Guest Post: How The End Of Empire Comes, Not With A Bang, But With A Whimper

Tyler Durden's picture

Submitted by Tim Price of Sovereign Man blog,

When Moody's downgraded the UK's sovereign credit rating last week it was something of an anti-climax.

The ratings agencies long ago lost what little credibility they ever had. Being downgraded by Moody's is like being called a moron by a moron; ask anyone who has ever set foot in a bond dealing room - the ratings agencies are always behind the curve.

The UK has been on the skids, credit-wise, for years. Britain's debt to GDP has gone through the roof. We, and generations to come, will be left with the reckoning.

We've seen this before in history. British debt to GDP peaked in the immediate aftermath of the Napoleonic Wars, the cost of which also brought in the 'temporary' measure known as the income tax. It wasn't so temporary.

But as the peace dividend and Britain's sole status as superpower flourished, debt/GDP ratio fell. With the outbreak of World War I, it began to rise again, peaking unsustainably as the Second World War ended.

By July 1956, British sovereign finances were in a dismal state. At the time, Egypt's President nationalized the Suez Canal, putting British oil supplies at risk. Joining the fray, Saudi Arabia began an oil embargo against Britain and France.

Britain wanted to take action and went to the IMF for support. But sensing an opportunity to increase its influence in the Middle East at the expense of its faltering old ally, the US said NO and threatened to dump some of its massive holdings of UK government debt.

Britain's foreign exchange reserves were running out, and the country would soon be unable to supply itself. Britain blinked first and bowed out. Our days of Empire were over. It came not with a bang, but with a whimper.

It is not unreasonable to believe that the exact same life cycle relates to the United States. Further, it is not unreasonable to think that the US' day in the sun has already been and gone.

If its own high water mark was the fall of the Berlin Wall, at which point the world recognized the primacy of the free market model versus the failure of Communism, America's 'end of Empire' moment has already passed.

Of course, like the UK, the US has already been downgraded (by Standard & Poor's in 2011). This only confirmed what we already knew: given the absolute level of its indebtedness, the off balance sheet debts, and its broken political system, the US hasn't been a genuine AAA credit for quite some time.

Yet even though its risk is obviously more than zero, US Treasuries remain the credit market's 'risk free rate'. This is because bond fund managers operate dysfunctionally, favoring the debts of the world's most heavily indebted countries.

Consequently, EVERYTHING is benchmarked to US Treasuries simply because the US is the world's largest debtor.

In this context, the US downgrade was an act of spectacular significance. It punctured (or should have punctured) a bubble of suspended disbelief that just about every investor on the planet had been inflating for years: that the US was a riskless credit.

Or, even more ludicrously, that there was such a thing as a riskless investment in the first case.

And yet, government bonds become even MORE attractive after the downgrade. We may see the same in the UK.

Nobody believes that bonds are an objective reflection of economic reality. The game is rigged, and everybody knows it. But the Moody's downgrade should serve as a piercing smoke alarm to anybody still naive enough to be holding these instruments of value destruction. Get out now while the going is good.

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BKbroiler's picture

"Being downgraded by Moody's is like being called a moron by a moron"


pndr4495's picture

Scale of feeblemindedness in descending order :  MORON - IMBECILE - IDIOT - so , in a warped way , someone is being paid a compliment.

AssFire's picture
Not With A Bang, But With A Whimper.....

Probably ends more like a bunch of sheeple blowing their whistles and pissing themselves.

idea_hamster's picture

Not With A Bang, But With A Whimper

Actually, it ends with both -- it all depends on whether you're a "top" or a "bottom."

(Hint:  If you don't know which one you are in the global financial food chain, you're a bottom.  Get ready to whimper....)

hedgeless_horseman's picture



The Emperor Comes, Not With A Bang, But With A Whimper

Ironic, considering his massive stimulus package.

Cognitive Dissonance's picture

The King reins for only as long as his court supports him. This is why Obama quickly embraced the banks after his initial election. And why the banks bankrolled both his initial election and his re-election.

Overfed's picture

He's no king, he's an emperor.

TruthInSunshine's picture


[Scene:  Obama rides down the spectator-lined boulevard in "The Beast" limousine with a flock of Drones in perfect Fat Middle Finger formation directly overhead]


Skeptical Independent:

"He enters the pool of sepsis that is Washington D.C. like a conquering hero. But what has he conquered?"

Jamie Diamond/Chuck "Fuck Flyover Country" Schumer/The Hon. Jon S. Corzine/Defense Contractors/BigPharma&HealthInsurers/WarrenBuffett&Charlie "Let Us Fuck The Taxpayers Harder" Munger:

"Give him time. He's young, he may do very well."

Skeptical Independent:

"For the nation? Or for you?"

Solon the Destroyer's picture

That's a great line, but unfortunately the author is wrong...  Bonds are exactly the place to be while one's hedge fund, I mean bank, can still front run the Central Banks and flip their bonds right back to them.  Guaranteed profits means guaranteed buyers in the primary market.

I mean who gives a rat's ass about the capital destruction being wrought on the real economy by perpetually decreasing interest rates while there's still FiatBux to be made?

buzzsaw99's picture

Moody's is the squid's lap dog. They are there to influence policy and help skim prices.

Mr. Hudson's picture

It will be a whimper, a bang; a big whimper, then a bang-bang; a real big whimper, and then one gigantic big-bang!

Super Broccoli's picture

get out and ? buy dollars ? lol

SheepDog-One's picture

'Any chance a girl like me and a guy like you could get together'?

'Well Loydd...I'd say about 1 in a million...'

'So you're telling me there's a CHANCE!!'

ebworthen's picture

As soon as military funding and equipment is eclipsed the gig will really be up.

Like any technology, it moves fast and does not take long.

player333's picture

Correct EBW


"Consequently, EVERYTHING is benchmarked to US Treasuries simply because the US is the world's largest debtor."


UST's are backed up by the US Military let that wane and the gig is up-and it will. When the choice are Beans and bullets vs EBT cards-the domestic burden will prevail. Pull your socks up and buckle your chin strap the bumpy ride begins soon. 


Jugdish's picture

Greg Marmalarde is God. Fuck Eric Stratton.

Bam_Man's picture

Better, more apropos line from the same flick:

"You fucked up. You trusted us."

sunnyside's picture

That saying should now go on all fiat currency

falak pema's picture

When the king's buffoon now shouts : the king is THE true buffoon, all that the king can then say is :

...Are you going to believe me or my buffoon?

Only to have thrown in his face that  : you Sire have always told us your court Jester was the cleverest man at your court, and you even called him your most irreverent and prescient shadow; one who bowed to no one EXCEPT to the truth in his inimitable and insolent fashion. 

So now you would burn him at the stake 'cos he has come the full circle and includes you amongst the devious clowns?

Good people, I am still your king and what I say is as good as gold!... 

We are now in this perennial tragicomedy, up to our ears! 


the not so mighty maximiza's picture

It ends in a big moan, if done right

tony bonn's picture

"Or, even more ludicrously, that there was such a thing as a riskless investment in the first case."

that is the point....and why mark to market is the only way to honestly book value.

El Hosel's picture

"Who you calling moron, moron?"...... CLASSIC, and fitting, The New Normal Mo Mo Markets.

                        N2 M3 to infinity.

Edward Fiatski's picture

Good article.

Britain had been used as a dirty whore and discarded, it's U.S.'s turn right now; whether China is next puppet is a function of the world peasants' acceptance of the New World Order, which presumably, will eliminate the need for such mechanisms of control.

But then again, China is too homogeneous, although, I suppose certain sections of the undesired population could be eliminated to instutute a decent new currency standard in place.

Still, I don't see China with its Yuan anywhere on the world stage at this moment, perhaps after a world war. :)

On topic: Argh! It's so tricky trading the Cable at the moment, with 200 DMA being all the way up at 1.6, have to use 3-5 year charts to make sense of this printing action. LOL

NuYawkFrankie's picture

Re Still, I don't see China with its Yuan anywhere on the world stage at this moment...

It'll happen (strike-up the orchestra..) -  "Yuan Sunny Day...."

Edward Fiatski's picture

Not before the EUR steps in to contend for the same Crown - Just you wait!! :)

tickhound's picture

The "economic reality" is to never "economize" anything... except waste, destruction, and the practice of scalping thy neighbor.

"Economy" is starting to taste like "Growth"     

LawsofPhysics's picture

Bullshit.  It's a global eCONomy now.  When the supply lines break, there will several "bangs". Perhaps small at first...

knukles's picture

To wit: IKEA horse-meat balls.
The neigh sayers must be silenced to preserve the system.

Next'll be sold under the Gelding brand name.

ParkAveFlasher's picture

If there is an iceberg approaching, the tip that we see is made out of horsemeat.

DaveyJones's picture

I vote for this version. The modern economy, in every aspect, relies on immediate real time delivery. We are rapidly using the real stuff that makes this happen. All the talk of energy and other resources we could find and mine and steal have nothing to do with real time delivery.We have delayed building the structures and things and systems that will replace them. There will be a huge gap in this transfer. And it will be ugly

Roandavid's picture

Being downgraded by Moody's is like being called a moron by a moron

I like it.  I'm taking it.

Unprepared's picture

Being downgraded by Moody's is like being told by your super-hot date that she was just faking it AFTER you break up with her.

JustObserving's picture

The end of empire comes when homeland security buys 1.5 billion hollow point bullets and 30,000 drones to spy on its own people - when your home base is in rebellion.

Luckily, we are decades away.


knukles's picture

Gota tell ya' a real life perfect example of Empire's squeamish whimpering ends was demonstrated first hand to me when I landed in London in the early '60s
The folks there by and large still made believe that they were a world class military, economic, technological and political power.  That in some true effective ways the Empire was still a bright influence of altruistic effect upon humanity.
Was far from the truth.  Empire had been lost long before.  Just a Pax Americana appears to be sliding away with time....
I expect no "revolution" precipice, dramatic fall, but a long, prolonged painful, decline into oblivion while we as a country remain halfheartedly singing God Bless America, the last fighter jet flies over the ball park trailing noxious black smoke, a tattered flag is raised, crime spreads, civility is lost, educational standards decline further, the Free Shit Army continues to blackmail the politicians, the politicians continue to rob the workers and throw us into greater debt and financial un-certitude, the essential substitute of corporate Soylent Green is everyday fare, medical care is nonexistent but for the uber-wealthy, eugenics and murder are acceptable state policies, the lies become even bigger and obviously untrue but ignored for the pure sense of sanity.

Meat Hammer's picture

medical care is nonexistent but for the uber-wealthy

I keep telling the Mrs. the very same thing.  Medical care for the non-wealthy will be the Obama pain pill to make death a little less excruciating.  If you want that chemo, you'll have to be wealthy and pay the oncologist in Au. 

Acidtest Dummy's picture

You'll pay the dentist Au, the oncologist will want Pt.

tbone654's picture

I wasn't so long ago, (50 years or so) when everyone in my neighborhood's dad aspired to own a little piece of land in the woods up north to build a cabin on that they could move to upon retirement.  Maybe hunt and fish for a while and then peacefully (hopefully) expire some day quitely after one last good season...  That dream seems to be making somewhat of a comeback...

It's lower cost, lower impact, and more reasonable than having to take a pill either way...  (chemo or kevorkian)  As long as your expectations are not too high...  I think everyone is spoiled into thinking they all have to live forever...  But it's a relatively recent phenomena, all this healthcare anyway...  Happy hunting...


Diogenes's picture

30  years ago I read an investment book that said the reason you should  start invesingt when you are young, is so that you don't have to spend your retirement years in a trailer in Florida when you are old.

It didn't seem funny back then.

tbone654's picture

Just so I don't have to shit in a 5 gallon bucket when I'm 80 wherever I am... (25 years to go)

I'll consider that a victory the way it's going...

tbone654's picture

8 Hit by NYC subways - in 5 days (drudge)

no kidding... why normal suicide, when you can get er done and help your family to a lawsuit...

Dagny Taggart's picture

The ego considers itself to be a separate and sovereign entity, not a part of “us”. Thus the ego is not bound by any moral, emotional or social boundaries nor does “it” feel constrained from lying, cheating or using subterfuge to get what it wants. Since our ego doesn’t physically control our bodies, it must use manipulative methods (essentially self psyops or self propaganda) to achieve its goals.

In a remarkable example of how the fabric and structure of our society and social order mimics our internal disorder, the control system (the Ponzi, the banking cabal aka the Federal Reserve and other central/commercial banks, the political and justice systems, the so called free press aka main stream media, religions, corporations, academia and the education system etc) does exactly the same thing to us externally as our ego does internally. And for the most part we fully participate in this.

Great article but it's such serious stuff. Dude, things ARE looking up. The NFL draft is only two months from today.

Cognitive Dissonance's picture

Will someone please tell me if Ray Lewis finally retired? I ain't coming out until he does.