We are like a man who used to be rich and is in the habit of paying for everybody’s meals and announces at a lavish dinner that he will pay the bill, only to then turn to the fellow sitting nearby and say, “Can I use your credit card? I will pay you back!”
— Ron Paul
I have in the past very briefly made the case for why it is not time to attack Iran:
The truth is that Iran (and more explicitly a strong and united Eurasia) is only a threat to America if America chooses to continue the absurd and destructive path of a world-dominating petrodollar superpower, dependent on foreign oil and resources, and with a foreign policy designed to (essentially) extort these things from the rest of the world.
Today, I want to go a little further: While — unlike some readers — I believe that Islamic terrorism is a real (though minor) threat, I believe that America’s neoconservative foreign policy is the greatest threat to American interests.
Neoconservatism holds that American and Western civilisation has a unique moral role in policing the world. That means military commitment, and very often war. That, in turn, means spending:
Spending has meant huge deb acquisition:
There are many historical antecedents of empires convinced of their own special role in history, and determined to impose it on the rest of the world by force. Look at Rome — driven into the ground by the cost of imperialism, and its “bread and circuses” welfare state.
A greater example still is Britain:
This graph is a tale of imperial overstretch, a tale of debt acquired by a colonial power playing world policeman, and trying to maintain the status quo.
Imperial Britain’s debt load hit its peak at the very point when its empire crumbled into the sand. This is not a co-incidence, and the good news for America is that once Britain ended its global role, growth soon returned, and Britain’s debt-to-GDP ratio fell back to a sustainable level.
Of course, America’s debt position might be more sustainable if she was still the world’s greatest industrial powerhouse. But she has instead exported much of her productivity to her hostile creditor, China:
The deindustrialisation of the West has allowed newly industrialised nations, especially China, to build up huge monetary wealth. This is a map showing the net of each nation’s reserves, minus external debt:
And neoconservatives continue to believe that America — dependent on foreign goods and resources, hugely indebted to hostile nations, and war fatigued — is somehow in a position to expand her empire, and to attack more countries?
Great Ron Paul quote and great use of figures.
Do you think America’s leaders just don’t care about the future of America, or are they just ignorant/misinformed? Maybe since we have been able to acquire more and more debt without any issues, we feel as if we can do this into perpetuity.
Another point, unrelated to this article, what would be the process of re-collateralizing the US Dollar with a tangible asset (be it gold, silver, w/e)?
I think reintroducing the gold standard on the back of a debt bubble is, effectively, impossible. Returning to the gold standard would require a new currency. Now, a Paul administration would surely stop the can kicking, causing a crash, and a currency crisis. This would clear out the debt and malinvestment (broadly a very good thing), but it would give his opponents a lot of firepower, so he had better be ready to introduce a new currency and for growth to return quickly.
I think America’s leaders, particularly in the field of economics, are deeply misinformed. There is no malice, but they all hold a massive candle to the artform of central planning, which — even if there are sometimes some good effects and outcomes — inevitably tends to lead to some kind of misallocation of capital.
A “gold backed currency” should be the goal. But currently we have accumulated debt under a FIAT regime so we need to default on unserviceable debt. What we have today is a fiat currency leveraged via fractional reserve lending that has perpetuated this gargantuan debt. We should never forget that “Every deficit is a future tax”. All this debt has to be reconciled either by payoff or default. Right now it is only a question of “when” does this process start.
Well the real issue with a gold backed currency is that what it is meant to achieve — preventing excessive credit creation — is also achieved by full-reserve banking. I am personally for competing currencies. I do not think it is good to give a private cartel like the Fed a monopoly.
Or …. if U.S really want the war, it can act as the old world mafia: The God father says to the countries of the world: “Look, people, oil price will be $300 soon because Iran. I can cut it down to $150 but everyone much hand out the protection fee. Countries want to get the cheaper oil must pay the War Fee. No more free lunch.”
Good point. I note Iraq has a contract with the USA for weapons and training. I am sure they will pay back their war debt, over a 100 years or so.
America will go bankrupt first.
Excellent and informative post, Aziz.
I note the Debt heat map. Australia is starting to glow, mostly because we have borrowed huge amounts to invest in property.
If the world economy tanks, and China stops buying resources, Australia’s dollar will plunge, and interest rates skyrocket, with the major banks rolling over their RMBS Bonds.
As Australia has full recourse financing, home borrowers will be living a very austere existence as they beg borrow and steal to pay back the mortgage. Australian property prices are already deflating. I have a contact in real estate who says buyers are offering 40% off, but there are no sellers willing yet. When forced (Marriage breakdown, loss of jobs) there will be much pain.
I grew up in a 10 square home, which was the norm, but now 20-30 squares is the norm. People have acquired McMansions and new cars, to live the “Desperate Housewives life”.
If I was a Bond Vigilante, I would want blood.
Horse shit—we were accused by the ENTIRE world for going to war with Iraq directly for oil interests…now we are leaving (minus a small State Dept. presence) without being compensated for introducing the element of Democracy to these people…over the years, wars have been fought over much less than access to vital natural resources…water, salt, etc.I say TAKE the oil. Fuck ’em.
Yeah. Iraq is real democratic now, huh? What with the whole Shi’ite theocracy thing.
Even Charles Krauthammer a man more pro-war than Bush‚ admitted before the war that there was a danger that building democracy in Iraq was fundamentally impossible.
There are a number of reasons for this. First, Iraq is a synthetic country created by the British Empire, made up of different ethnic groups who generally dislike each other.
Second only a minority of Iraqis actually favor democracy. Most favor some kind of Islamic state.
Like I said, TAKE the oil…fuck the opinions of those not involved…
We took the oil. Oil is still more expensive today. Looks like the volatility of invasions matters more to the cost than the plentifulness of oil…
Yes Islamic terrorism is a real threat, there are crazy people around, however this empowers the US imperial state (the anglo oligarchs), it gives it more excuses to invade countries and increase the MIC (military industrial complex). The imperial state will not only exaggerate the threat but they will also encourage attacks and enemies by creating more war situations which bring about blow back. The imperial state needs the terrorism for its own survival. It is not a conspiracy, just the way the system is set up. Perpetual peace would mean many people would lose their reason for living. The CIA, would be unnecessary, economic stability would not create the potential for social unrest and the state would not use the threat of terror to pre-empt it. Liberties in the US have been curtailed just when economic turmoil threatens to bring social unrest, is it just coincidence? No, the current system of social organization is dying and a new one is being born, people in power are trying to control it without causing total chaos, hence we have the increase in MIC and police powers of the state at home.
The Iraq invasion was going to be paid for by Iraqi oil, I am sure that is still the case. The US MIC needs sources of instability abroad, Iraq may create thousands of new terrorists and this is exactly what the ruling elites want. This will give them more power, people will gladly give up their liberty if threatened, frightened, unemployed and anxious for security if politicians offer them this. Politicians serve finance, the whole system operates in the interest of the financiers, the wars, the terrorism, the financial crisis etc.
After all that has happened including the trillion dollar bailouts of banks, are people still convinced that democracy is freedom and is rule by the people for the people?!!
I am incredulous, please see the last cartoon on this page:
You can click on the cartoon to increase its size.
Do you think if Ron Paul actually became the president of America, he’d be able to close all foreign US bases? Such decision would renege on the numerous treaties the US made with other countries, so it wouldn’t be politically much viable. It would also mean that America would allow China – already in territorial dispute with SE Asian countries, Japan and S Korea – to expand all the way into Guam (see this: http://koreadefence.net/wys2/file_attach/2010/05/02/1272780744-89.jpg) in the Pacific and ultimately reign over the Pacific Ocean. It would mean not only the end of American hegemony (which I don’t have a problem with, and would certainly benefit average American citizens) but also the start of Chinese hegemony (which, in my opinion, would be a disaster worse than WW3 due to China’s ruthless foreign policies).
If America is to step away from its military burden, she should write pacts of joint military R&Ds or similar treaties with her allies so that the American allies can inherit some of the “policing” America did around their land. America may even reconsider closing bases at Japan, S Korea and Australia to contain China from building a vast empire over Asia and Pacific. America should take these measures to share the burdens with her allies. Or else we are all in Chinese serfdom.
I’m not advocating US isolationism. I am saying that continuing US hegemony is a danger to America. My aim is a multi-polar world. The US should retain a major sphere of influence in North America, the Atlantic, the Arctic and the Pacific, and a minor one in Africa, Europe, and the Middle East. But the idea that ending US imperialism will open the door for China is not true. There are many other influential nations in the region, all of whom have interests and a foreign policy, and many of whom have nuclear weapons. A staged withdrawal from some bases in South East Asia and around the world to improve the US fiscal and economic situation will allow the US to remain a great power and a counter-balance to China for longer. Continuing and growing the pace of military spending will create more debt and waste more domestic productivity which is absolutely the last thing America needs if she is to remain a counter-balance to China. I don’t want either the US or China to attain hegemony. Continuing on the path of American imperialism, more debt, more wars virtually guarantees Chinese hegemony.
You seem to hold a post-American-hegemony world view similar to me. What I am worried about is RP going too isolationist (unlikely, due to the vested interests and already much-extended world trade web) or Romney going full neocon mode and starting a war in the name of sacredness and fu*king “war stimulus.”(highly likely) Or there is a moderate chance of Obama getting reelected if the GOP nomination goes wanky, who won’t be much different from Romney but would spend much more on populist healthcare and pensions.
He’s endorsed by George H.W. Bush.
I wouldn’t expect any “less”.
“What I am worried about is RP going too isolationist…”
As RP has repeatedly said, GOVERNMENT INTERVENTION is isolationist in that it contravenes the free and voluntary exchange of goods, services, and ideas — the FREE MARTET — that would otherwise unite not GOVERNMENTS but the PEOPLE themselves the world over.
After all, it’s what built our OWN country, so why can’t it build the world as a whole? And why is this so difficult to understand?
Ron Paul will not win.
US Politics needs fanaticism to get people out to vote. This take money.
Perhaps forums like this or ZH or other sites where I here the RP name, are just the platforms for his campaign. I read a lot of fanatical support. If I was on RP’s propaganda team, I would be slinging Aziz some filthy lucre.
But I rarely here his name in the mainstream media, and thus, the average voter will only choose someone Oprah mentions.
Because RP’s money is not “welcome”.
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