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When The Money Runs Out... So Does The Empire

Tyler Durden's picture


Submitted by Bill Bonner via Acting-Man blog,

Funding an Empire with Debt

In 2006, we wrote a book with Addison Wiggin called Empire of Debt: The Rise of an Epic Financial Crisis. The idea of the book was as follows:

Empires are not the result of conscious thought; they happen when a group is large enough and powerful enough to impose itself on others. But empires are expensive. They are typically financed by theft and forced tribute. The imperial power conquers… steals… and then requires that its subjects pay “taxes” so that it can protect them.

The US never got the hang of it. It conquers. But it loses money on each conquest. How does it sustain itself? With debt.

It doesn’t take tribute from the rest of the world; it borrows from it. As far as we know, no other empire has ever tried to finance itself by borrowing. But it is a special kind of debt. The US borrows in its own currency – which it can print as it chooses. If the burden of repayment is too high, in theory, the Fed can just print more dollars to satisfy its obligations.



(Photo credit: Michael Brown)


Here is further insight from two foreign policy professors Flynt Leverett and Hillary Mann Leverett:



“Since World War II, America’s geopolitical supremacy has rested not only on military might, but also on the dollar’s standing as the world’s leading transactional and reserve currency. Economically, dollar primacy extracts “seignorage” – the difference between the cost of printing money and its value – from other countries, and minimizes US firms’ exchange rate risk.

Its real importance, though, is strategic: Dollar primacy lets America cover its chronic current account and fiscal deficits by issuing more of its own currency – precisely how Washington has funded its hard power projection for over half a century.”


Total credit liabilities, US

In the 1950s and 1960s, this posed little risk to foreigners, because the US dollar was backed by gold. But in 1971 – on August 15 – President Nixon repudiated the greenback’s gold backing – click to enlarge.


Global Inflation

Nevertheless, the dollar reigned supreme. Foreign nations needed to stock dollars in order to settle up on their overseas financial transactions. The US printed dollars… Americans spent them on foreign goods… foreign central banks bought them from their local merchants and manufacturers, and reinvested much of them in US government debt.

The dollars went out … in exchange for valuable goods and services … and then they came back in exchange for – more pieces of paper!

Year after year, the US ran a trade deficit. Year after year, US paper dollars and Treasury debt stacked up in foreign banks. We haven’t done a recent calculation. But the last time we looked, net cumulative deficits were approaching the $10 trillion mark.

When foreign central banks took in dollars, they had to print local currencies to give to local exporters in exchange for dollars. The owner of an export firm presented the dollars to the local bank; he needed yuan, yen or zlotys to pay his bills. The local central bank invested those dollars back in the US.

This is how the US credit boom led to an explosion of cash and credit all over the world. Foreign central banks had to increase their money supplies – by printing up local currencies – to use to exchange for the rush of dollars.

This is what led Ben Bernanke to refer to a “global savings glut.” Actually, these were not savings at all – but money created ex nihilo by central banks. Our point is that all empires end when they are defeated by a more vigorous empire… or when their financing runs out.


China's Reserves

China's forex reserves: this is one of the symptoms of US debt and money supply inflation - click to enlarge.


The Beginning of the End

And now we are seeing the beginning of the end. From the Leveretts:


“America is increasingly viewed as a hegemon in relative decline, China is seen as the preeminent rising power. Even for Gulf Arab states long reliant on Washington as their ultimate security guarantor, this makes closer ties to Beijing an imperative strategic hedge. For Russia, deteriorating relations with the United States impel deeper cooperation with China, against what both Moscow and Beijing consider a declining, yet still dangerously flailing and over-reactive, America.”


Economist Liam Halligan, writing in British newspaper The Telegraph elaborates:


“Beijing has struck numerous agreements with Brazil and India that bypass the dollar. China and Russia have also set up ruble-yuan swaps pushing America’s currency out of the picture. But if Beijing and Moscow – the world’s largest energy importer and producer respectively – drop dollar energy pricing, America’s reserve currency status could unravel. That would undermine the US Treasury market and seriously complicate Washington’s ability to finance its vast and still fast-growing $17,500 billion of dollar-denominated debt.”


When the money runs out… so does the empire. Perhaps with a whimper. Or maybe a bang.



How hegemons decline, via JCMargeson – click to enlarge.



One of the left-overs of the Western Roman Empire. They didn't expect this to happen, but ultimately, Rome was brought down by the same overreach and the same reaction to its failure that brings down all empires. What ultimately ended the Roman empire was, you guessed it, inflation and price controls!

(Photo by DAVID ILIFF. License: CC-BY-SA 3.0)



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Sat, 08/09/2014 - 11:52 | 5069850 IridiumRebel
IridiumRebel's picture

I'll file this one under the "No Shit Sherlock" File.....

Sat, 08/09/2014 - 12:01 | 5069868 y3maxx
y3maxx's picture

Don't need Money...Let's invite ISIS, Sunnis, Shiites, Christians and Jews and have a "Love In".
..."Make Love, Not War"...

Sat, 08/09/2014 - 12:15 | 5069922 eclectic syncretist
eclectic syncretist's picture

Don't worry!  The younger generation will save us......Oh.........wait.....

Sat, 08/09/2014 - 12:29 | 5069967 max2205
max2205's picture

LOL. to enlarge?


I can see that without my glasses

Sat, 08/09/2014 - 12:32 | 5069971 SWRichmond
SWRichmond's picture

When i still participated on Mish's site we used to argue about this.  There is no monetary / banking "Japan Scenario" for the United States.  Empire is the reason.

Sat, 08/09/2014 - 12:35 | 5069986 Anusocracy
Anusocracy's picture

"The US never got the hang of it. It conquers. But it loses money on each conquest. How does it sustain itself? With debt."

The Elites got the hang of it: conquer a country, steal its assets, and give the debt to the productive people of the US.

Privatize the gains, socialize the losses. The Elite's motto.

Sat, 08/09/2014 - 12:43 | 5070012 Four chan
Four chan's picture

fantastic observation tyler.

Sat, 08/09/2014 - 13:44 | 5070196 markmotive
markmotive's picture

Over-extended. Over-committed. And insecure.

Documentary:The Decline of the American Empire

Sat, 08/09/2014 - 14:32 | 5070364 zerozulu
zerozulu's picture

Just be patient. On a long enough time line, survival rate of every superpower drops down to zero.

Sat, 08/09/2014 - 12:51 | 5070025 sessinpo
sessinpo's picture

Anusocracy   "The US never got the hang of it. It conquers. But it loses money on each conquest. How does it sustain itself? With debt."

The Elites got the hang of it: conquer a country, steal its assets, and give the debt to the productive people of the US.

Privatize the gains, socialize the losses. The Elite's motto.


I agree. And the debt doesn't just disappears. It takes all that printed money which disappears.

Sat, 08/09/2014 - 19:56 | 5071261 BobPaulson
BobPaulson's picture

The weirdest thing about the US strategy, after conquering Europe, was that their bean counters told them it is better to create perpetual war and chaos, instead of invading and occupying. If you look around, they actually don't hold onto a lot of places, they just set up a base and make sure the killing and weapons sales are secure and the cocaine, opium or oil continues to flow. Sortof like the British policy with China in the 19th Century.

Sat, 08/09/2014 - 13:23 | 5070118 barre-de-rire
barre-de-rire's picture

pointless money, go full virtual, this way only a x86 command to add some unit to debts... a 9 years old genis hacker will ruin the system...

fuck that, i dont give a shit, we wont pass the winter anyway.

Sat, 08/09/2014 - 15:05 | 5070122 msmith9962
msmith9962's picture

They are a bunch of whiners.  Just an observation of the handful I work with.  95% of those 35 and under.  Of course the other 5% read ZH.

Sat, 08/09/2014 - 12:28 | 5069963 Harbanger
Harbanger's picture

The US never got the hang of it. It conquers. But it loses money on each conquest. How does it sustain itself? With debt."

That's funny really, they never got the hang of conquering.  Maybe because the idea wasn't to "Conquer" anybody.   But maybe like Rome, we can transition from Republic to Empire and start conquering the "proper" way.  That's how you make money.

Sat, 08/09/2014 - 12:34 | 5069980 SWRichmond
SWRichmond's picture

August is the month when average temperatures begin falling in Ukraine.  Soon it will be gas?  Putin is fighting a delaying action, and so far successully.  Those two reasons are why there is a sense of urgency for NATO to plunge eastward.

Sat, 08/09/2014 - 12:39 | 5070000 Harbanger
Harbanger's picture

Yes, I think the plan is for Nato to move eastward.  Putin not selling Europe gas is only going to make them turn against Russia.  The whole thing is a mess and before long Europeans will be at each others throats once again.

Sat, 08/09/2014 - 12:41 | 5070007 SWRichmond
SWRichmond's picture

US is trying to force NATO into military confrontation with Russia before the citizenry in Europe starts feeling the cold and wondering about their heat supply and the relative wisdom of goin to war with Russia.

Sat, 08/09/2014 - 12:44 | 5070017 Harbanger
Harbanger's picture

Why before feeling the cold?  No gas supplies and cold citizens is good motivation to go to war.

Sat, 08/09/2014 - 13:40 | 5070178 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

In the long term, Putin wants to avoid war while controlling the Ukraine. Our idiot-in-Chief along with NATO is forcing him into an unnecessary standoff with the west as a whole. My guess is Putin's backup plan has the war starting in late Sept to early Oct. The Russian military can still fight conventionally for a few weeks before heavy snow hits. When the conflict drags on in the winter (giving Russia the advantage) and the gas is turned off, the west is going to be in a critical situation. The will be especially true for Europe.

Sat, 08/09/2014 - 14:31 | 5070358 Harbanger
Harbanger's picture

Yes, but cutting gas off to Europe is not going to help him avoid war.  What's he going to do, invade Europe this winter to get the upper hand?  Of course not.  But Europeans are going to be pissed off that they suffered through the winter.  Which will motivate them to go to war, but not during this winter.  Putin is smarter than Obama but Obamas puppet masters may be smarter than putin.  After all, they do a great job of controlling their citizens and most of the world by simply managing perception.

Sat, 08/09/2014 - 16:12 | 5070652 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Chess master Putin will do all he can to win a conflict if forced into one instead of our MIC who wants war indefinitely. The greatest weapon Russia has is winter. When in combat use natural advantages. See WWII and Napoleon's invasion to see previous results.

Russia is preparing to win while NATO has their head stuck up their ass. Simple as that. War within a couple of months.

Sat, 08/09/2014 - 23:16 | 5071789 DanDaley
DanDaley's picture

General Snow and General Mud...the 2 great Russian allies.


Sun, 08/10/2014 - 09:46 | 5072387 SWRichmond
SWRichmond's picture

Winter brought with it the rains, oceans of mud filled the roads
Gluing the tracks of their tanks to the ground, while the skies filled with snow

And all that I ever
Was able to see
The fire in the air, glowing red
Silhouetting the snow on the breeze

Sat, 08/09/2014 - 12:37 | 5069989 CrazyCooter
CrazyCooter's picture

I think the OP is reasonably stated, albeit avoiding the petro-dollar language, but doesn't point out anything new.

US influence abroad is typically to secure "support" or "loyalty" from the regime in control, usually through loans, so as to use that nations resources for our purposes and commerce. To be clear, rather than administering directly, as did previous British and French colonies, the US used local governments as intermediaries. What despot would turn down "billions in aid and training and loans"? Duh.

But that only works so long as the US can hold it all together. It has been coming apart for some time and survival instincts are strong with these "colonies". They pretend to hold on, but will bail as soon as they are sure they can get away with it.

Unfortunately for them, the only other suitor in town is Russia and/or China, which they may find is a bit rougher on their domestic vajayjay than the US was ...



Sat, 08/09/2014 - 13:01 | 5070065 Harbanger
Harbanger's picture

Good point.

Sat, 08/09/2014 - 12:52 | 5070038 El Vaquero
El Vaquero's picture

The idea was not to conquer, but rather to subjugate. 

Sat, 08/09/2014 - 13:01 | 5070062 Harbanger
Harbanger's picture

Conquering sounds so much better.  But this is the way the world works.  It's like the "would you rather" game.

Sat, 08/09/2014 - 14:25 | 5070330 Kirk2NCC1701
Kirk2NCC1701's picture

Actually, given our fiat currency plus FRB system, the problem won't be running out of "money".  The real problem is "When our monetary system runs out of people to indebt/enslave".

'Merica, IF YOU LIKE YOUR DEBT MONEY, YOU CAN KEEP YOUR DEBT MONEY!  And you can keep your war machine.  Your days of financial slavery are numbered, and the world is fed up.

Sat, 08/09/2014 - 23:44 | 5071853 Buck Johnson
Buck Johnson's picture

I agree, and the sick thing is that we will never be the same ever again.  We will be a complete shadow of what we where and that is if we stay together as a country.  More likely parts of the country will break off and become their own country.  

Sun, 08/10/2014 - 01:13 | 5071976 good man
good man's picture

My last pay check was $9500 working 12 hours a week online. My sisters friend has been averaging 15k for months now and she works about 20 hours a week. I can't believe how easy it was once I tried it out. This is what I do...

Sat, 08/09/2014 - 11:53 | 5069853 yogibear
yogibear's picture

The Federal Reserve policy is finished when the US dollar crashes.

They know all Fiats go to 0.

Sat, 08/09/2014 - 12:18 | 5069930 Bossman1967
Bossman1967's picture

but when? it's looks like we will just make the new players use the dollar? I assume that's what all the friction and warmongering is all about . just wish it was over as a upper middle tired American this system sucks. as an Italian American I will survive and thrive in a brave new world

Sat, 08/09/2014 - 12:33 | 5069976 max2205
max2205's picture

Fixed it


Fed establishes new gold stadard at $1 to 0.00001 ounce of gold


Don't laugh

Sat, 08/09/2014 - 16:00 | 5070612 Idaho potato head
Idaho potato head's picture

The que to "cash" in on that plan will be overwhelming, I'm gettin my camping gear and establishing a place in line tomorrow morning.

Sat, 08/09/2014 - 11:56 | 5069866 ekm1
ekm1's picture

The moronity of a "permanent decline" of USA Empire continues unabated.


Obama and Bank Lobby want to destroy the Empire but they can't do it, unless Military back them up.


Military cannot just ally with bank lobby to destroy itself.


Let me tell you something. History has shown that when few oligarchs war against the system, as bank lobby is doing now, the system will eliminate them first by soft force and if not successful then by physical elimination.

Sat, 08/09/2014 - 12:26 | 5069960 umdesch4
umdesch4's picture

Interesting thought, (I certainly didn't downvote you) but it only really serves to caution us that the collapse may take longer than we think. The problem with modern military force is that it has huge energy requirements. At some point, there's a reality brick wall that will be hit, where a military will spend more energy and resources acquiring and defending supplies than it gains. EROEI goes below 1, then what happens?

Sat, 08/09/2014 - 12:31 | 5069969 ekm1
ekm1's picture

That is the whole point of technology, to reduce EROEI.

EROEI nowadays is just propaganda.


Energy prices are too high because bank lobby is controlling them via derivatives.

Remove leverage trading of energy and oil drops to $60-70 overnight

Sat, 08/09/2014 - 12:46 | 5070019 CrazyCooter
CrazyCooter's picture


Just to put the current US oil boom into further perspective, over the past five years global oil production has increased by 3.85 million bpd. During that same time span, US production increased by 3.22 million bpd — 83.6 percent of the total global increase. Had the US shale oil boom never happened and US production continued to decline as it had for nearly 40 years prior to 2008, the global price of oil might easily be at $150 to $200 a barrel by now. Without those additional barrels on the market from (primarily) North Dakota and Texas, the price of crude would have risen until supply and demand were in balance.

Source: World Sets New Oil Production and Consumption Records

While I do not disagree with the assertion their are financiers gaming commodity markets, it is naive to assume this is the only root cause.

The reality is the "marginal utility" of a gallon of diesel in a rural farm in India is vastly greater than that of a soccer mom taking her crotch fruit to soccer practice. And there are a lot of rural farmers in India (and China) that would love to automate around the farm. Demand from these developing countries will grow, grow, and grow some more. The US can no longer expropriate all these resources for its own needs.

All of this drama  centers around energy, oil in particular. To claim technology "solves" or "obsoletes" this problem is chicanery.

The military will secure, from domestic sources, its energy supply FIRST and if there is left over the civi's can have it.



Sat, 08/09/2014 - 12:51 | 5070034 ekm1
ekm1's picture

Keynes has brainwashed almost everybody.


Economy is not about demand, economy is about supply.

Demand is infinite

Supply is scarce.


That indian farmers "demand" energy means absolutely nothing. What matters is who is going to provide that energy to them.


Sat, 08/09/2014 - 13:03 | 5070066 El Vaquero
El Vaquero's picture

There is a problem:  It will come down to a choice between food and military at some point.  Don't expect the fabric of society to remain intact when it does so. 

Sat, 08/09/2014 - 14:10 | 5070288 Harbanger
Harbanger's picture

What fabric of Society?

Sat, 08/09/2014 - 15:01 | 5070445 El Vaquero
El Vaquero's picture

It's possible to sit down for dinner in a restaurant with very little worry that the guy in the booth next to you is going to rob you, kill you or otherwise beat you to get your hamburger, isn't it?  It is the trust that the average person isn't going to do you harm in some way.  It is why a mass shooting in a theater shocks people and is not the norm. 

Sat, 08/09/2014 - 15:08 | 5070468 Harbanger
Harbanger's picture

Two things allow for that safety you describe in a society, a Moral Fabric or a Police State.  Which would you rather?

Sat, 08/09/2014 - 15:52 | 5070584 El Vaquero
El Vaquero's picture

Get rid of the police state and most people would still not just up and rob somebody.  Right now, even though a lot of it is because of things like social security, EBT, etc... people still have their basic needs being met.  Get rid of that across the board, and neither a police state nor moral fiber will stop the chaos.  If you have access to food, you will eye every single stranger as a potential threat and thief, and if you don't have food, you will lie, rob, and murder to get it.  

Sun, 08/10/2014 - 10:00 | 5072409 fattail
fattail's picture

If the FSA is only being held back by the expropiation of my tax money by the coercive powers of the govt, I would assert the moral fabric is long gone.  Which explains the general disgust I feel every time the MSM puts out another "feel good" story about one of the police state actors.  

Sat, 08/09/2014 - 12:55 | 5070043 umdesch4
umdesch4's picture

I'll admit, I've heard this assertion before. I haven't read anything backed by solid numbers that convinces me of it yet though. Can you point me at one? I'm honestly asking, because if I can find some glimmer of hope in this situation, I might not feel so depressed about the world my kids will be inheriting. I think about all the epic (all the ones over, say 2500 miles) road trips I took in my youth, and realize my son will probably never be able to afford to do the same.

Sun, 08/10/2014 - 12:49 | 5072815 El Vaquero
El Vaquero's picture


Missing 200 Million Barrels of Crude.

Uh, given that the US alone uses 18-19 million barrels PER DAY, and that 200 million barrels of crude is less than THREE days of global use, that is just a blip.  If you want to talk about things that are more than just a small extender of our current ways, you need to be talking about hundreds of billions of barrels.


And again, leverage gives you the ability to apply a greater FORCE over a shorter DISTANCE.  Learn what energy is, and why leverage will not save us.

Sat, 08/09/2014 - 13:34 | 5070162 CrazyCooter
CrazyCooter's picture

There are two ways to look at solving this problem:

  1. Sustainable energy over the long haul ... by limiting population
  2. Sustainable energy over a really long time ... by replacing oil with something else

Because no one in leadership (politics, oligarchs, etc) care about 2, I think 1 will be what we get.

The answer to 1 is live near hydro power. If you genuinely do your homework, youo can find all sorts of interesting places to live. One freebie I will give you is New Zealand which gets X% of their electricity from hydro power (look it up). If it rains, hydro power is there (up to capacity) so this is a bet on nature providing rain. In places where hydro power is prevalent, there are usually very long historical records that show it rains a lot.

But this doesn't do much for the idiots that live elsewhere and thus has a population component that is macrebe at best.

The answer to 2 is Thorium Molten Salt reactors for the simple reason that the technology has been proven, but never commercialized. This isn't a paper or a theory, it was done and ran safely for many months back in the 60s IIRC. Thorium can't be weaponized, so it was abandoned. There is vastly more thorium fuel in the earths crust than uranium. At current population, Thorium MSRs could provide all the electricity for hundreds (up to a couple thousand) years.

The problem here is that regulatory agencies are there to protect the investments of the elite class, not to provide safe power to the pleeb class. If you owned a bunch of old nuke plants, why would you want a new competitor on the scecne? Why would you want to spend a shit load of money and take risk when you can milk your old investment? Thorium will never have legs in the US. It might in India or China where they are grappling with solving their energy problems.

Russia is the wild card on this one because they have the brains and expertise to commercialize this and if the first to do so would fare well selling services/parts abroad. They do traditional nuke stuff too, so I don't know what their vested intersts think about the technology.

There are google talks and other stuff on Thorium MSRs if you can to go looking.

Fossil fuels are already in decline although people will haggle about the noise. If you are 30 or 40, you will live to see a contracting global oil supply and it won't be a pretty sight.



Sat, 08/09/2014 - 12:56 | 5070047 El Vaquero
El Vaquero's picture

Dude, come back to me with a working definition of energy. You don't understand what you are talking about.


Technology uses energy, and there are some real limits to extracting it.  You have to use energy to drill through dirt and rock, you have to use energy to produce well casing, and there is zero potential technology on the horizon that even has a chance of mitigating that.  TANSTAAFL. 

Sat, 08/09/2014 - 13:05 | 5070070 El Vaquero
El Vaquero's picture

You still don't understand what energy is.  Come back to me with a working definition.

Sat, 08/09/2014 - 13:06 | 5070073 ekm1
ekm1's picture

Ok, I'm stupid. So please ignore my comments

Sat, 08/09/2014 - 13:07 | 5070076 El Vaquero
El Vaquero's picture

Or you could actually educate yourself.  I'll give you a hint:  Leverage gives you the ability to apply greater FORCE over a shorter DISTANCE. 

Sat, 08/09/2014 - 13:12 | 5070092 ekm1
ekm1's picture

Ok, let me explain it in another way to you.


Are we ever going to run out of air to breathe?

Answer: No


Same with energy.

Nature provides free energy like gravity and ocean water power which can technologically be channeled to be used as 'archimedes lever' which I used as analogy as to how naturally available energy is utilised.


There are risks for sure, no doubt, like BP ocean spill.

Technology bears lots of risks.

Sat, 08/09/2014 - 13:38 | 5070152 peakgrowth
peakgrowth's picture

No.     First and Second LAWS of Thermodynamics.  Read. Learn. Understand. Come back to this blog. Energy is everything.

Sat, 08/09/2014 - 13:50 | 5070208 ekm1
ekm1's picture

Yes as far as laws.

Earth will go extinct in few trillion of years.

Sat, 08/09/2014 - 16:14 | 5070661 Idaho potato head
Idaho potato head's picture

Newtonian physics is experiencing a dismantling, there are other realities emerging that go beyond it's scope. just sayin.

Sun, 08/10/2014 - 03:12 | 5072078 El Vaquero
El Vaquero's picture

Newtonian physics has been superseded for around 100 years.  Yet, it still works within the realm that it was originally observed in.  I'm not going to use quantum mechanics or general relativity to predict where an artillery shell will land.  Newtonian mechanics works under those conditions where arterlirry works.  When going to the other math-ey portions of physics, the definition of energy hasn't changed, and the shit still works as well as Newtonian mechanics does when shit's not going too fast, shit's not too small and shit's not exposed to a different level of gravity.


The physical observation that energy gets shit done is not going away.

Sat, 08/09/2014 - 13:38 | 5070174 CrazyCooter
CrazyCooter's picture

Ok, I think I get your logic now; you don't use air, there fore air is infinite.

Aye = Bee, Bee = See, See what I mean?

Fucking brilliant logic! You need to get your ass in an Econ PHD program at a top U ... bright future ahead!



Sat, 08/09/2014 - 13:57 | 5070238 ekm1
ekm1's picture

Free energy available in nature is hyper plenty.

There are many risks for sure.

It's a tradeoff

Sat, 08/09/2014 - 18:20 | 5070999 Totentänzerlied
Totentänzerlied's picture

"Are we ever going to run out of air to breathe?"

Earth's air could very easily become unbreatheable, say if the Nitrogen or Carbon percentage rose even just a few whole percent.

But to stick to your phrasing, a powerful enough CME or quasar or meteor could easily destroy/remove Earth's upper atmosphere, and all of the tropospheric gases we call air would quickly escape into space.

Also, any physicist will tell and explain to you that gravity is not energy. Ocean hydropower is no more free than solar or wind power, that is, not at all, because you have to first develop and produce the technology and infrastructure to use it, and that of course has opportunity costs.

Sat, 08/09/2014 - 13:28 | 5070136 msmith9962
msmith9962's picture

Mechanical advantage?

Sat, 08/09/2014 - 13:31 | 5070150 umdesch4
umdesch4's picture

Please don't give up that easily. I see where you're going (and appreciate that link you provided further up), and it's a debate that's worth having, IMHO. I think you're basically saying that we will continue to find ways to innovate and stay ahead of the curve, if not indefinitely, then at least far enough into the future that it won't matter to our great-great-grandkids. I want to believe that's true. Past performance would suggest it, but you know what they say about past performance being an indicator of anything. I'm not at all confident about making any predictions into the future, but I appreciate the people who know a lot more than me on the subject, and are trying. Every innovation I read about gives me some degree of hope.

Sat, 08/09/2014 - 16:14 | 5070659 Errol
Errol's picture

umdesch4, "find ways to innovate and stay ahead of the curve" is why the industrialized nations have spent probably a tillion dollars (in current dollars) on fusion reasearch.  It didn't work out, and there is not enough time and unencumbered capital left to build-out anything else.  We are well and truly toast; the elite have been thoroughly briefed on this and so are in the process of eating the seed corn.

Sat, 08/09/2014 - 13:30 | 5070142 msmith9962
Sat, 08/09/2014 - 18:33 | 5071028 bid the soldier...
bid the soldiers shoot's picture

"At some point, there's a reality brick wall that will be hit, where a military will spend more energy and resources acquiring and defending supplies than it gains."

That's why a smart military, like ours, for example, should make its move sooner rather than later.

Hey, that's what it's doing.

Sun, 08/10/2014 - 02:43 | 5072060 hedgiex
hedgiex's picture

Develop this thought. The military true to its calling can make a difference to balance the structure and uses its assertiveness against Wall Street.

It has happened in the 1940s when the Red Army then uncorrupted connected with the proleteriat to impose its will for China.

The dangers lie in the Military not falling into the hands of demagogues.

Any other historical success elsewhere

Sat, 08/09/2014 - 11:56 | 5069871 yogibear
yogibear's picture

All China and Russia have to do is help the Fed crush the dollar. Essentially bankrupt, the US won't be able to afford it's military.

In essence the Federal Reserve is treasonous. Prosecute all the Federal Reserve heads as traitors. 

Sat, 08/09/2014 - 12:04 | 5069884 db51
db51's picture

Ya'll are dreaming.   China and Russia are the Fed's Butt boys....bending over on command.  Sure, they get out of line once in a great while - onnly b y design. -  but then the spanking, and after smacking that little ass a couple time, the Fed pounds the hell out of it with their big hard dick.   Rinse, Lather and Repeat.   This game goes on forever, there will be no consequences, not now, not ever for the Power Elite.   Now children, go back to your room and play.  All Hail the Fed....and King Dollar.

Sat, 08/09/2014 - 12:13 | 5069915 yogibear
yogibear's picture

You realize that China and Russia play the Fed's game as long as it benefits them. When the benefits stop Russia and China as well as others that hate the US will end up chopping that dick off. The US is following Japan into the debt black hole.

People with the big money are already preparing for this.

Sat, 08/09/2014 - 12:37 | 5069992 umdesch4
umdesch4's picture

Yup, I never understand why people fail to reach a simple logical conclusion. The power elite demonstrate daily that they are sociopaths. I'm sure nobody on this site would argue against that. But if that's true, then that implies that they also have none of the mental processes that would invoke any degree of patriotism. They wouldn't feel anything at all if the US became a 3rd world country overnight. They'll know it's coming, and already have their assets transferred, and be living in some place far away from all the people they care nothing whatsoever about.

Sat, 08/09/2014 - 12:28 | 5069964 Escrava Isaura
Escrava Isaura's picture


My advice, for whatever it is worth? Do more reading, instead posting nonsense.

Sat, 08/09/2014 - 12:34 | 5069982 Winston Churchill
Winston Churchill's picture

He already KNOWS god is a very exceptional  American, and plays baseball.

Its his delusion. let him enjoy it.

Sat, 08/09/2014 - 12:42 | 5070011 Escrava Isaura
Escrava Isaura's picture

I guess I have some catch up to do. Thanks for the warning. Now, I feel ready to face losts of stupidity.

Sat, 08/09/2014 - 12:06 | 5069885 alexcojones
alexcojones's picture

The Money can Never run out.

Confidence & Trust run out, before the printing press stops.

But that is why wheelbarrows were made, and buzzards too

Sat, 08/09/2014 - 12:07 | 5069898 IridiumRebel
IridiumRebel's picture

Funny how people think that...especially those with liberal leanings. 

Sat, 08/09/2014 - 12:04 | 5069891 Ivan Nokabolokov
Ivan Nokabolokov's picture

'If Beijing and Moscow – the world’s largest energy importer and producer respectively – drop dollar energy pricing, America’s reserve currency status could unravel. '

Could happen this winter if this asinine warmongering continues.

Sat, 08/09/2014 - 12:05 | 5069894 q99x2
q99x2's picture

still flailing and over-reactive bitchez.

The inbreds over-reacted and lost.

They would not give up at all cost.

Within the ground

Their borrows may be found.

When aliens dig through the frost.

Sat, 08/09/2014 - 12:17 | 5069897 Seek_Truth
Seek_Truth's picture

After this I saw another angel coming down from heaven. He had great authority, and the earth was illuminated by his splendor. With a mighty voice he shouted:

“‘Fallen! Fallen is Babylon the Great!’

She has become a dwelling for demons

and a haunt for every impure spirit,

a haunt for every unclean bird,

a haunt for every unclean and detestable animal.

For all the nations have drunk

the maddening wine of her adulteries.

The kings of the earth committed adultery with her,

and the merchants of the earth grew rich from her excessive luxuries.”…

“The merchants of the earth will weep and mourn over her because no one buys their cargoes anymore…

Then a mighty angel picked up a boulder the size of a large millstone and threw it into the sea, and said:

“With such violence

the great city of Babylon will be thrown down,

never to be found again…

Your merchants were the world’s important people.

By your magic spell all the nations were led astray.

-          Revelation 18: 1,2,3,11,21,23

The "magic spell" is fiat currency, fractional reserve lending, derivaties, swaps, etc. '"Babylon the Great" is the global financial system that has long profitted from this magic spell. Both are doomed and on their way out, soon.

Sat, 08/09/2014 - 12:08 | 5069905 Dubaibanker
Dubaibanker's picture

While the entire western Govts comprising of 7 countries on the planet run amok like a madman with schizophrenia & amnesia of history while being obese and with no money to even buy a bottle of booze and can only think of bombs, bombs and more bombs thrown into other countries, instead of diplomacy or non intervention into other people's affairs or peaceful negotiations.....which is truly sad! These were the acts of uncivilized people in the stone ages, not monkeys in suits, oops, our chosen leaders!

Meanwhile, what Russian and Chinese are doing is like hitting in the nuts of USA-where it hurts the most!

Russia, China agree on more trade currency swaps to bypass dollar

Sat, 08/09/2014 - 12:47 | 5069935 Escrava Isaura
Escrava Isaura's picture

"run amok like a madman with schizophrenia & amnesia of history.... instead of diplomacy"


Can't tell, at this moment, where I see this trend. But, I have a feeling, it's nearby.

Sun, 08/10/2014 - 08:43 | 5072321 bombdog
bombdog's picture

Ironic considering most of your posts, I've upvoted your comment because the least diplomatic person in the room is definitley nearby - it's you!

Sat, 08/09/2014 - 12:16 | 5069918 edwardo1
edwardo1's picture

"In the 1950s and 1960s, this posed little risk to foreigners, because the US dollar was backed by gold."

That's something of a howler. Clearly the author of that quote has a very narrow definition of the words risk and foreigners.

More to the point, the author leaves out some crucial history as it pertains to the reason why the dollar ceased to be "as good as gold." The French, first and foremost, recognized that the U.S. government-see Vietnam as an important chronologically relevant example- were abusing their exhorbitant privilege, and did what any sensible nation would do in response, they exchanged their dollars for physical thereby making manifest the somewhat obscured reality that the dollar was not as good as gold as a SOV.

In any case, the main point of the author is absolutely correct, ex priv, more than any other factor, and by a large factor, underlies the inordinate military might of the U.S. And when the ex priv goes (and it is well down the road to oblivion now) so too will all vestiges of U.S. hegemony.

Sat, 08/09/2014 - 12:21 | 5069946 Escrava Isaura
Escrava Isaura's picture


So what come next?

Sat, 08/09/2014 - 12:22 | 5069931 Renfield
Renfield's picture

Welcome Bill Bonner, the blogger who first introduced me to gold and educated me on it many years ago. The man whose crisis alert flag got us well ahead of the 2008 dive even when people were snickering. You will never know the good your advice did for our family.

I am glad to see your clear writing on the Hedge. You cut to the heart of it: wars must be financed. World War III cannot be financed via military for long, when global currencies are all in the process of trying to avoid a hyperinflationary collapse in a world of resource shortage. World War III is a currency war.

Sat, 08/09/2014 - 14:03 | 5070262 Escrava Isaura
Escrava Isaura's picture


Too simplistic! You ought to do better than that.

This might shed some light:

"I don't know (how WW-3 will be fought). But I can tell you what they'll use in the fourth. They'll use rocks!" – Albert Einstein

Sat, 08/09/2014 - 14:05 | 5070268 Escrava Isaura
Escrava Isaura's picture

By the way, get 'Curious' about The Inca Empire.

That too, will help a lot!

Sat, 08/09/2014 - 12:22 | 5069942 JenkinsLane
JenkinsLane's picture

“Great empires, such as the Roman and British, were extractive. The empires succeeded because the value of the resources and wealth extracted from conquered lands exceeded the value of conquest and governance. Washington’s empire extracts resources from the American people for the benefit of the few powerful interest groups that rule America. The military-security complex, Wall Street, agribusiness and the Israel lobby use the government to extract resources from Americans to serve their profits and power. The US Constitution has been extracted in the interests of the Security State, and Americans’ incomes have been redirected to the pockets of the 1%. That is how the American Empire functions.”

Dr Paul Craig Roberts

Sat, 08/09/2014 - 12:26 | 5069957 Escrava Isaura
Escrava Isaura's picture

new JenkinsLane,

That quote by Dr Paul Craig Roberts is nonsense... and you should know that.

Sat, 08/09/2014 - 12:35 | 5069984 JenkinsLane
JenkinsLane's picture

In the real, adult world, when you disagree with an individual's argument, or believe it to be

incorrect, you explain the reasons why. You do not blindly assert that the argument is "nonsense"

or "wrong" followed up by a variation of the ad hominem attack.

Sat, 08/09/2014 - 13:30 | 5070030 Escrava Isaura
Escrava Isaura's picture


Good point. I had a feeling you would nail me for that.... and you did.

By the way, I am a great fun of Dr. Roberts. But, I have major issue with this quote:

Dr. Roberts said: “Great empires, such as the Roman and British, were extractive.

Wrong! There are NO great Empires. Just ask the people that were robbed by them.

Roberts:“The empires succeeded because the value of the resources and wealth extracted from conquered lands exceeded the value of conquest and governance.”

Duh! Getting rich at somebody else’s expense.

Roberts: “Washington’s empire extracts resources from the American people for the benefit of the few powerful interest groups that rule America. The military-security complex, Wall Street, agribusiness and the Israel lobby use the government to extract resources from Americans to serve their profits and power.

Oh boy! Here Roberts goes off the railing. Which resources is Roberts talking about it?

US top ten exports:

Roberts: The US Constitution has been extracted in the interests of the Security State, and Americans’ incomes have been redirected to the pockets of the 1%. That is how the American Empire functions.”

Duh! This is exactly how an Empire is supposed to work. There is NOT enough wealth for everyone, period!

As a matter of fact, it only gets worse, because we live in a finite planet. The link below will help.


Sun, 08/10/2014 - 08:38 | 5072316 bombdog
bombdog's picture

Wrong! There are NO great Empires. Just ask the people that were robbed by them.

What was it about the word "extractive" that you didn't understand?

Which resources is Roberts talking about it?

Your link to US export figures doesn't prove anything. Maybe you should instead look at the decline of the civilian economy and the dwindling American middle class? For example the work of Seymour Melman shows how the military industrial complex destroyed the productive capacity of the civilian industries and made the US uncompetitive. It doesn't follow that an empire robs its own citizens, at least not until the final phases. Clearly the US is being hollowed out domestically and you need look no further than the massive numbers of people on foodstamps for that. But it was not always this way and Americans (rightly or wrongly) had the best standards of living and industrial progress during most of the 20th century.

Roberts is basically correct and your arguments are essentially specious, especially the "finite planet" planet part which is a complete tangent to the discussion.

Sat, 08/09/2014 - 12:20 | 5069944 Lordflin
Lordflin's picture

Actually, the money runes out long before the Empire. That is what makes the finale so spectacular.

Sat, 08/09/2014 - 12:21 | 5069948 yogibear
yogibear's picture

The US dollar is backed by nothing but BS. Once countries wake up and realize that the only thing it manufactures is debt they'll dump the Ponzi fiat paper.

Sat, 08/09/2014 - 13:06 | 5070075 Monty Burns
Monty Burns's picture

And replace it with what?

Sat, 08/09/2014 - 14:08 | 5070281 Ckierst1
Ckierst1's picture

Honest money.  Need I say more at this late date?

Sun, 08/10/2014 - 13:08 | 5072853's picture


Sat, 08/09/2014 - 12:31 | 5069970 KnuckleDragger-X
KnuckleDragger-X's picture

Every nation has its own game plan that it thinks is a winner. The problem is it tends to be hard on the people who support it. The interconnected world only gaurantee's more pain for more people. History is preparing to tke a giant step backwards into feudalism.

Sat, 08/09/2014 - 12:50 | 5070032 alexcojones
alexcojones's picture

See Truth - Speak Truth

Many Well-reasoned opinions and ideas here today. And some?

Have a good weekend

Alex C

Sat, 08/09/2014 - 13:44 | 5070195 Escrava Isaura
Escrava Isaura's picture


You're something else!

Sat, 08/09/2014 - 13:11 | 5070085 TVP
TVP's picture

The dollar has been strengthening in fiat terms, because of other periphery currencies inflating even faster.  A "flight to safety" has caused buying of US dollars and treasuries.  

None of this means anything until a viable alternative to the dollar has been established (BRICS bank, anyone?)  

Until then, people want the only fiat they know has exchange value for certain, and this will cause the dollar to continue to rally.  The ultimate paradox, perhaps.  

Sat, 08/09/2014 - 13:12 | 5070094 nicoacademia
nicoacademia's picture

well. maybe the jest from those on the american continent will now end.


i'd be very afraid if The Empire unravels whilst still talking shit out of its ass.

Sat, 08/09/2014 - 13:14 | 5070096 logicalman
logicalman's picture

The whole financial world runs on ignorance, not faith and trust.

Next time you are standing in line somewhere and get chatting to someone next to you, ask them what money is and where it comes from. You'll likely see a blank expression or a look of puzzlement.

If it wasn't for people's lack of knowledge and understanding the world would be a very different place.

You are never taught about the reality of money/currency in school. I wonder why? ;-)

All wars are banksters wars.


Sat, 08/09/2014 - 13:27 | 5070126 Escrava Isaura
Escrava Isaura's picture


You said: "The whole financial world runs on ignorance... All wars are banksters wars.

C’mon logical!

1) Financial world is NOT ignorant. These are very smart people.

2) Wars are ‘mainly’ because of wanted something that somebody else has.

Smedley Darlington Butler, a United States Marine Corps major general, and at the time of his death the most decorated Marine in U.S. history would have had strongly disagreed with your statement.

“War is a racket. It is the only one in which the profits are reckoned in dollars and the losses in lives. I helped purify Nicaragua for the international banking house of Brown Brothers in 1909-1912. I helped make Haiti and Cuba a decent place for City Bank boys to collect revenues in. I helped make Mexico, especially Tampico, safe for American oil interests in 1914. I brought light to the Dominican Republic for American sugar interests in 1916. In China I helped to see to it that Standard Oil went its way unmolested” -- Smedley Butler


Sun, 08/10/2014 - 00:42 | 5071925 DanDaley
DanDaley's picture

...and get chatting to someone next to you, ask them what money is and where it comes from.


Or as Jim Willie says, ask them what the difference is between legal tender and money. (Legal tender is what the government tells you to use to pay taxes and what must be accepted as money, but real money...

Sun, 08/10/2014 - 08:33 | 5072312 edotabin
edotabin's picture

Dude, everyone knows starbucks prints the money.  That's why the dollar is green.

Sat, 08/09/2014 - 13:26 | 5070125 Duc888
Duc888's picture


well. maybe the jest from those on the american continent will now end.


i'd be very afraid if The Empire unravels whilst still talking shit out of its ass.


Listen up.  Different "factions" of US government are fighting EACH OTHER in the proxy warz.


You'll never hear this on MSM.  Our government is split up into a few factions and they're now fighting each other in Europe and the Mideast.



Sat, 08/09/2014 - 13:42 | 5070182 Escrava Isaura
Escrava Isaura's picture


US is a complicated nation because, in one side, it labels its self as an Republic, but the states don’t get along; all while running an Empire.

Sat, 08/09/2014 - 13:32 | 5070153 Peter Pan
Peter Pan's picture

In short, the world has been had for over half a century and in process a series of paradigm shifts have been spawned that have led to nothing of beneficial and enduring substance other than war, debt and unfullfillable promises by government.

And to put it more succinctly, one nation has been gorging itself at the expense of all others.

Sat, 08/09/2014 - 14:21 | 5070320 Raoul_Luke
Raoul_Luke's picture

That's what happens when you do imperialism while trying to maintain your image as the good guys.

Sat, 08/09/2014 - 15:00 | 5070444 optimator
optimator's picture

The most dangerous empire in the world is one who collapses financially, morally, and totally, but remains the world's premier nuclear power.

Sat, 08/09/2014 - 15:26 | 5070516 Libertarian777
Libertarian777's picture

"no other empire has ever tried to finance itself by borrowing"


wtf. Ever hear about the French? or the British?

or dozens of European wars. All empire wars funded by debt.

there are many empires that resorted to deficit spending. It is the last vestiage of an empire. debase the currency and issue bonds till you're blue in the face.

Sat, 08/09/2014 - 19:26 | 5071170 Bazza McKenzie
Bazza McKenzie's picture

The British empire was actually very profitable for Britain.

The debts it incurred that ultimately were a problem was money borrowed, largely from the US, to fight Germany that had invaded the rest of Europe. Ironically, the loser in WWI and WWII got to repudiate its debts, while the European winner, Britain, was stuck having to repay them at a point where the empire countries had become independent.

Sun, 08/10/2014 - 18:24 | 5073858 GeoffreyT
GeoffreyT's picture

The British Empire was profitable for a narrow clique of politically-connected cronies, and literally nobody else. For the first three centuries of the British Empire, living standards outside of the upper-middle class (the top 5% or so) were stagnant.

The broader rise in living standards in the last century of the Empire - those that riased the lot of the median-and-below - were not due to resource-transfer-by-conquest, but due to technological change. This should be obvious - because they rose more rapidly, in places that weren't part of the Bitish Empire (e.g., the US).

All Empires exist to transfer resource-exploitation profits to political cronies, with the resource-acquisition undertakn by force and funded by tax-payers.

Once there is any meaningful resistance to Empire (once the fuzzie-wuzzies get technology more effective than pointed sticks), the costs of maintaining control over resources rapidly exceeds the costs of obtaining them through trade.


And if the locals give the Empire a black eye at any point, it's basically all over due to the complete loss of respect for authoritaah. Examples: Rome at Teutoberger Wald (53BCE); Rome at Carrhae (9CE); Rome in Palestine (70CE); Rome in Caledonia (122CE); France in Egypt (1790s); France in Mexico (Hacienda Camaro - 1863); Britain in Afghanistan (1830s); Britain in New Zealand (1830s-1890s); the US in VietNam (1960s/70s); the USSR in Afghanistan (1980s); the US in Iraq and Afghanistan (2000s/10s). Failure to impose on the locals makes the whole empire begin to unravel. (Napoleon's invasion of Russia in 1812 is not included, because it was power-on-power).

It used to take some time (centuries) for folks to see the writing on the wall, but since the printing press news has travelled faster; then radio and TV made it even faster; and now we have the internet so we see things in real time, unfiltered by .gov....

And if the local indigenes decide on a guerilla war (as the Maori did in NZ, and the Viet Cong, Afghan mujaheddin andf IRaqi insurgents have done recently), you simply can't profitably exploit them - which is why NZ was a part of the British Empire by choice, subject to a Treaty with terms unlike any other that the British ever agreed to anywhere else on the pink bits of the map.

Sat, 08/09/2014 - 18:37 | 5071038 Totentänzerlied
Totentänzerlied's picture

“Beijing has struck numerous agreements with Brazil and India that bypass the dollar. China and Russia have also set up ruble-yuan swaps pushing America’s currency out of the picture. But if Beijing and Moscow – the world’s largest energy importer and producer respectively – drop dollar energy pricing, America’s reserve currency status could unravel."

Pay attention. Anti-dollar. Not anti-IMF. Not anti-BIS. Not anti-World Bank.

Still waiting for anyone to show me anything that suggests Russia and China are not among the strongest supporters today of the IMF and by implication the BIS- they just want to see it placed under new management, and are getting a bit impatient. All the BRICS are jockeying for position in the post-Anglo-American global financial system, and that means having a large share in the SDR basket.

Sat, 08/09/2014 - 21:42 | 5071532 bytebank
bytebank's picture

I guess we want Russia's gold now. Ever more desperate. How long before the collapse?

Sat, 08/09/2014 - 22:12 | 5071619 robobbob
robobbob's picture

The US never got the hang of it.............

you're making the mistake of confusing the ruling shadow government with the political marionettes or the American people

those running the game are making a fortune, its the sappy american taxpayers that are picking up the tab.

Sat, 08/09/2014 - 23:46 | 5071857 AdvancingTime
AdvancingTime's picture

Those who look closely understand that it is not the 1% at the top stealing the icing off the cake, but the much smaller .1% or .01% that are skewing the numbers and overreaching.

I contend the biggest problem is the massive growth in crony capitalism and corruption in Washington. Much of this can be attributed to the ability of those in control "changing the rules" and positioning themselves to benefit at every corner. In our busy and complex world we have found it impossible to watch all the moving parts. More on this subject in the article below.


Sun, 08/10/2014 - 07:29 | 5072235 22winmag
22winmag's picture

The curtain is hanging on by a thread and about to be torn down (finally and forever this time).


What will remain? Tens of millions of highly motivated, heavily armed, well informed American citizens seeking redress.

Mon, 08/11/2014 - 14:52 | 5077783 BlackVoid
BlackVoid's picture

No, it is not debt. It is hidden imperial tribute.

The US can get essentially free goods for freshly printed paper. The dollar system is in fact a tribute system.


And the financial woes are only a symptom to the real problem: diminishing returns everywhere - most importantly in energy production. Everything else is a consequence of this.

Do NOT follow this link or you will be banned from the site!