The tottering US imperium

Dedicated empire-watchers like myself have long been arguing that the days of the US imperium are numbered. But the argument for this position quickly becomes a little more intricate than I would wish. The imperium has two foundations -- financial and military -- and they are mutually reinforcing. The collapse of one has grave implications for the other. Without the ability to run huge fiscal deficits -- and as a concomitant have them financed by foreigners such as the Chinese and Japanese -- the US military complex cannot be sustained even for a year or two. Yet there is now a growing reluctance to finance these deficits when the value of the paper these foreigners buy (in return for real goods and services) becomes increasingly dubious. This growing scepticism and reluctance is what we've been seeing the last few months, and in particular at the meeting in Yekaterinburg a few days ago attended by SCO and BRIC countries (see Hudson's article here for an excellent analysis).

Every week now there are a handful of articles in serious publications worrying about the fate of the dollar. The crux of the problem is an utterly irrational US financial and political system whose dynamics no-one understands -- not even those at the helm of affairs in the US. For instance, no-one knows what the consequences of "quantitative easing" are going to be -- is it going to be deflation or Weimar-style hyper-inflation? No-one knows. Even I don't know. All serious people agree, however, that the house of cards that is now the US economy, is looking increasingly fragile and unsteady. The US today is not the juggernaut of half a century ago. Most people also agree that this is a time of transition as the US loses its top-dog position and we enter a more confusing multi-polar world whose rules and dynamics are unclear.

The catalyst for this post was a well-crafted article in the Daily Telegraph.