the markets.

Today, we had a big drop in the end of the day, as nvestors were probably looking for an excuse to sell.

Richard Bove had made some good calls in the past, and that may be why they sold today on his comments.

By the way, the Invetrics DJIA index timing signal switched to Short prior to market open today (unrelated to the analyst's comments), and warned web site visitors of today's potential drop in the market.

It is up a respectable 64.84% for the year (as of October 20, 2009) and it is free of charge for individual investors at:


Anonymous's picture


Our problems are not confined to our portfolios, IMHO. In fact, the focus on the value of our portfolios is a large part of the problem, again IMHO.

We were all born naked into the world and will take none of our stuff out of the world. Does the accumulation of wealth define our purpose? Do we have a purpose? If not, then why bother with life?

phaesed's picture

So in otherwords your timing signal said short right before a hundred point rally. Fun for those who are smart enough to use stops.

ghostfaceinvestah's picture


How Did America Fall So Fast?"


A pure fiat currency combined with fractional reserve lending gone crazy.

Next question.

Great Depression Trader's picture


true that the exporters depend on US trade deficits, but what about them consuming their own products? What if after the "big crash" the exporters allow their currencies to float. Wont they then be able to buy more commodities? Wont inlfation become more subdued? Why should the US be the only nation that should be able to consume? True, at the present time there are imbalances but these imbalances can be cured with a crash. The crash only lasts so long. It is fear that is pushing politicians and foreign central bankers to keep supporting the USD. Once they overcome the fear of the short term, the long term benefits will appear. I think this line of reasoning that "we must buy in order for them to produce" is indicative of american arrogance and entitlement. Remember, Asia has the productive capacity, not the US. Thus, in the long term we will be forced to buy from them, not they being forced to sell to us.

Because of the current dollar propping the Chinese laborer cannot keep up with Chinese inflation and therefore his wages remain stagnant. The foreigners need to grow some balls and need to stick it to the US good. Sell the dollar and force us to overpay as they are forced to undersell. In the end, the US needs to get back to work and not just pushing paper. Everyone in the US sells something, whether it be real estate, stocks, loans, insurance, advertisement, consumer goods, etc. How about we roll up our sleeves and get to fucking work. Also, dont forget that this foreign borrowing is allowing us to play the big gangster bully by bombing Iraqis and Afghanis to the stone age. God has punished america and this whipping has just gotten started.

Charley's picture

GD: what about them consuming their own products?

Let's use China as an example. It could feed it own population, and develop its internal market, but to do so presently, it would have to massively devalue its export sector, throwing millions into the street. So, yes. There is an internal market that is untapped, but it can only be tapped at the expense of a massive devaluation of existing capital.

GD: Why should the US be the only nation that should be able to consume?

The US is the consumer of last resort, because it is most profitable for each surplus producing nation to share a portiuon of its profits with the US as a means of expanding the market for its goods. The US profits by this relationship more than each of these countries, but they profit as well. The only ones who suffer are the populations who are effectively starved - i.e., whose consumption is curtailed to make it possible for China to export to the US.

GD: True, at the present time there are imbalances but these imbalances can be cured with a crash. The crash only lasts so long.

The cure would only be temporary. Remember, the US is incredibly productive. Were it to be forced to produce what it now imports, China goods would be pushed out of the global market. Everyone is being driven by what is most profitable to do given their circumstances. At present, it is most profitable for them to produce and the US to consume. They are, therefore, being driven toward a cliff by their own interests.


Great Depression Trader's picture

The cure would only be temporary. Remember, the US is incredibly productive. Were it to be forced to produce what it now imports, China goods would be pushed out of the global market. Everyone is being driven by what is most profitable to do given their circumstances. At present, it is most profitable for them to produce and the US to consume. They are, therefore, being driven toward a cliff by their own interests.

Im not so sure that the US is so incredibly productive anymore. Moreover, the US is incredibly hostile to the manufacturing industry. Try opening a factory in California or any other state for that matter. The amount of red tape is unbelievable. My uncle built a restaurant in Redlands, CA and the city wants $500,000 in traffic impact fees and $300,000 for the water license.  i$800,000 in city and council fees to open a 2900 sq ft building. Now he running in the courts fighting this absurd politburo handgrab. His lawyer fees alone will run him $150,000.

Or how about employee lawsuits? The US is notorious for litigation as everyone has the something for nothing mentality. A buddy of mine has a class action lawsuit of 1200 employees for the "15 minutes time off". Only 2 employees complained, the case settled, but my friend doled out $750,000 in lawyer fees.

Next we have all the environment regulation and possible cap and trade tax. Then we have the medical costs and insurance going through the roof. The costs of business are skyrocketing thus more companies will leave.

In addition, americans in general are such shitty people that they are impossible to deal with. Sexual harassment claims, discrimination, unpaid overtime, unsafe work conditions, blah blah blah bunch of crying fucking bitches. Litigation is good to a certain extent. Here because of the huge payouts everyone is trying to make a quick buck. This ruins productivity as owners become discouraged. The only real workers left in america are the illegals and now they are leaving too!!! The US has become priced out due to its moral and spiritual decline. 

Lets not forget the effect of the family law court. This destorys business everywhere. I have seen several wealthy friends go through this process and have seen them give up on their companies as the bitch wants it all. They run the companies to the ground in order to avoid a multimillion dollar  payout to the entitled cunt. This happens on a daily basis and you know this to be true.

Anonymous's picture

Great Depression said: "The US has become priced out due to its moral and spiritual decline"

BINGO!! We have a winner!!!!

Until trust is restored in our society, nothing else is going to help. The assumption that no absolute right or wrong exists IS the root cause of the remainder of the mess.

We must have an agreed upon set of standards that apply in all situations. Compare the Ten Commandments and/or Matthew 22:35-40 to the Code of Federal Regulations. I would be surprised if my Islamic brethern do not have similar beliefs.

Charley's picture

GD: Im not so sure that the US is so incredibly productive anymore.

The percentage of the population engaged in agricultural in any country is the number one indicator of its productivity.

Just google the percentage of China'a labor force engaged in agriculture versus the percentage of American engaged in agriculture:

For China, I believe that number is somewhere in the vicinity of 50-60 percent of the labor force. (Don't hold me to that.)

For the US, I believe the latest figure is 0.68 percent.

The US is, therefore, approximately 100 times more productive than China - which explains the low wages in their export sector.


Anonymous's picture

I don't know why but this reminds me of a Christpoher Walken quote from the movie "Blast from the Past"

There was no bomb dad.
The Soviet Union collapsed
without a shot being fired. The Cold
War is over.

That's what everybody believes?

Yes, sir. It's true.

What? Did the politburo just one day
say - "We give up?"

Yes. That's kind of how it was.


My gosh, those Commies are brilliant!
You've got to hand it to 'em! "No, we
didn't drop any bombs! Oh yes, our
evil empire has collapsed! Poor, poor
us!" I bet they've even asked the
West for aid! Right?!

Uh, I think they have.

Hah!!! Those cagey rascals! Those sly
They've finally pulled the wool over
everybody's eyes!

Daedal's picture

You lost me at "Greenspan, Rubin, Gensler and others which preached that the economy was self-stabilizing and self-sustaining. This type of false ideology only can spread during times of abundance and complacency, when an empire is at its peak and people can fool themselves into thinking "the empire has always been prosperous, we've solved all of the problems, and we will always prosper" (incidentally, this type of false thinking was also common in the 1920's, when government and financial leaders said that the "modern banking system" - overseen by the Federal Reserve - had destroyed instability once and for all).  "


The markets are self correcting. The problem is the same as it was in the 1930's. After the market started to correct itself (unwind all of the absurdity of the asset bubble) the government steps in and prevents/delays/distorts the market from correcting itself. Did you hear of the Smoot-Hawley act of 1930's, for instance? Or the increase in minimum wages during 1930's deflationary environment?

You're correct on your general observations about societal largess and the subsequent effects on the people and policies, but are WAAAY off in regards to your conclusions on capitalism and government intervention.


Edit: That is not to say that we shouldn't have a government that protects and enforces contracts, transparent activities (on exchanges), and fair dealings amongst markte participants; it should.

However, what we have is a government intervenes, obscures, colludes, manipulates, ignores, and at times contributes to wrong doing.

Anonymous's picture

America can fall very quickly. For the rest of the world, a light is being switched on. It's not "on" yet, but the lightswitch is in motion. The rest of the world is quickly realizing that America is stealing their money (ie their goods and services). The dollar as a reserve currency allows America to steal their goods and services. Any money loaned to America by foreigners will never be repaid with value. Foreigners are quickly realizing that. Like a drug addict, America will only stop borrowing money once the "pusher" (our foreign lenders) cut us off. Foreigners now realize that any future loans to America are gifts. I don't know about you, but I don't like to make gifts to total strangers that have guns and like to shoot my family. Once the loan tap is turned off, the dollar goes into hyperinflation as the Fed prints ever more money to fund America's criminal government. The game is over. The die is cast. The end is near and like Weimar Germany, the hyperinflation will strike like lightning (it only took 3 months for a total wipeout).

Anonymous's picture

I believe the situation is a little more complicated. The US trade imbalance is a direct consequence of currencies not reflecting the exports of the respective countries. Had currencies been allowed to adjsut to trade flows, the US deficits would have been self-correcting through currency adjustments.

Since these adjustments did not occur, some states developed reserve surpluses while the US devloped a large debt.

Chemists and physicists are exposed to Thermodynamics in their undergraduate programs. One principle is that over a long enough period of time, a system will revert to equilibrium. Stated differently, the value of the $ must adjust to compensate for earlier imbalances. This can be resisted but not stopped. The US debt will be written down, either through $ devaluation or other means.

Argonaught's picture

Comparisons to Great Britain's fall from power are not accurate because unlike other empires before, GB's best pals stepped up and over.  If Germany had had achieved their world-domination goals, history would not show a sort of slow-drift downward for Britain.  Look at other great empires of history, the fall is not pretty and there has never been a two-time champ.

The US will have nations champing at the bit to step in.  The last time a land this rich in resources was "available", the native americans didn't stand a chance...

chet's picture

I would love to meet the nation that thinks that a nation brimming with tens of thousands of nuclear warheads attached to the most advanced delivery systems ever conceived is "available" for them to "step in."

Anonymous's picture

Okay with some of your rant - government officials especially.

But the non-sequitur about the Iraq and Afgan wars - geez. I guess you miss those justified wars that led to the peak of our Republic like the War of 1812, Spanish American War, the whole list just goes on. I would even add WWI. WTF were we doing in Europe then?

And you are saying we were financially pure way back when with gold panics, monopolies, JP Morgan owned Wall Street and...oh yeah, the Depression.

Are things bad now? Yeah. Were the good old days great? No.

Anonymous's picture

But the person who appears to be the actual author of this passage is none of the men named above. They were not born from the mouth or pen of a political leader or historian or famous author. Rather, they would seem to be the words of Henning Webb Prentis, Jr., President of the Armstrong Cork Company.

In a speech entitled "Industrial Management in a Republic," delivered in the grand ballroom of the Waldorf Astoria at New York during the 250th meeting of the National Conference Board on March 18, 1943, Prentis had this to say about

Paradoxically enough, the release of initiative and enterprise made possible by popular self-government ultimately generates disintegrating forces from within. Again and again after freedom has brought opportunity and some degree of plenty, the competent become selfish, luxury-loving and complacent, the incompetent and the unfortunate grow envious and covetous, and all three groups turn aside from the hard road of freedom to worship the Golden Calf of economic security. The historical cycle seems to be: From bondage to spiritual faith; from spiritual faith to courage; from courage to liberty; from liberty to abundance; from abundance to selfishness; from selfishness to apathy; from apathy to dependency; and from dependency back to bondage once more.

Charley's picture

I am not so sure that your prediction of US demise are accurate at this point. Let me offer a different perspective:

Based on Tyler's remarkable post yesterday (How The Federal Reserve Bailed Out The World) I would make these points:

First, so far, the financial crisis proved the dollar is the sole currency to be held by every nation; and, oddly enough, that the local and regional national currencies are the Achilles Heel of national economies. Every shortage of capital is now a shortage of dollars! It follows from this that anything which interrupts the flows of dollars through the global markets threaten every nation with catastrophe.

Even as they complain about this salient fact, China, Brazil, Russia, Europe, et al, know this to be true.

Second, nearly every national economy at this point suffers from some level of excess productive capacity, which, if it is to be offset by trade, explicitly depends on the US negative trade balance to act as consumer of last resort. Since, so many of national economic development plans rest on locally unbalanced economic activity - resource exports, in-sourcing, on-shoring, etc.; since all of these plans cannot be realized collectively unless some national economy actively seeks to import resources, out-source, and off-shore; since only the US, as owner of the reserve currency, could possibly play this role; and, finally, since this excess capacity is the underlying cause of the financial crisis, the result is that the US must become ever more dependent on debt it cannot repay and deindustrialized.

China's, Brazil's, etc. growth demands not fewer dollars, but more; not balanced US trade, but ever more negative trade balances; not an end to the triple deficits, but their geometric growth.

SWRichmond's picture

Every shortage of capital is now a shortage of dollars!

The problem is, rather, that there is no capital.  We ate it.  Your assertion leads to the (unspoken) conclusion that we can print up new capital by printing dollars; printing capital is irrational, and decidedly monetarist.  Do we need to revive the discussion about token-thingies?


Joe Sixpack's picture



Other countries are [at least] trying to move out of dollars, so your first observation may onlty be temporary.

As for the second, I think part of the problem (espcially for China) is that the productive capacities were geared to serve the west, and this will impact them. China is starting to convert some of that export capacity to internal capacity, but this will take time.

Anonymous's picture

Joe, your first comment is not true. Charley's comments are both astute and correct: Foreign net purchases of Treasuries hit an all time high of $100.5 Billion in June 2009 with China and Japan purchasing the most.

Anonymous's picture

There are problems with the US, to be sure. But the real problem is with the world as a whole, US is just a part of it. The economic globalization assumes, at least in principle, that you can transfer the western civilization to the entire world population. You can not. It is too resource intensive in its present form. If you open western markets to outsourcing of labor, you clobber domestic labor and get a classic marxist crisis. The theory was that you would develop new markets elsewhere and the rising economic tide would lift all boats. No it will not, until there is intense technological restructuring, if one is indeed possible. In other words, making a globally prosperous economy is not a problem that can be solved by the political economy, at least not in a short term. In the short term, the world is trending towards the only technologically feasible solution. This is 15% of the population living a decent life, with 85% resentful and trying to kill the upper 15%. The 15% is getting redistributed worldwide, so the US is trending towards the latin american model of society. Extreme inequality, deepening pauperization of the lower 85%. Such a society is generally incompatible with democracy, because of the level of social conflict, and violent means that need to be employed to control it. One needs to rethink foundations of the international order, and ask how can the US society regain the role of an engine of innovation. This may mean at least a partial reversal of global free trade policies to preserve some social balance. All countries are in danger, and the ones that figure out how to maintain cohesion and become the center of innovation will be future leaders. I doubt that China will be that future leader. More likely, China will tear herself apart, as she attempts an impossible task of transplanting the western civilization upon herself. At least Indians are making the Nano, Chinese are buying the Hummer brand.

mrhonkytonk1948's picture

How could anyone have thought for an instant that "globalization" would be anything but a race to the bottom in terms of its impact on the American middle class?  Oh, wait.  Now I remember.  An "economist" said that mutual benefit would emerge from the magic cloud.  Once the harvesting is finished, most of this country will indeed be paupers.  Damned shame.

lieutenantjohnchard's picture

2/3rd's of the country collapsed. imo there's 1/3rd of the country still focused on excellence.

america is more than fiatscos, bernanke, hammerin' hank et al.

the country will survive even if a combination of gs, ms, c, bac, wfc, jpm or cof fail.

fact is we can retrench, solve our problems and emerge stronger with the proper leadership and frame of mind.

first we have to rid ourselves of the vampire squid, bring jobs back home, have a moon shot approach to energy independence and quit trading with 3rd world countries as ricardo advised.

of course the monetary and fiscal issues are part of the equation.

just one man's quick thoughts.

economessed's picture


I share the observations you've made here and subscribe to the theory that we are in a reinforcing cycle of decline due to short-term and selfish decision making.  America took the notion of being "the land of opportunity" for granted; believing that entitlement was a right, not something that was earned.  These 50 states and we citizens no longer have a shared vision of what America should be.  We spend our energy trying to divide ourselves into groups of "us or them" rather than building the common ground we share.

I detest what we have become.

My question to you:  what do we do about it?  Do we work to make radical change to break the cycle of decline, or do we help it fail faster so we can get on with a new society with a brighter future?