Guest Post: “More Empires Have Fallen Because Of Reckless Finances Than Invasion”

While Eric Margolis’ entire comment in the Toronto Sun is a must-read, the following two quotes really hit the nail on the head:

More empires have fallen because of reckless finances than invasion…

If Obama really were serious about restoring America’s economic health, he would demand military spending be slashed, quickly end the Iraq and Afghan wars and break up the nation’s giant Frankenbanks.

Margolis is right.

As I have repeatedly shown, war is bad for the economy. According to a Nobel prize-winning economist, the head of JP Morgan and others, the Iraq war and the war on terror in general were huge factors in destroying our economy.

America is a dying empire, destroying the last of its resources to fight unnecessary wars. Instead of rebuilding our economy so that we can once again be a strong nation, we are wasting trillions fighting those unnecessary wars, thus guaranteeing that we do not have the economic resources to defend ourselves in the future from real threats.

Don’t believe me?

Well, our military and intelligence leaders say that the economic crisis is now the biggest threat to America’s national security.

And as leading economic historian Niall Ferguson recently wrote in Newsweek:

Call the United States what you like—superpower, hegemon, or empire—but its ability to manage its finances is closely tied to its ability to remain the predominant global military power…

This is how empires decline. It begins with a debt explosion. It ends with an inexorable reduction in the resources available for the Army, Navy, and Air Force…

If the United States doesn’t come up soon with a credible plan to restore the federal budget to balance over the next five to 10 years, the danger is very real that a debt crisis could lead to a major weakening of American power.
The precedents are certainly there. Habsburg Spain defaulted on all or part of its debt 14 times between 1557 and 1696 and also succumbed to inflation due to a surfeit of New World silver. Prerevolutionary France was spending 62 percent of royal revenue on debt service by 1788. The Ottoman Empire went the same way: interest payments and amortization rose from 15 percent of the budget in 1860 to 50 percent in 1875. And don’t forget the last great English-speaking empire. By the interwar years, interest payments were consuming 44 percent of the British budget, making it intensely difficult to rearm in the face of a new German threat.

Call it the fatal arithmetic of imperial decline. Without radical fiscal reform, it could apply to America next.

And William R. Hawkins (formerly an economics professor at Appalachian State University, the University of North Carolina-Asheville, and Radford University) fills in some details on the fall of the Hapsburg empire:

Spain was the first global Superpower…With Spain as its political base, and gold and silver flowing in from its American colonies, the Hapsburg dynasty became the dominant power in Europe. It controlled rich parts of Italy through Naples and Milan, and Central Europe from the Netherlands through the Holy Roman Empire to Austria. In the 16th century it added the far distant Philippine islands to its empire. The Hapsburgs held off the Ottoman Turks, whose resurgent wave of Islamic conquest in the 16th century swept across the Balkans and nearly captured Vienna.

The Hapsburgs went into decline in the 17th century, and while any such momentous event has many causes, for our purposes the focus will be on the economic collapse of Spain, which not only sapped the empire of strength but served to build up the power of its rivals.

The demands of empire required a strong and growing economy, but Spain did not keep up with the economic expansion that was taking place in other parts of Europe. Madrid’s financial base fell out from under its empire. Spain could continue to consume in the short term because of the flow of precious metals from American mines, but it could not produce the goods it needed at home, which in the long-run proved fatal to its standing as a Great Power and as an advanced society.

Spanish imports were double exports and the precious metals became scarce within weeks of the arrival of the American treasure fleets as the money flowed to Spain’s many creditors. What industry there was, along with banking and shipping, was in the hands of foreign owners. As a modern historian, Jaime Vicens Vives, has concluded, “This was one of the fundamental causes of the Spanish economy’s profound decline in the seventeenth century, maritime trade had fallen into the hands of foreigners.” This, plus the “opening of the internal market to foreign goods,” produced a “fatal result.” Spain’s exports were at the same time under heavy pressure by competitors in third country markets. A nation that cannot control its domestic market will seldom be able to sustain itself in foreign markets, which are inherently less accessible and more unstable.

Yet, Spanish leaders were deluded by a sense of false prosperity. This is testified by the statement of a prominent official, Alfonso Nunez de Castro in 1675: “Let London manufacture those fine fabrics of hers to her heart’s content; let Holland her chambrays; Florence her cloth; the Indies their beaver and vicuna; Milan her brocade, Italy and Flanders their linens…so long as our capital can enjoy them; the only thing it proves is that all nations train their journeymen for Madrid, and that Madrid is the queen of Parliaments, for all the world serves her and she serves nobody.” A few years later, the Madrid government was bankrupt. The Spanish nobleman had foolishly elevated consumption, a use for wealth, above production, the creation of wealth.

Historians have traced the flow of Spanish gold and silver across the markets of Europe. Those who “served” Spain by establishing industries to manufacture goods for the Spanish market gained the money. Spain’s rivals, France, Holland (which started a successful revolt in 1568) and England, prospered by their trade surpluses, and reinvested the money to expand their own capabilities. Another modern expert on Hapsburg history, Henry Kamen, has cited contemporary sources who referred to 17th century Spain as “the Indies for the foreigner.” The military empire of the Hapsburgs became the economic colony of other powers, or, to use a current phrase, Spain was the “engine of growth” for the rest of the continent.

Where there were jobs and prosperity, there was also rapid population growth, and rising tax revenue. Rival powers were able to field and finance military forces that could defeat the once superior Spanish forces both on land and at sea. The irony of this is that Spain was ruled by a warrior aristocracy tempered by centuries of constant warfare against Islamic hordes and Christian heretics. These nobles looked down on merchants and manufacturers and disparaged their mundane professions only to find that without a strong domestic business class they could not afford the fleets and armies that guarded the empire they had built.

Today, the American “empire” is also trying to consume more than it produces. The U.S. trade deficit is nearing Spain’s nadir of imports being double exports. Both government spending and private consumption are financed heavily by debt. Washington is printing money, the modern equivalent of digging gold out of the ground, rather than earning the means to pay its bills. And the political and military elites are apparently indifferent to the fate of domestic business and industry. Americans must learn … from the Spanish experience … and take corrective action while they still can.

As for the need to break up the “Frankenbanks”, see this.

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About George Washington

George Washington is the head writer at Washington’s Blog. A busy professional and former adjunct professor, George’s insatiable curiousity causes him to write on a wide variety of topics, including economics, finance, the environment and politics. For further details, ask Keith Alexander…


  1. Qafir Arnaut

    FYI, the military spending that the Habsburg and Ottomans suported was a ruinous 20% of the GDP. America’s is a measly 5%. There’s still a long way to go. Plus, is it the wish of the authors to see America turn into a Brasil? For that is what it will become w/o its military

      1. Qafir Arnaut

        If we are measuring budget deficits relative to the GDP, the same must be done with a budget expense.

        1. Independent

          If you add in all the non DOD expenses like nukes, vets, homeland security, intelligence, and ongoing, one time, war payments the total is closer to 10% of GDP. A GDP that itself is inflated with debt spending rather than production.

          1. Ishmael

            Does anyone believe the GDP numbers. Oh wait, how could I be thinking that the government would actually cook the GDP numbers.

            Let’s face it, GDP is not true GDP. It is a false measuring of inflation due to various factors. Over the last few years, GDP has gone up almost dollar for dollar for the increase in debt.

            One of the reasons the economy started collapsing is due to nonpublic entities reaching a limit to the level of debt which could be increased. The public entities had to step in and fill the gap. If this had not happened we could have seen a 25% collapse in GDP.

            I personally believe if GDP was properly measured it would be somewhere below $10 trillion.

            Hope I do not shock anyone over this statement.

          2. Qafir Arnaut

            Ancillary expenses that benefit the domestic dynamic are not to be counted with expenses related to maintaining Benevolent Hegemon status.

            It is true however, that these ‘ancillary’ expenses do weigh in the domestic factors expediting the US’s demise. (That the end of the US will come domestically is not a new theory. Abe Lincoln has expressed himself quite well on the subject.) The key is to export the domestic malaise abroad (which has been done) and weaken the Rest.

            The Chinese, the continental Europeans, the insular Europeans, all have had their day as hegemon, and none has been as efficient as the Americans in shaping the world (ancient Greece excepted)

            Thus I am well pleased to observe that the american defense expenditure is well below that of lesser peers such as the Ottomans and the Habsburgs

    1. Sharpshooter

      In addition to that, I supposed our runaway entitlement spending isn’t a problem?

      Military spending is Constitutional, the rest is not (or is the author not too taken with rule-of-law?)


  2. Advocatus Diaboli

    Eric Margolis is a racist hack. While some of his articles are OK, a lot of his books and longer articles are poorly researched and betray an attitude that should have died out a long time ago.

    If you want, I will post over a dozen references to his articles with relevant text excerpts.

  3. Paul Tioxon

    Imperial overreach is the catch phrase. As you can see by this year’s budget, $704b for the military, exclusive of the VA, National Intelligence, and Homeland Security. The big lie repeated over and over by the republicans, how can we spend spend spend spend so much on health care? However, its price tag is over ten years vs yearly military outlays exceeding health care reform, by any version out in the public view. And of course, the stimulus or tarp, take your pick. Equal to military annual expense, and by the way, did anyone read the military budget and drop a hard copy of it on the floor of Congress, saying it was too bloated and probably too full waste, fraud and every other financial abuse of the tax payer you can imagine? Our deficits track the national defense budget closer than the 30 yr mortgage tracks the 10 yr T bill. The point is not that the military is only 5% it is closer to 10% I attribute the interest payments, plus the VA, NatIntell, HomelDef and NASA, plus other black budget items, and other items part of national defense that support the military mission, like Nuclear Power. Yea, the peaceful atom, why do you think Israel wants to bomb Iran? There is no nation that is a threat to us all by ourself, and especially when you bring into account NATO. What nation in their right minds would start an arms race with us in preparation for geopolitical expansion? The world saw what broke the Soviets. To see the dollars spent and the complete lack of security in our homes, in our cities, our college campuses, even the lack of safety at Ft Hood begs the question, how secure are we and from what threat? The relevant text is Paul Kennedy, THE RISE AND FALL OF GREAT POWERS.

  4. Toby

    The question is how to reform money itself so that it is debt-free at creation, (or even — for the true radicals out there — so that it makes itself slowly redundant) and how such a money would fit into the international framework. The whole system of owing interest to banking cartels in order to fund empire or nation building is open to question. It is but ONE way of conducting business, not THE way. And if this system leads repeatedly (some would say inexorably) to collapse, then it is obviously not a sound one.

    That modern debate does not include an analysis of money creation itself and the ravages of interest bearing debt says plenty about modern debate, and raises in and of itself serious suspicions about a state of affairs in which the media, politics, energy and money strongly appear to be in the grip of a few “elitists.” I applaud any and all efforts that shine a light on this murky, yet vital corner of civilization.

  5. sam hampster

    Globalization means the dissolving of national loyalties. The U.S. is now a financially defenseless nation to be plundered and looted from within and from without. What part of that do you not understand? Creative destruction, man. The efficiency of the market is moving the wealth elsewhere. Don’t complain, adapt.

    In short, the post refers to a paradigm that is now gone. In the new paradigm, the reader would be happy to know how many 100’s of millions of Asians have risen out of poverty in the last twenty years and the reader would consider retraining and just moving to another country if the labor market dictated so.

    That, or riot, burn and overturn cars

  6. MyLessThanPrimeBeef

    Let’s see, Spain lost her Great Armada in 1588 and went bankrupt a few years after the above quote in 1675. What are we to conclude, that we have almost a century to recover after Vietnam and we can continue to afford wars in Iraq and Afganistan?

    As for the immediate cause for the fall of Rome, I thought it was because they let in those ‘bar bar’ speaking Gothic barbarian refugees? Are we to conclude that we take in no tired, poor or huddled foreingers yearning for a chance at the American Dream, because that also happened to be the immediate cause for the end of the classical period of ancient China when they let inside the Great Wall another barbarian tribe seeking refuge, the Xiongnu (i.e. the branch of the Huns who stayed in northern China, instead of migrating westward toward the area occupied by the Goths) who not soon after overran the Western Jin dynasty?

  7. Kevin de Bruxells

    The Spanish Empire faced many more or less equally endowed rivals, the British, the French, the Ottomans, the Holy Roman Empire and the Russians to name just a few in Europe. The international scene back then was truly a Hobbesian state of nature with no single power dominating the rest. And so of course in such a situation the economic productivity of an Empire has everything to do with how long it will survive. This was proven by the steady decline of the Spanish Empire.

    But to apply the rules of a Hobbesian state of nature to the current global situation and America’s place in it is a mistake. America has risen very close to the position of being the global sovereign and therefore the current situation should be viewed through the framework of an international Hobbesian commonwealth, presided over by a sovereign. Now to be sure the US’ sovereignty is not absolute; all sovereigns have limits to their power.

    What are the main characteristics of sovereignty? The first is a monopoly on violence. While the US is not powerful enough to bully around China and Russia, it is very close to achieving an international monopoly on violence. The only “international” (civil wars are different, analogous to a domestic squabble within a household for a national sovereign) breaches of the US monopoly on violence since the end of the cold war have been Russia’s wars in Chechnya and Georgia. The war in Yugoslavia was also a breach but the US stepped in a shut it down just as you would expect a sovereign to do. All other international wars have been either launched by the US or approved (Israel attacking Lebanon or the Ethiopian invasion of Somalia).

    The other characteristics are to coin currency (the dollar is obviously the world’s dominate currency, almost every international trade transaction throughout the world is settled in dollars.). Also sovereigns write and execute laws. This area is less clear but most international laws are heavily influenced by US wishes, including all recent free trade laws. Also the US controls global finance through its quasi-government agency investment banks like Goldman Sachs. And through intelligebce agencies like the NSA, the US is able to monitor global communications.

    The only potential rivals the US has that could threaten its rise to sovereignty are Russia, the EU, and China. Russia is well on its way to becoming a US vassal state through the creation of an oligarchic elite that will soon take over power from the KGB remnants still in control of the Kremlin. The EU can be easily manipulated as seen by the current Goldman Sachs-led attacks on Greece. China is a serious long-term threat but is still totally dependent on US protection of vital shipping lanes as well as access to US markets.

    What threats then do the US face? Economically the US has been parasitical (as all sovereigns are) for some time. Far from cutting its deficit (n-word puh-lease!!) the US will instead move to formalize what it is due in tribute from the rest of the world. Internally the US population is totally docile and still believes in the fairy tale of two-party democracy. If they just throw the bums out one more time, hope and change will reign forever! Militarily there are no rivals expected for 50 years at least. Nuclear proliferation could be a potential threat however as well as the omni-present danger of non-state actors who operate below the level of US sovereignty.

    So the only real threat that I can see the US faces as global sovereign is if the rest of the world refuses to pay tribute. But any nations that are late on payments could very well be cut off from international credit markets by US enforcers like Goldman Sachs.

    1. Dan Duncan

      Another Lyrical Lefty.

      Reading this post, it’s like listening to a bad REM song where meaningless lyrics are simply a vehicle of vocalization…and that is all. And in the crowd you have a group of 1st year Social-Science majors (future Lyrical Lefties), trying to cull meaning out of Radio-Free Europe.

      “…and therefore the current situation should be viewed through the framework of an international Hobbesian commonwealth, presided over by a sovereign.”

      C’mon, man. Give me a break. You spew this Historical-Literary Lyricism, and the Lefties fall into a trance. “Oooh, view it through the framework of an international Hobbesian commonwealth! Might it be Orwellian? Yes!”

      This Lefty Lyricism then deludes you into making such comments as this:

      “[The US] it is very close to achieving an international monopoly on violence. The only “international” (civil wars are different, analogous to a domestic squabble within a household for a national sovereign) breaches of the US monopoly on violence since the end of the cold war have been Russia’s wars in Chechnya and Georgia.”

      Without a doubt, the most ignorant and inane statement I’ve read on this blog.

      Millions of people killed in wars since the end of the Cold War…Millions! Most of the people were killed in genocidal civil wars that never would have been sustained without outside influence. Most could have (and should have) been stopped but for a feckless U.N.

      But that doesn’t really count. They are just footnoted “domestic squabbles”…all for the purpose of the another one-liner for the Lyrical Lefty:

      “The US has achieved a Hobbesian Monopoly of Violence.
      As a Radio Free Orwellian Hegemon…”

      What a joke.

      1. Kevin de Bruxelles

        If you have a counter argument, why not present it calmly instead of resorting to name calling? Your first mistake is of associating sovereignty with totalitarianism; if that is what you mean with your reference to Orwell. Is it Orwellian to say the France, for example, has sovereignty over its own population? Sovereignty is not Orwellian, totalitarianism is. Since I never claimed that the US was a totalitarian dictator over the world I’m not sure why you are calling on Orwell.

        As for civil wars, I clearly stated that the US has a monopoly (or close to it) on INTERNATIONAL violence (that means one country against the other); not intra-national violence or civil wars. I put international in quotes because it is a little unclear if Chechnya is independent of Russia and the war in Yugoslavia could be called a civil war. So you refute nothing by pointing out what I already stated.

        You seem like a smart guy Dan, if you think I am wrong (and frankly I wish I were wrong) use your brain to show it instead of your emotions.

        1. Anonymous Jones

          I like a lot of Dan’s comments. He is at times an effective gadfly, and I think a number of his criticisms are worthwhile, especially when they are attempting to make people question their assumptions and question what they know.

          At other times…well, I don’t want to go *too* ad hominem or engage in *too* much in armchair psychology, but there does seem to be a pretty clear pattern to many of his more, let’s say, piqued comments. Do they evince a deeper insecurity? Is it coincidental that the objects of the attack are always the more thoughtful and well spoken contributors like DownSouth and kevin? Why are these contributors “jokes” and “delusional” to Dan? I’ve been around a while and met a lot of people, a lot of highly educated and extremely financially successful people. Most people really aren’t as smart and thoughtful as DownSouth and kevin. I can’t believe I have to actually argue this, but it is really, really difficult to believe that statement isn’t, in fact, you know, true. Have we hit upon what is really threatening to Dan — those who write well *and* disagree with him? I’m not sure why you would spend the time writing the posts he does if there wasn’t at least the inkling of a threat (obviously, if Dan were not threatening in some way to me, I wouldn’t be writing this either).

          In any event, Dan does seem to have a few tragic flaws, not just emotion as kevin points out. He sometimes seems too enthralled with his own cleverness, and he does seem to love engaging in literary flourishes that are not, exactly, well…apt.

          Look at the alliteration in “Lyrical Lefty.” Incredibly clever. Well, it seems clever and, even dare I say, lyrical, until one examines that kevin’s comment wasn’t particularly “lyrical” (at least in sense of song and poetry that Dan conjures by noting REM in his comment) and that kevin’s comment wasn’t particularly “lefty” (if it is, please demarcate this bright line right-left divide in a more definitive way than it has ever been heretofore explicated for me).

          Look further at the other technique that Dan employs again and again — comparing his opponents to some mythical standard of college freshmen. I actually have a good deal of close friends who are professors at good colleges and universities. The idea that the type of discourse going on here that Dan attacks is, in any way, representative of even smart and talented 18 year olds, well, I hate to say it, but from my experience, that does appear to be somewhat delusional on Dan’s part.

          So in the end, he seems to like to play the bully (and like all bullies, it seems to stem from a deep seated insecurity that is paradoxically anathema to him and his own vision of himself) and he seems to let his desire for cleverness hoist him on his own petard, but as long as we take him for what he is (and we clearly can’t get rid of him or his type), we can at least try to extract the useful bits and ignore the rest.

          1. Daisy Duke

            I have to agree with Dan Duncan, here.

            The Hobbesian sovereign was to enforce the peace. The US imperial cowboy likes to stomp around stirring up trouble, especially the already unstable mid-east.

            It’s clearly wrong.

          2. Kevin de Bruxelles

            Daisy Duke,

            There is nothing in Hobbes that says the sovereign should himself be peaceful. But as I said, the sovereign should be working towards a monopoly on inter-national violence which is exactly what the US is doing. Again, civil wars in the Congo are not necessarily within an international sovereign’s magisterium, unless he chooses them to be, just as in the old classical polis the ruler’s power stopped at the front door of the head of the family’s abode. The dependent women, slaves and children were the responsibility of the patron of the house and fell under his sovereignty. The growth of the modern ubiquitous state has blurred these lines in modern times. But if you look at the UN charter there is no provision for intervening within intra-national (civil wars), despite what subsequently happened.

            There seems to be a conflict also between your and Dan’s outlooks on America and I think it is worth the effort to explore this further to clarify my position which perhaps seems ambiguous to those used to thinking in black and white terms. After this last shot I promise to get off this soapbox!

            America was founded on a good vs. evil contradiction between universal equality of men enshrined in the Declaration of Independence and the 3/5 rule for Blacks, along with the 0/0 rule for Indians in the Constitution. This ambiguity between a framework for freedom for some and an apparatus of destruction for others has haunted the American project ever since it first began its expansion across the North American continent and the conflict was only intensified as it then continued its journey by other means over almost the entire globe. In foreign policy this original contradiction is manifested as an ambiguity between protection and domination. America is a synthesis of the thesis of outright imperialism and the antithesis found in the benign spread of liberty. The two political traditions within the US tend to exaggerate one aspect over the other. The Right claim the US can do no wrong while the Left deny the fruits of the very freedoms they themselves rely on to make their denunciations.

            What is interesting in the idea of decline of the American project, and something my previous analyses missed, is that we are indeed reaching a critical juncture, and for the second time, the expansion of America is reaching a limit–a crisis point to be sure–and much can be learned from the previous example of such a predicament. The American idea was always a framework of liberty and, a constitution in network as Hardt and Negri state in Empire (which much of this is based on). This expansion was a sine qua non to avoid problems of scarcity and internal strife, and to keep power from concentrating by maintaining it within the competing and expanding networks. The last time America reached an expansionary limit was near the end of the 19th century. As a result power was monopolized and class struggle rose. In other words the energy of the American idea was contained and folded back on itself, as a result the pressure rose to dangerous levels. It was Frick, Carnegie, Mellon, and Morgan vs. the Haymarket Square riot and the Pullman strike.

            The solution was to puncture the limits of American expansion by launching two contradictory imperial impulses that reflect the original good vs. evil dichotomy enshrined by the founding fathers. Teddy Roosevelt choose traditional European style self-interested imperialism (the conquest of the Philippines being the classic example) while Wilson choose a universalist (not self-interested) utopian framework for the eventual spread of the American idea across the globe. The actualization of these two competing and reinforcing currents released enough internal pressure so that after the US intervention of WW1 the US could prosper for a decade. But during this decade the imperial project was stopped and simultaneously the Russian revolution prepared the ground for the greatest crisis in US history in the 30’s. In other words the internal pressures started to rise again to dangerous levels. It was thanks to the leverage western workers received by the fear instilled in their elites by Bolshevism that welfare states spread in Europe and to a lesser extent (reflecting the distance from the original infection) in the US. But the internal pressures continued to build to throughout the 30’s and were only released in a massive and semi-permanent way with the US entrance into WW2.

            After WW2 the US continued to expand and was relatively stable at home which allowed for internal effort to be expended righting some of the original 3/5th wrongs. But while the original US flaw was being adapted at home, the contradiction between protection and exploitation in foreign policy was never clearer than during the Cold War. On the one hand Wilsonian international organizations were founded to better protect the spread of freedom but focused primarily on Europe while the brutal imperialist actions were taken in the third world and were highlighted by the failure of US imperialism in Vietnam. This dualism was also seen in the first decade of the 21st century where a clearly imperialist war was launched in Iraq which was contrasted by the “good war” launched in Afghanistan.

            Today we see an America on the threshold of global dominance but internally there are echoes from the era of more than a century ago when the US stood triumphant over the middle section of North America. The President of the United States (especially if he is a Republican) is unabashedly referred to as “The Leader of the Free World”. Today the “Free World” and the semi-free world make up most of the globe. But today we also see an increase in internal pressure of the US and class conscienceless is returning. Citi, GS, BofA, and JPM have replaced Frick, Carnegie, Mellon, and Morgan but as yet there have been no Haymarkets. The deficit is being cut for the masses so that it can be increased for the few. And this time, if we forget about conquering the moon, there is no only no easy way to release the growing internal US pressure. Worse for the masses, the tool they previously used to extract concessions –the elite’s fear of the Soviet proletarian– has been stripped from their hands and in its place the elites are welding an even more powerful weapon — the masses’ fear of the Chinese sweat shop worker.

            So as the internal pressure continues to rise in the US and there is no obvious way to release this pressure in a controlled way, the balloon very well could just one day go pop. The only question is how soon.

      2. Moonbeam McSwine

        That Dan Duncan has responded only weakly to my ardent advances. By now I suspeck that he suffers from primary impudence, or like most angry & resentful reactionary fellas, pedo-feelia. Woulda thought we was made for each other, my exotic allure and his aging, platowing, college republican fratboy second-rate school mediocrtty but what can you do. Maybe I’ll find my true soulmate at the bloomin onion booth at tonight’s tractor pull.

        1. Daisy Duke

          Very lyrical. Very Dali-esque. From “Diary of a Mad Genius,” consider:

          “As usual, a quarter of an hour after breakfast, I slip a jasmine flower behind my ear and go to the toilet. I have hardly sat down before I have a bowel movement that is almost odourless. So much so that the perfumed toilet paper and my jasmine completely dominate the situation.

          This event might have been predicted by the blissful and extremely pleasant dreams of the night before, which in my case herald a smooth and odourless defecation. Today’s movement is the purest of all, if that adjective is at all appropriate under the circumstances. I attribute it entirely to my nearly absolute asceticism, and I remember with repugnance and almost horror the bowel movements I used to have at the time of my Madrid debauches with Lorca and Bunuel, when I was twenty-one.

          It was the most unspeakable, pestilential ignominy, intermittent, spasmodic, splattering, convulsive, infernal, dithyrambic, existentialist, excruciating and bloody, compared to today’s, whose smoothly flowing continuity has made me think all day of the honey of a busy bee.”

          …wait–I just know it’s relevant somehow. Give me a minute.

        2. Moonbeam McSwine

          I dine exclusively on Fritos, so I myself cannot remember my last bowel movement but I often fantasize that I would be cohabitating in full common law with Dan Duncan in his modular and he would bring me my morning bowl of Fritos on a Richard Petty commemrative tray and then we would watch the news on Fox News and CBN because I love that Pat Robertson, he is adorable like a little puppy dog the way his ears flop down from the top like that. Dan Duncan and I would be united by our faith and our values like Freedom isn’t Free and also Drill Baby Drill.

    2. Percy

      Loved this: “Far from cutting its deficit (n-word puh-lease!!) the US will instead move to formalize what it is due in tribute from the rest of the world.” I’ve been advocating this for years, emphasizing the “what it is due” aspect, only to attract strange looks. It was the Athenian, Roman, and some might say Napolean’s way. Later, once crushing military dominance is firmly established (not sure we’re there yet or that we have the will), tribute is converted into taxation. Have to be pretty brutal about it to get it done,however, and that does not seem to be our way as a people. Success at it provokes resentment, envy and imitation. Eventually the tribute-surrendering folks acquire military means of one sort or another to do their best to take over parts or even all of the operation. As it did here, say, in the beginning. Can work quite well for a while, though, if done in a moderate way.

      1. Kevin de Bruxelles

        “Can work quite well for a while, though, if done in a moderate way”

        Like through the polite cover of selling Treasury Bills or mortgage-backed securities.

        Look at the trap China is in, they have to keep buying those T-bills or they lose their best market. The US just has to suck more nations into this trap.

        I agree though it can not go on forever. And when it crashes it’s going to be real ugly.

        1. Vinny

          “I agree though it can not go on forever. And when it crashes it’s going to be real ugly.”

          And exactly why wouldn’t it be crashing right now?


          1. Kevin de Bruxelles

            “And exactly why wouldn’t it be crashing right now?”

            Because the US “sold” $40 billion in T-bills today. The day no one shows up to buy those T-bills is the day it all crashes.

            But don’t get me wrong, I have three children so my cellar is stocked — just in case. And I’m looking for a small plot of land in the country for growing vegetables and raising chickens — just in case.

          2. i on the ball patriot

            It is crashing right now, at a controlled and well orchestrated rate.

            One who forgets the past is condemned to repeat it, yes. And history many times reveals future. But we live in a unique time now that no past history has had to deal with. We have peak oil, immense global pollution problems and increased population pressures on resources.

            The wealthy ruling elite have recognized this new threatening reality and have formulated a plan of ‘full spectrum dominance’ long ago to deal with it. The nation states have all been illegally co-opted through deception and corruption by a global cabal of gangster ruling elite. Cheney did not lose the war in Iraq. What he and Bush did is to create divisive conditions in the Middle East region that will keep the populations there ensnared in a perpetual conflict with each other for generations to come. That program is now being perpetuated by Obama.
            And here history does repeat itself, it is racist Abe Lincoln decimating the Indian tribes all over again.

            The global financial ‘crisis’ is not a result of reckless finance. It is itself an astute use of finance for invasion, and decimation, of the highest resource consuming group on the planet, the global middle class, and, for geopolitical control. Just as old nation state historical thinking is wrongly applied to the present, so too are older notions about finance. The assumption that profit is the premiere goal leads everyone to believe that ruling elite puppets, Greenspan, Bernanke, et al., are simply bumbling idiots, and so, everyone, even after having been fleeced by these gangster charlatans, expends their valuable time submitting remedial plans to them to get us all back on the road to greater profit. Greater profit and a healthy economy is not their goal. They want the exact opposite. Control, and a well orchestrated decimation of the global economies, at such a rate so as to allow for containment of all resistance and protest. They are doing a superb job of it.

            Credit bubble bombs have been exploded domestically and all over the planet. It is the same old debt trap bait but intentionally released at a never before seen rate and cheap cost especially given that conditions did not warrant it. The bubble bombs were soon followed by derivative bombs selectively dropped into domestic municipalities, state governments, pension funds, etc. and foreign central banks. Their intended effect was to create fear and havoc and shut down credit and demand and to cripple consumptive commerce. And then came the biggies — again well orchestrated — the bunker busting, ‘Too BIG TO Fail’, bombs that clearly put the taxpayer, and generations of his/her children, on the hook and enslaved for years to come.

            This has been a financial invasion of the global middle class, and have not, by the global cabal of wealthy ruling elite. It is a war of the rich pitted against the poor. It is a war of deception pitted against perception.

            The debt is illegal and immoral. Tell Mr. Ruling Elite Banker to go fuck himself and keep the keys!

            Deception is the strongest political force on the planet.

    3. MarcoPolo

      I typically learn more from the comments here than from the
      posts. Happy to know there are so many that know their history.

  8. d4winds

    The US economy faces 4 stiff long-term problems dragging it down. The first two are also unique to it:

    (1) The excessive cost of health care (employer-provided and individually-purchased to at least the same extent as government-provided). 4% more of GDP is spent on health care in the US (despite all the uninsured) than in any other major industrial nation with less to show for it in outcomes. (The Swiss spend 12% of GDP, we spend 16%; all of the EU, Canada, Australia, & Japan have a GDP health care % less than 12%.)

    (2) The huge military budget, now at its highest inflation-adjusted level since WWII and representing in excess of 4% of GDP, is a drain that no other country faces. Indeed, it exceeds the military budgets of the rest of the world combined. Historically, no empire has ever been maintained as a pure onus on the builder (the longest lived regimes, ancient Rome and Persia, considered such building to be a profit-making enterprise). We may not like believing that we are maintaining an empire–let freedom ring etc.–but functionally, though perhaps not morally, we are. Military Keynesianism may work for stabilization but definitely not for long-term growth.

    (3) The 3rd economic drag we have is common to the EU but not to the BRICs and other emerging markets: We have a huge, privately profitable, yet extremely unproductive–witness the events of late 2008–financial sector that is eating up our brain power, mis-allocating enormous resources–and doing as a part of what it considers to be its raison detre–and devouring the nation’s real wealth to little, no, or negative productive purpose.

    (4) The fourth economic drag we face with Europe and BIC (not BRIC) but not with some emerging markets: energy dependence on foreign imports.

    Neither (1) nor (2) were especially difficult for US growth vs. Europe/Japan when those economies were rebuilding from WWII and when US excess costs on health care as a % GDP were much smaller (Canada & US %ages were about the same early Nixon years, e.g.). Due to (1) & (2), however, the US may count itself lucky 20 years from now to be a large Denmark. Due to (3) in addition to (1) and (2) we are severely disadvantaged

    1. DownSouth

      Warlocks and Warlords, that’s how I’ve come to think of it.

      The Warlords, just like much of the 16th and 17th century Spanish aristocracy, embrace an economic paradigm based on conquest and plunder. When you think of Warlords, just think Dick Cheney. He saw all those massive oil reserves in Iraq and believed, maybe correctly so, that if we could lay our hands on those, that that vast natural wealth would pay the tab for the next generation or so. And there is little doubt that if Cheney’s military adventure in Iraq had been successful, we would now be hailing him as a great American.

      The Warlocks are the financiers, the rentiers, who even though became most prominent in 17th-century Spanish society, somehow evaded mention in George Washington’s narrative. They practice a black magic known as economics, which masquerades under the veil of science or nature. Man lived most of his two-million-year existence on this earth in primitive societies that esteemed the best hunters and the highest producers. These elite producers were also the most generous. A man, after all, can only eat so much, and the bulk of the perishable production of the best hunters had to be given away, which won him many friends and great admiration. Then about 10,000 years ago man started organizing himself into complex, hierarchical societies, where it became much more difficult to ferret out the high producers from the slackers and free-riders. The most esteemed were in many cases no longer those who produced and gave the most, but those who took the most. The alchemy the Warlocks (financiers and economists) practice is the magic of making those who take the most appear as if they are the ones who produce and give the most.

  9. Matt Franko


    “…Rival powers were able to field and finance military forces that could defeat the once superior Spanish forces both on land and at sea….”

    Do you even read your own posts? Resp,

  10. Hal

    Sooner or later, down the line, there will be a guns v. butter situation for the USA. Do we cut our military expenditure to save our social ones, or vice versa? Given that few voting Americans really benefit from the military expenditures, I find it unlikely that the choice will be for more military expenditures. Historical parallels are tricky but I think it obvious that the Spanish monarchy was finally exhausted economically by its war on Protestantism. The French monarchy’s need for new taxes that precipitated the 1789 Revolution was the result of a century of warfare. The Soviet Union folded due to the pressure of maintaining parity militarily with the USA, etc., etc. In each case there was another nation, less burdened by military expenditures that delivered the coup de grace: the France of Louis XIII for Spain, Britain for Louis XVI, and the US for Russia. Today China, not at war with anybody, stands to benefit from our military exhaustion when it comes. In spite of some qualifiers, Margolis is right.

    1. Kevin de Bruxelles


      All I can say is that I hope you are right, but I can’t say I’m optimistic. There is certainly a guns vs. butter situation right now in the US with health care and it is pretty clear which way that battle will end up. In fact cutting “guns” is not even up for debate. And that’s with the supposed “butter” political party at its peak of power. When you say guns vs. butter what you are really of course saying is the needs of the masses vs. the elite. If recent history is any guide, I just don’t see that battle being won at the election booth; since that fact is you will not be given that choice at the voting booth in the first place. I see the pendulum of power swinging even more towards the elite. And for the elite to keep that power all they have to do is keep the masses distracted, divided, and fighting amongst themselves. Perhaps our grandchildren will finally get a clue but I can’t see any hope for change any time soon.

      1. Toby

        Hi Kevin,

        collapse could be a “refreshing” wake up call. If financially — with an attentive eye on oil, water and topsoil — the current model truly is unsustainable, we will not have to wait for our grandchildren to put two and two together. The elite will run out of their Eternal Power Elixir, which means the reins and controls of power will evaporate in their hands. When that happens (I think this is just a question of time) the likely outcome is chaos and collapse. What emerges from that mess is anybody’s guess, but change it most definitely will be. Information disseminators like the Internet, for all its distracting bells and whistles, will be key.

        1. DownSouth


          I’m with you.

          Fast forward from Spain to Great Britain, the most recent world hegemon to bite the dust, and we see a more condensed time table. GB started to decline in the 1860s, but didn’t completely pass the baton of world hegemony to the US until WWII. So it took about 80 years from the time decline set in to the final displacement as world hegemon.

          In the case of the US, decline began in the 1960s. Eighty years out would put us about 2040 or 2050.

          These things can take time, but history has demonstrated that it can take less time than what kevin asserts.

          Also, by the end of the 19th century the signs of British decline were blatant and plentiful, and yet the great majority of British remained in complete denial.

          1. Vinny

            The free and rapid flow of information, money, and people across the globe, are likely to heavily compress the collapse of the US. Considering, as you say, the decline alrady began in the 1960s, the US then only had a couple of decades of true ascention, far less than what empirs before enjpyed.

            I would not yet rule out the current economic crisis as the straw that broke the camel’s back. Things can deteriorate rapidly.


  11. ds

    A real spurious argument here. The title of the post states that “more empires have fallen because of reckless finances than invasion” but the reasoning the post provides has nothing to do with “finances” but rather with the real damage a large, warring military does to the productive capacity of a nation.

    Most certainly the financial collapse of these great empires was a proximate result of excessive debt. But that debt was only a symptom, and not a cause of the real collapse of these societies. The real cause was because these nations diverted their real productive capacity towards the destructive pursuit of war and the unproductive administration of overseas territories. They could not physically produce enough to satisfy their military ambitions and their domestic needs at the same time. The financial ramifications — excessive debt, inflation, etc. — were just a manifestation of this real problem of insufficient capacity.

    Supposedly this is a warning to us fat, lazy, and profligate Americans about our excessive debt and warmongering ways. These eminent scholars have studied the past and concluded that, much like Colonial Spain, we Americans are living beyond our means. But, in real terms, what characterizes America today is over-capacity. Using whatever real metric you want to use — unemployment, industrial utilization, etc. — America currently has FAR MORE real productive capacity than it is actually using today. This is precisely the opposite situation than what Spain, Rome, or other great empires faced.

    Sure, Spain defaulted on its debt and suffered severe bouts of inflation due to a surfeit of silver. How is this relevant to the free-floating external debt America has today? All we owe to China and the Middle East is more dollars, which we ourselves can create at the behest of a keystroke. We have no financial constraint which would lead to a debt-default similar to the cases of Spain and pre-revolutionary France. The only constraint we have is a real one, and, in real terms, we have a problem of TOO MUCH capacity with respect to our needs.

    1. DownSouth


      While I agree with much of what you have to say, the missing ingredient in your analysis is what billyblog (see today’s “LINKS”) called “real resources.”

      The way I see it, the US is beginning to run low on these, and their imperial ambitions to secure these have not proven successful.

      1. aet

        Ah, but the Imperial ambition to make all others pay as much for oil, as they have to from their own domestic sources, has been close to fulfilled.

        And in my opinion, that’s what counts in the long run.

  12. tim

    Can someone correct my on my simple reasoning why I agree with the “wreckless finances ruin an empire” but not due to a screwed budget?

    It will be caused by the destruction of confidence, overwhelming uncertainty, a too complicated system wound too tight with a “bank run” on the entire system and the resulting chaos. [Think Fall 2008, only worse]

    Like, as an example, this:

    Coupled with a lot of what’s brought to light on Naked Capitalism that isn’t getting the press it needs.

    1. aet

      Empires fall when the citizenry thinks that they can get more from being outside, than being inside, its “protection”.

      When enough of the Citizenry thinks, feels (and most importantly, acts) that way, Empires collapse. Sometimes in a day (like Byzantium) completing something that took centuries to occur.

      This is a nuclear age. It is IMHO unlikely that any American collapse will be so spectacular and abrupt, so military in nature: if collapse is to come – and we are no whereeven close to such – it will be the work of centuries.

      This talk of “collapse” seems to me to be part of “rushing people on to do foolish things in haste”, kinda like the AIG bail-out by the Fed.
      Relieving the pain of a moment, by blasting and ruining the next twenty years of commerce & business activity? We shall see…because that has happened before in history.

  13. rickstersherpa

    History is a dangerous thing, especially when used to make didatic arguments. Each nation or empire usually goes to hell in its particular way. For instance, Habsburg Spain’s eventual collapse may have started with one of its apparent strength. Its New World gold and silver functioned as the same kind of curse that oil does now. It created an overvalued exchange rate and rendered domestic producers in Spain non-competitive with foreign producers. It also gave the Spainish ruling class a false sense that they were God’s chosen and bless and led them to adopt a particularly when a rigid, intolerant ideology in Counter-Reformation Catholicism. As adopted by Phillip II and the his nobility and their successors this ideology provoked a reaction in the Low Countries, and thereby cut them off from the most economically dynamic and productive part of their empire and dragged Spain into wars of exhaustion for the next 70 years. And a final brick in the wall was the Spanish nobility’s refused to tax themselves for these wars, instead transfering that burden to Spain’s small middle class and its peasants and looting the “non-pure blood” (somewhat like “non-real Americans) Spanards of Jewish and Moorish descent. The Dutch also had to fight these same endless and exhausting wars and yet they produced a Golden Age. Perhaps because the Dutch elite was willing to tax itself and, perhaps under the influence of their Calvinism, to forgo luxuries to pay for these wars. At the moment the U.S. elite appears to have adoptd the Spanish model. I don’t think the British example fits. B Britain had the early lead in the Industrial Revolution, and it was only an Island with a limited population. And then had a world-wide empire to defend after nations with larger populations and land masses caught up with it economically. Absent a radical political solution (possibly a political union with Canada and Australia and South Africa for Foreign and Military affairs and devolving local government, which would have meant for the English elite to submit to having the Irish, Canadians and Australians rulers, probably a fate worse than imperial dissolution?) I don’t know what Britain could have done to remain a great power any longer than it did. Although certainly, the rigidities in its political and social structure did not help.

    For an interesting perspective on our long term decline I can recommend Mancur Olson’s book.–wC&dq=Mancur+Olson&printsec=frontcover&source=an&hl=en&ei=sW5xS4GKB5XU8QaCusS5Cw&sa=X&oi=book_result&ct=result&resnum=5&ved=0CBQQ6AEwBA#v=onepage&q=&f=false

    1. aet

      The Dutch did not “forgo luxuries to pay for” anything. Quite the reverse.
      Their mercantile empire fought wars to preserve and increase their luxuries: and for no other reason.

      But sacrifice has long been a Christian meme, eh?
      Very strong in America: but what America needs is NOT more cutbacks, or yet more stringency and sacrifice of their wages & salaries, “to preserve the Empire”: rather the reverse – they need a lot more non-military domestic spending to get their economy moving, and to spread the wealth by increasing employment and wages for all!
      And without needing to fear or destroy some other Nation to keep Americans working.

      Meh. America started to decline as soon as it refused to gear down its WW II military spending after the War.
      But I’m not going to argue about it.

  14. MarcoPolo

    No argument with the basic premise – reckless finance undermines even great empires. Interestingly the Greeks were on to this more than 2000 years ago. But William Hawkins’ understanding of Spanish history is … sorrowful. To avoid the ad hominum filter I’ll say only that he seems ignorant of the divisions within that Hapsburg dynasty. Volumes have been written.  Too bad he appears not to have read any of it.    Suffice it to say the lessons to be learned from Spanish history are more relevant to the EC & EMU than to the US. 

  15. ex-PFC Chuck

    The military reform movement that coalesced around the late USAF Col. John Boyd 30+ years ago has arguing compellingly for decades that too much money and misplaced priorities are going to kill us. See their most recent missive, “America’s Defense Meltdown”

    For a great, if long, read about the decline of the Spanish Empire see “The Count-Duke of Olivares : The Statesman in an Age of Decline,” by J. H. Elliott.

  16. Blurtman

    “Well, our military and intelligence leaders say that the economic crisis is now the biggest threat to America’s national security.”

    If this were true, Goldman Sachs and Wall Street would be under investigation for terrorism.

  17. russell1200

    What a very odd unqualified argument. There are an amazing number of empires out there.

    Just on a guess I would say more empires fall due to interal fighting: often rulership succesionary conflict.

    In fact in pre-modern empires tended to do very well with their military spending so long as they were in an expansionary mode. Its when they ran out of adjacent areas that were able to, or worth conquering, that they started running into problems. The Romans also fall into this category.

    But lets just take some Modern Empires that made it into the 20th century:

    Ottoman: conquered in WW1.
    German: conquered in WW1 and WW2.
    Japanese: conquered in WW2.
    France: conquered in WW2.
    Chinese: Largely conquered by Japan in WW2, but with huge internal conflicts as well.
    Austria-Hungary: conquered (really collapsed) during WW1.
    Russia: virtually conquered before their collapse in WW1.
    Italy: conquered in WW2 (granted it wasn’t much of an empire).
    Dutch: conquered in WW2.
    Belgium: conquered in WW1 and WW2 (again not much of an Empire).

    As noted, not all of these were huge empires, but that leaves only 2 Empires that I can think of that started the 20th century as still in place. The British arguably fit his case of an economic collapse, and the US (he is arguing) may collapse under economic over-reach.

    I would say that empires come and go for a variety of reasons, but that economic collapse is not number one on the list.

  18. EmilianoZ

    I find claims that most empires fell because of financial collapse rather fuzzy. To be convinced I would need to know in each case:

    1) What oligarchy benefited
    2) By what mechanisms this oligarchy benefited

    Start with the Roman empire for instance. What oligarchy enriched itself from “reckless finance”? And how?

  19. Vinny

    The US may very well collapse because of internal pressures from an ever growing impoverished population lacking the security of a home, food, and access to health care and affordable education. This has already occurred, as large segments of America resemble Haiti already. America does not need an outside threat, as the Ministry of Truth has been trying to deceive us into believing – it has already created such a foe out of its own population.

    Electing Obama was a last ditch effort to postpone the full-blown riots and social disintegration that were about to explode across the country. However, what have observed is that the sense of desperation that existed before Obama, has now been further enriched by a sense of betrayal that this new president managed to instill in the vast majority of voters who believed his rhetoric. It appears that instead of delaying the inevitable, this new president is speeding it up. Definitely a wrong move on the behalf of the elites.


  20. scharfy

    The US is a singularly unique empire.

    It has not paid well to bet against the decline of the United States. It has been on its heels more often than not, but manages to survive. 1812, The civil war, Great Depression, WW1&2, Vietnam,Civil Rights, the Cold War, the late 1970’s, and now the Great Credit Collapse… Call it what you will.

    Tocqueville noted this in his classic “Democracy in America”, that is, that we fix our problems. We veer far off path, but are a self correcting nation. You will see this play out more and more over the next 10 years.

    I know, I know, this time its different.

    We are on the ropes, and the citizenry are asleep. But as we awaken from our slumber, and the warm blanket of prosperity is yanked away, we shall not be in a good mood.

    The GOVT is buying time, but that is all. Another massive evolutionary step in our nations history is about to occur, I just feel that it shall be a step forward, when the dust settles.

    1. Vinny

      How did you enjoy your last Sarah Palin rally? Did they again have a translator for words longer than 2 syllables?…lol


  21. scharfy

    Even the slightest pro-US gails draw Sarah Palin snipes? Tough crowd. Ill head back over to my NASCAR blog, leave the heavy mental lifting for the intelligentsia.

  22. reason

    Isn’t the lesson of this story that being the main supplier of currency has a strong “Dutch Disease” component, not so much that military expenditure is unaffordable even for rich countries.

  23. Aigle-Sage

    For another story about the fall of an empire, see or listen to this:

    The most interesting paragraph in there:

    “This third century is also the period of the persecution of the church, and we find that at least some of the emperors must have had a sense of humor because when they passed a regulation that if a Christian was arrested and found guilty of capital punishment, namely believing in Christ, he was to not be executed but offered the option of becoming a decurion.”

    According to the article, a decurion was a tax collection officer.

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