Peak Flim-Flam

How the world's largest – and most indebted – empire got so outta hand...

(Source: Getty Images)

Bill Bonner, reckoning today from Dublin, Ireland...

Churches gotta have bell towers. Rats gotta have tails.
And empires gotta do empire things…until they can’t do them anymore.  

~ Bill Bonner

You may wonder, dear reader, why we continue (did we hear you say “harp”?) on the inflation story. “Don’t you know,” you might ask, “inflation is going down?”

Not so fast!

Prices may go up. They may go down. But inflation won’t go away anytime soon.   Yes, it was triggered by the feds’ stimmie checks in 2020. But there was a lot of inflation waiting to happen. Because, inflation is not a thing unto itself. Instead, it’s part of a bigger picture – that includes federal deficits, trade deficits, transfer payments, a declining middle class, an ‘extractive’ elite, rising real interest rates, and the cost of maintaining a huge, worldwide empire.  

A real “cluster,” as the kids say. Today, we’ll look at one of the biggest pieces of it, the empire itself.

Shorter, Blinder

In this, as in so many other things, America is a victim of its own flim-flam. The peak of it (the flim-flam, not the empire) probably came when Madeleine Albright, the US Secretary of State, announced that the US was ‘indispensable’…and that ‘we stand taller…and see farther’ than other people.

Since then, we’ve gotten shorter…by almost every measure. Even life expectancy. The rest of the ‘western,’ fully developed nations in the G7 have an average lifespan of 83 years. In America, we live to 76…and life expectancies are falling, along with wages, productivity, GDP growth, trust in government, innovation, happiness and just about everything else.  

As we pointed out in our 2006 book, “Empire of Debt,” the American economy became the world’s biggest at the end of the 19^th century. By then, the country had plenty of experience taking land from others – the Indian tribes and the Spanish.  Then, when it straddled the continent, sea to shining sea, it looked abroad. And by the early 20^th century, it was master of islands in the Pacific (including Hawaii) and the Caribbean, as well the Philippines.   

But rather than follow the tried-and-true empire model – conquer, steal, tax – the US imagined that it was doing the world a favor; it is a ‘good empire,’ handing out democracy and LBQT rights like free weed at a rock concert.

The net loss due to its imperial wars is said to be around $8 trillion so far this century. But the total cost of its empire is much higher – including foreign aid, veterans’ benefits, diplomatic missions, support for the World Bank and other international agencies, whose main purpose is to expand the influence of the US beyond its own borders. This year alone, the total cost is said to be around $1.5 trillion, or at least $20 trillion all-in since 1999.

And since they have never had a lot of extra money lying around, the federales had to borrow and print it…which is now embedded, like a recurring nightmare, in America’s $33 trillion of government debt. 

Yes, this is a new kind of ‘empire’…muddled in claptrap thinking and mired in debt. Yes, the US conquered. And yes, it killed – with as many as a million people dead this century alone. But it forgot to send a bill!  

The White Man’s Burden

Inflation and empire go hand in hand. It is widely assumed – though never debated in Congress, or even whispered in the popular press – that the empire is a necessary or inevitable thing. We did not choose to be an empire – at least, not in a deliberate or conscious way. Instead, we believe that greatness was thrust upon us…like a crown upon the head of Claudius; we, Americans, had to take up the White Man’s Burden whether we liked it or not.  

But the burden is fundamentally a hustle…a scam. Spend, borrow, print…bomb, sanction…put the coup in the coup d’etat. And give the money to favored elite groups. The ‘Green’ Lobby, for example. Fox News:

Biden energy secretary doubles down on electrifying US military's vehicle fleet by 2030: 'We can get there'

Last April, Biden said his administration is working to make 'every vehicle' in the U.S. military 'climate-friendly'

Department of Energy Secretary Jennifer Granholm said Wednesday that she supports efforts from the Biden administration to require the U.S. military to implement an all-electric vehicle fleet by 2030, telling lawmakers that she believes "we can get there."

Yes, we can get ‘there,’ but ‘there’ has nothing to do with protecting the country…or national defense. That could be done with as little as, maybe 25% of the existing empire budget. Maybe a good deal less. After all, the US has no enemies the empire didn’t create for itself.  

In other words, why not renounce the empire, as presidential RFK,Jr. proposes?  The US deficit could be eliminated…and the main driver of inflation removed.  Switzerland has no troops stationed around the world. Sweden has no empire budget. Ireland spends only 0.3% of GDP on its military (compared to America’s Empire Budget of 6% of GDP…20 times as much). As far as we can tell, the people of Ireland and Switzerland are no less happy and no less prosperous than those of the USA.  

So, why not give peace a chance? Russia renounced its disastrous Soviet Union.   France withdrew from Vietnam and gave up Algeria. Britain turned India over to the Indians. And every one of these nations was better off. 

And the US? Why not become a regular, decent nation, minding our own business and balancing our own budget?  

Stay tuned...

Bill Bonner

Joel’s Note: Economically, America's days as a world dominating trade empire are already entering what you might call the “sunset phase.” At the end of WWII, the United States accounted for roughly 50% of global GDP and held some 80% of the world’s hard currency reserves. By 1960, the country’s share of global GDP had dipped to 40%. And by 1980, it had fallen to 25%.

Today, it’s down to 15%… and is projected to fall for the rest of the decade.

China, meanwhile, has tracked the opposite course. Back in 1980, the Middle Kingdom’s share of global GDP stood at a paltry 2.6%. By 2000, the year before China entered the World Trade Organization, it had tripled… but was still a fairly modest 7.3%. Ten years later, it had roughly doubled again, to 13.6%.

In 2023, China’s share of global GDP stands at 18.9%. It is projected to hit 20% by the end of the decade.

China is also the top trading partner to no fewer than 120 countries around the world. As the Wilson Center notes:

China is the largest trading partner to Japan, South Korea, Vietnam, and Taiwan. Given their proximity, those countries are hardly a surprise.

But it is also the top trader with Russia—and Ukraine. In Africa, China is the top partner for countries like South Africa and Kenya. In South America, for places like Brazil; in the Middle East, places like Saudi Arabia. And China is the largest external trading partner of the European Union.

How, then, does the United States, with a shrinking share of the world’s trade, expect to maintain its empire around the world? Take a look at the following graph, from April of this year. According to the Peter G. Peterson Foundation, the United States spends more of “defense” than the next 10 countries combined:

According to the Peter G. Peterson Institute, defense spending in the US accounts for around 12% of all federal spending and nearly half of discretionary spending.

The US maintains something like 750 foreign military bases (nobody knows the exact number) in over 80 countries around the world. (Britain, France and Russia, by contrast, have about 30 foreign bases… combined.)

Hmm… shrinking economic dominance and an enormous military, just sitting around waiting for something to do...

One recalls the famous line, attributed to French philosopher, Frédéric Bastiat: “When goods do not cross borders, soldiers will.”