The End of Super Imperialism?

By T. Sabri Öncü (,s an economist based in İstanbul, Turkey. Originally published in the Indian journal the EPW

Summary: With intensifying concerns regarding the soundness and stability of the international monetary and financial system, calls for reforming it have been on the rise. One recent call was made by the Bank of England Governor Mark Carney, in August 2019, in which he suggested a synthetic hegemonic currency to replace the US dollar as the key reserve currency. Whether such calls will lead to an end of the key reserve currency status of the dollar remains to be seen.

Oldrich Vasicek is an old friend. When I started my “quant” career in bonds in January 1994 in Walnut Creek, California, Oldrich was there. A recently graduated PhD in mathematics, I received my first real-life finance education from him.

Vasicek (1977), a statistician by trait, is famous for developing the first theory of term structure of default risk-free interests rates in 1977. But, despite this, he had been unfortunate until lately because his theory allowed for negative nominal interest rates. Many modellers considered this as a flaw because negative nominal interest rates were unimaginable then.

And recently, the entire term structures or in non-academic parlance yield curves of Denmark (on 24 July 2019), Switzerland (on 29 July 2019), Germany (on 5 August 2019) and the Netherlands (on 5 August 2019) went below zero. On 15 August 2019, Finland’s entire yield curve also went below zero, but the next day, the longest maturity rate was above zero. I presumed it would go below zero again and, as expected, it went below zero on 28 August for another day. Belgium and Sweden seem to appear next in line, although which one will win the competition remains uncertain.

Negative Interest Rates

Let us forget about the theories and look at the history of nominal interest rates starting from about 5,000 years ago (who knows, maybe earlier?) when lending for interest started (Hudson 2018). Although negative interest rates had occurred on some rare occasions in the past, such as on some gold deposits during the gold rush of 1848–55 in California as protection costs, the start of the “formal” history of negative interest rates goes back to the 1970s.

Given that Super Imperialism was kicked off in 1971 (Hudson 2003), it does not come as a surprise that the first “formal” negative interest rates had been imposed on bank deposits of foreigners in Switzerland from 1972 to 1978 to discourage capital inflows to ease the appreciation of the Swiss franc. But, what is Super Imperialism and what happened in 1971?

Super Imperialism

Super Imperialism is a term coined by Michael Hudson (1972, 2003) in his celebrated book, Super Imperialism. The Pluto (publisher of the 2003 edition of the book) press release on 25 November 2002 describes the concept as follows:

Past studies of imperialism have focused on how corporations invest in other countries, extracting profits and interest. This phenomenon occurs largely via private sector investors and exporters. But today’s novel form of international financial imperialism occurs among governments themselves, and specifically between the US Government and the central banks of nations running balance-of-payments surpluses.

The larger their surpluses grow, the more dollars they are obliged to put into US Treasury securities. Hence, the book’s title, Super Imperialism.

If you agree with this description, then the kick-off date of Super Imperialism was 15 August 1971, although the transition had taken place over about five years through the monetary crisis of 1968–73 and Super Imperialism formally started in 1973.

On the kick-off day, the then United States (US) President Richard Nixon gave his now-famous speech in which he announced his New Economic Policy in an address to the nation on “The Challenge of a Peacetime Economy.” He said:

We must create more and better jobs; we must stop the rise in the cost of living; we must protect the dollar from the attacks of international money speculators.

Among many policy tools to achieve these goals, he suspended the dollar’s convertibility into gold.

Bretton Woods System

Although there has been much debate on when exactly the US started to challenge the United Kingdom (UK), there is little doubt that the “official” US takeover of the world hegemony from the UK took place in Bretton Woods, New Hampshire at the Bretton Woods Conference from 1 to 22 July 1944.

At this conference, 700 delegates from 44 countries met to establish a new international monetary system in which they would go back to a gold standard following World War II. At the time, the US held about 75% of the world’s gold stock. So, rather than a gold standard, the countries ended up with a dollar standard in which the US would fix the price of gold at $35 per ounce, and the rest of the world would fix their currencies to the dollar, albeit in some adjustable window.

Two important institutions came out of the conference: The International Monetary Fund (IMF) or the Fund, and the International Bank for Reconstruction and Development (IBRD) or the Bank, which soon came to be called the World Bank. The task of the Fund was to assist for the countries to fix their currencies to the dollar by providing short-term loans during temporary balance-of-payment deficits. The task of the Bank, on the other hand, was to provide financial assistance for the reconstruction of the countries devastated by World War II and for others so that they can “develop”, although its purpose has eventually become lending to emerging and developing market countries only.

The US Department of State website states that these institutions were created with the following in mind:1

The lessons taken by US policymakers from the interwar period informed the institutions created at the conference. Officials such as President Franklin D Roosevelt and Secretary of State Cordell Hull were adherents of the Wilsonian belief that free trade not only promoted international prosperity, but also international peace. The experience of the 1930s certainly suggested as much. The policies adopted by governments to combat the Great Depression—high tariff barriers, competitive currency devaluations, discriminatory trading blocs—had contributed to creating an unstable international environment without improving the economic situation. This experience led international leaders to conclude that economic cooperation was the only way to achieve both peace and prosperity, at home and abroad.

So, according to the US Department of State, this conference was more about free trade than an international monetary system. The monetary system was to ensure that high tariff barriers, competitive currency devaluations, discriminatory trading blocs and the like did not occur.

Collapse of the Bretton Woods

While the US had been a debtor country for most of the pre-war period, World War I changed that. The US emerged from World War I as the world’s largest creditor and largest holder of gold, mostly running balance-of-payments surpluses. At the time of the Bretton Woods Conference, this was still the case. And this was the main reason why other countries eventually agreed to hold dollars as the gold equivalent in their central bank reserves. But, there was a problem in this arrangement.

The central banks held the reserve currencies mostly in the form of government bonds and less often, other financial assets of the reserve currency-issuing country, at least, back then. Hence, the US had to pump more dollars into the world financial system by borrowing more from the rest of the world.

I must add that in the US most real assets, especially those the US government deems strategic, are not up for sale to the foreigners. So foreigners do not have many options. What the US Department of State calls free trade on its website means that the US can freely trade whatever it wants. But, the others cannot.

Let me also add that since 1986, the US has been in a perennial balance-of-payments deficit and the world’s largest debtor country. As the US hardly ever pays its Treasury bonds because it keeps them rolling, this means that the US gets others to pay for its foreign expenditures, including its military adventures. In a nutshell, this is what Hudson (1972) defined as Super Imperialism, the seeds of which were planted at the Bretton Woods Conference. Whether the US negotiators knew what they were doing at the time is, of course, open for debate.

The system operated reasonably well until the 1960s as there had been little doubt that the US was fully capable of redeeming these dollars with its enormous gold stock. However, when an attack on the dollar and run on gold pushed the price of gold temporarily up to $40 per ounce in the autumn of 1960, the eyebrows began to raise. Fears that the US was approaching the point at which its debts soon would exceed the value of its gold stock began to spread.

Attacks on the dollar and runs on the gold had continued, and finally, on Thursday, 14 March 1968, a major run on gold on the London Gold Exchange ensued, forcing the US to request the UK to suspend the London Gold Exchange. On Friday, 15 March 1968, the London Gold Exchange was closed temporarily. On Sunday, 17 March 1968 in Washington DC, an informal agreement was reached with the central banks of Belgium, Germany, Italy, the Netherlands and the UK that they would stop converting their dollar reserves into gold. And on Monday, 18 March 1968, the US Congress repealed the requirement for a gold reserve to back the US dollar.

This was actually how the Bretton Woods system ended. What Nixon did on 15 August 1971 was just making it official. Since the US dollar was not backed by gold after 15 August 1971, it was made a floating currency. And by March 1973, all currencies were made floating and from a form of gold standard, the world moved to a form of US Treasury bond standard.

Finally, on 19 October 1976, the then President of the US Gerald Ford signed an act to put in law what was already true as a matter of formality.

Financial Crises

With the abandonment of capital controls after the start of Super Imperialism, capital started to flow across borders freely, and thus began a new era of financial crises. If I list only those crises I have personally experienced since I started my “quant” career in bonds in January 1994, I may run out of space. So rather than giving the full list, let me turn my attention to the last of the crises—the ongoing global financial crisis (GFC) that started in the summer of 2007. I have tried to chronicle the GFC in many articles in EPW and elsewhere, and my EPW readers would recall that I have always argued that the GFC has never ended (see, for example, Öncü 2015b). As my readers would know, I have been waiting for the end of the GFC like Waiting for Godot (Beckett 2011) and although, I am sure Godot will arrive one day, I still do not know when. And since the start of August 2019, I have started waiting for the end of Super Imperialism. I will explain why, but first, let me discuss some of the events of August 2019.

A Volatile Month: August 2019

The month began on Thursday, 1 August with a tweet of President Donald Trump announcing an additional 10% tariff on $300 billion in Chinese imports as of 1 September, and the world stocks and government bond yields started to fall. It must be that Trump is not one of those US policymakers who took lessons from the interwar period in which government policies, such as high tariff barriers, had contributed to creating an unstable international environment without improving the economic situation as the State Department had claimed.

Friday, 2 August was calm. The mayhem began on Monday, 5 August when China allowed its currency, the renminbi to fall to its lowest level against the dollar in more than a decade. The onshore renminbi traded at around 7.05 renminbi per dollar, and the world stocks and government bond yields fell even worse than they did on 1 August. Indeed, 5 August was the day when the entire yield curves of Germany and the Netherlands went below zero. Before further progress, let me go back to the history of the negative interest rates.

Although some ultra-short Japanese interest rates in the derivatives market had entered the negative territory for ultra-short periods in the 1990s, the second phase of the “formal” history of the negative interest rates started about seven months after the GFC reached its climax with the Lehman collapse of 15 September 2008 in Sweden in 2009.

Shortly after the US central bank, the Federal Reserve (Fed) started its first quantitative easing programme and the zero interest rate policy, the central bank of Sweden, the Riksbank, announced on 2 July 2009 that it lowered its repo rate (the rate at which it lends reserves to banks against collateral overnight) to 0.25%, pushing the deposit rate (the interest banks get for depositing reserves with the Riksbank overnight) down to -0.25%. Then in 2010, the European Debt Crisis started in Greece (Öncü 2015a). In response, Switzerland’s central bank, the Swiss National Bank, announced on 3 August 2011 that it was narrowing the target range for the three-month LIBOR from 0.00–0.75% to 0.00–0.25%. This pushed interest rates on the Swiss two-and three-year government bonds into negative territory and the rest is history.

Therefore, the fact that some more interest rates went negative on 5 August 2019 was not that novel. One novelty that occurred on 9 August 2019 that might have gone unnoticed was that Chase Bank, part of the New York-based JP Morgan Chase & Co, made the following announcement:2

Chase made the decision to exit the Canadian credit card market. As part of that exit, all credit card accounts were closed on or before March 2018. A further business decision has been made to forgive all outstanding balances in order to complete the exit.

One takeaway from this is that debt cancellation is not religious fiction or ideal as some think it is (Öncü 2017). If so chosen, it can happen even today, as the Chase Bank demonstrated in Canada. Indeed, negative interest rates also are a form of debt cancellation. You lend someone some money today to get less in the future. According to Hudson, rates will quickly go as negative as 25% and thus erase some of the debt burdens.3 However, I am less optimistic than him.

Then came Wednesday, 14 August. For no obvious reason, the 30 Year US Treasury bond yield dropped to its historical low below 2%. If you looked for a novelty, this was a novelty for sure. What was not novel was that on the same day, the spread between the 10-year and 2-year US Treasury yields went below zero. This spread is another measure of the US yield curve inversion (Öncü 2019). It has happened many times before, but the last time it happened was in the summer of 2007. When this inversion happens, many commentators start screaming, “recession.” Whether such an inversion signals recession or not is immaterial. If the market believes it does, it becomes a self-fulfilling prophecy.

An interesting observation came on 19 August 2019.4 The observation is this:

A 4-sigma event would be expected to happen once or twice in a trading lifetime—according to the most popular VaR-based risk models. We’ve seen 10 of those this month in Treasuries. What we should have learned from the GFC has been all but forgotten. What the market had considered to be impossibilities (or at least highly unlikely…) is quickly becoming the norm.

This may sound too technical. The author essentially is saying that if daily yield changes were distributed normally (assuming 252 trading days a year), the observed jumps in the US Treasury yields in the first half of August 2019 would have had an approximate daily frequency of once every 63 years. No one can claim the normal distribution of daily yield changes. But, if these many jumps happen in about 15 days, it is not normal. The last time something like this happened was in 2008. First, around the Bear Stearns collapse of 14 March 2008, and then, around the Lehman collapse of 15 September 2008.

But, the most important event of August 2019 was Mark Carney’s, the current governor of the Bank of England, speech at the Fed Jackson Hole Symposium on 23 August 2019.

When change comes, it shouldn’t be to swap one currency hegemon for another. Any unipolar system is unsuited to a multi-polar world. We would do well to think through every opportunity, including those presented by new technologies, to create a more balanced and effective system. (excerpt from Carney’s speech)5

Here is a second excerpt:

Even if the initial variants of the idea prove wanting, the concept is intriguing. It is worth considering how an SHC in the IMFS could support better global outcomes, given the scale of the challenges of the current IMFS and the risks in transition to a new hegemonic reserve currency like the Renminbi.6


Carney’s synthetic hegemonic currency (SHC) proposal at the Fed Jackson Hole 2019 Symposium is reminiscent of Keynes’s bancor proposal at the Bretton Woods Conference of 1944 (Keynes 1943):

The proposal is to establish a Currency Union, here designated an International Clearing Union, based on international bank-money, called (let us say) bancor, fixed (but not unalterably) in terms of gold and accepted as the equivalent of gold by the British Commonwealth and the United States and all members of the Union for the purpose of settling international balances.

Of course, neither Carney is Keynes, nor is the Fed Jackson Hole Symposium 2019 the Bretton Woods Conference 1944. Further, Carney is not the first major central bank governor who made such a proposal. Others have also made similar proposals and one of the first ones was Zhou Xiaochuan, the Governor of the People’s Bank of China. Shortly after the Lehman collapse of 15 September 2008, on 23 March 2009 in the Bank of International Settlements (BIS) journal BIS Review, Governor Zhou wrote:7

The desirable goal of reforming the international monetary system, therefore, is to create an international reserve currency that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies.

As Carney said on 23 August 2019 and Zhou appears to have agreed on 23 March 2009, “we need to improve the structure of the current IMFS.” Of course, Carney could not have said the following at the Jackson Hole Symposium, but I can write it here:

Our international monetary and financial system is broken. Indeed, it was this conclusion and the observations I have made in this and other articles that led me to ask the question in the title of this article: Are we approaching the end of Super Imperialism?


6 SHC is the abbreviation for synthetic hegemonic currency, and IMFS is the abbreviation for international monetary and financial system.


Beckett, S (2011): Waiting for Godot, New York: Grove Press; New York.

Hudson, M (1972): Super Imperialism: The Economic Strategy of American Empire, New York: Holt, Rinehart and Winston, New York.

— (2003): Super Imperialism: The Origin and Fundamentals of US World Dominance, London: Pluto Press, London.

— (2018): … and Forgive Them Their Debts: Lending, Foreclosure and Redemption From Bronze Age Finance to the Jubilee Year, New York: ISLET, New York.

Keynes, J M (1943): “Proposals for an International Clearing Union,” White Paper given to British Government in April.

Öncü, T S (2015a): “Greece, Its International Creditors and the Euro,” Economic & Political Weekly, Vol 50, No 7, pp 10–12.

— (2015b): “When Will the Next Financial Crisis Start?” Economic & Political Weekly, Vol 50, No 24, pp 10–12.

— (2017): “Bad Bank Proposal for India,” Economic & Political Weekly, Vol 52, No 10, pp 12–15.

— (2019): “Thus Spoke the Bond Market,” Economic & Political Weekly, Vol 54, No 6, pp 10–12.

Vasicek, O (1977): “An Equilibrium Characterization of the Term Structure,” Journal of Finance, Vol 5, No 2, pp 177–88.

Print Friendly, PDF & Email
This entry was posted in Banking industry, Federal Reserve, Globalization, Guest Post, Payment system, Technology and innovation on by .

About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.


  1. K Lee

    Please do a story on this!

    Why is Wall St receiving so much public money? “The entire GDP for the United States last year was $20.5 trillion. The four banks mentioned above have 27 percent of the entire U.S. GDP in deposits. How could it be possible that those four banks can’t come up with $100 billion in repo loans per day and thus are forcing the Fed to once again become the lender of last resort.

    Congress needs to call hearings on this matter immediately, calling as witnesses the President of the New York Fed and the CEOs of each of the mega banks holding these trillions in deposits.”

    “Socialism” for Wall St. Unnecessary!

    1. PlutoniumKun

      Yves addressed this btl yesterday I think – in short, while it represents an embarrassment for the Feds, WoP have exaggerated the impact, its more of a technical issue, the volume of money involved is misleading. In other words, its not as big a deal as it seems on first sight.

    2. Louis Fyne

      there needs to be a deposit and regional cap on banks, break up JPM Chase, Citi, WFC, BofA like 1984 ‘Ma Bell.’ bring back Glass-Steagall and no bank can have more than (a still generous) $500 billion in assets.

      But Chuck Schumer and Nancy Pelosi would never vote for that. total regulatory capture in DC whether under Clinton, Bush, Obama or Trump.

    3. Susan the other`

      Maybe they are being pre-disastered so they can pay 25% negative rates until debt is wiped off their books and they can keep on functioning as usual. Whatever that is.

  2. Steve H.

    Correct me if I’m wrong, but doesn’t MMT specifically state that currencies are driven by taxes, payable only in that currency?

    Who enforces the use of the SHC? Who gets to decide who gets sanctioned out of its use? When’s a credit card going to pay me for using it?

    I’m kinda feelin’ the hegemon p’ing its pants that it’s stuck with negative interest rates while the New Development Bank is firing up its engines. But I’m a biased sample.

    1. Susan the other`

      And what is the difference between a “resilient” system of exchange (not hampered by credit burdens) where payments flow easily across borders and the unregulated flow of capital? Won’t all these synthetic transactions cause as much disruption as before?

    2. DHG

      There are tons of credit cards that pay you to use them, they are called rewards and sign up bonuses. If a card has 0 rewards or SUBs I dont get it.

  3. rob

    so, the world monetary systems and markets that were created after the creation of our federal reserve, and the establishment of world technocratic think tanks like the council on foreign relations and royal institute of international affairs as well as the other organizations created at the same time by the same people in european nations and pacific rim countries, all “connected” by “tradition” and in-breeding… have been bleeding the world for the exploitation of it’s resources and peoples… for over a hundred years…. in the name of profit to the immortal corporate “persons” out there… since the days of the initial “reboot” of society and colonial dominance after WWI; is coming to an end?
    I doubt it….
    All the crashes and bubbles and busts….. are part of a musical chairs style game where the rich get richer… and the people are the fodder….
    When we are the fuel… people are the fodder from the cradle to the grave.. to fuel this beast….. If pickin’s are slim in any other sense…. we will just have to suffer more…
    But this system will never “let anything go”… they are winning… they own our lives and our posterity…. they make money out of nothing and use it to enrich themselves and add the debt to OUR tally. thus enriching themselves further..

    Now what if we really put a hitch in their plans and did a truly amazing thing like monetary reform in this country. A parallel move to the jugular of this system.
    Pass a reform like was proposed back in the thirties and as recently as 2011/2012 in the 112th congress HR 2990 “the need act”
    If this country took the creation of money power from the banks and the speculator class, and gave it back to the people(i.e. the us congress) where it should have been for the last hundred years instead.
    We could try something that is not in the “establishment” playbook… of market forces and corporate profit being the driving force of everything under the sun…. and the US could be the first in the world to lead the way in showing the world a new paradigm of a monetary system. We could create the money we need to “pay for” programs that help humanity and the environment, with out creating the debt that fuels this beast of the international criminal business class.
    Money is just a thing we made up. the world is not money…. but with the debt we all owe.. we supposedly don’t have the “right” to a sane world till we can pay for it”, which we will never do with all the debt out there making markets and corporations seem like they own everything.

    Now how to overcome the last 100 years of propaganda that has passed as financial education , is the toughest nut to crack.
    All the injustice the world has seen because of these “people”… we are so used to being “whats for dinner”… we don’t even realize we COULD demand more…. and how we might go about it.
    And as bad as everything has become… leaves no real reason to cling to this corrupt system.. and we really ought to be engaging in real debate over our monetary system… with an eye towards the world situation in the future.

    1. Summer

      “We could try something that is not in the “establishment” playbook… of market forces and corporate profit being the driving force of everything under the sun…”

      That would include, in a major way, people changing the way they think about work and jobs. None of it will work as long as the unemployed are vilified.
      May sound too abstract to people with Calvinist and Puritanical belief systems (even if they don’t identify as religious), but it is key.

      1. Susan the other`

        Definition please Mr. Carney: what is a synthetic hegemon? I just hope it is not somebody like Soros or Summers who prey on poverty and debt. If a synthetic hegemonic currency replaces a sovereign currency it also replaces the mandate for sovereignty. So does Mr. Carney want the kind of chaos and deprivation this would create? What a bankers’ banker he is! It would be much healthier to have all currencies be sovereign by definition and allowed to roll up their debt as long as their spending achieved social and environmental goals. Those goals do not burden any country or the planet with pollution and poverty and hence they are prosperity creators – the original prosperity… like capitalism once tried to do without the benefit of hindsight. Now we have it. I hope the banksters can catch up; sounds like Carney is living in the 1800s.

        1. Susan the other`

          Ah ha moment: the Synthetic Hegemony is Sovereignty. (Interesting that Carney avoids using any words that indicate this.) That’s the only way it can work – it is a synthesis of all sovereign organizations. That eliminates privateers and speculators. A sovereign organization is a nation. Nothing less. I would say that a consortium of privateers and speculators that does not have a taxing authority cannot meet the definition of sovereignty.) But creating a “sovereign hegemony” with its own multipolar currency is an interesting idea. Requires more bookkeeping than we have now because deficits and debt are such easy but blunt and austere instruments for balancing wealth. Instead, a balance of sovereign hegemons each with a national interest, creates something like a mutual fund for exchange finance. I submit that there have to be strict requirements for joining this organization based on the health of the nation – it has to be socially prosperous and environmentally clean. Those expenditures are not deficits – that is the hidden oxymoron which could lead to exploitation and crushing austerity imposed by a multi-polar financial hegemony. Those expenditures are prosperity creation. Now, I’d betcha that Carney doesn’t like this definition at all – just my gut instinct.

          1. Tony Wright

            But Susan, is not the Euro a local synthetic sovereign hegemony for the EU27? Many financial analysts consider that this common sovereign currency is the EU’s Achhilles Heel , more than even the various other often discussed European economic hazards (debt, demography, refugees etc) .
            The EU is also an example of how the “strict requirements for joining this organisation” can be manipulated for political reasons – remember what happened (and is still happening with Greece). Italy, “too big to fail?” is now in a similar parlous economic state.
            And what would happen to countries that were not socially prosperous (many) and environmentally clean (most of them)?
            So it might be a bit too much like cat herding to work effectively in my opinion.
            But something has to change, that is for sure.

      2. xkeyscored

        That would include, in a major way, people changing the way they think about work and jobs.
        Try telling Bangladeshi whores and garment workers that. They know full well that their jobs suck. It’s work and production that need to change, not how we think about them.

  4. xkeyscored

    All this stuff about super-imperialism is fine and dandy, and no doubt there’s a lot of truth in it.
    But doesn’t US military might have any role in it? OK, this article mentions that “the US gets others to pay for its foreign expenditures, including its military adventures.” But isn’t military might behind the USA’s financial might? I thought, for example, the Saudis were informed during the 1970s oil crises that abandoning the petrodollar would be cause for war, or something like that.
    To put it another way, doesn’t imperialism have a huge military as well as financial component?
    That said, with the US military finding itself increasingly incapable of anything but spreading death, chaos, and instability, maybe we are approaching the end of Super Imperialism whichever way you look at it. Let’s see how China fares as it takes up the reins.

    1. Mattski

      Yes, even a nebbish like Tom Friedman gets that. (I understand that the Canadians have a missile system that’s CALLED the Velvet Glove.) This isn’t real granular analysis, though. If M. Oncu were living it at that level he probably wouldn’t be writing it–or, better said, his regular audiences wouldn’t be reading it.

      I see the significance of this, its publication here, more as evidence that the crisis/es rise to a level disruptive enough–or maybe that the hegemon in question is weakened enough–that serious change can be discussed at the very highest levels. It’s the artifact of a certain KIND of thinking. But I agree with rob and K. Lee above that mostly this likely means more real pain for those who do not live in Commanding Heights and more angsty angst and head-scratching high above, from whence the dandruff and bad air flows.

      Hudson can be commended for thinking that he can glimpse positive outcomes almost HAVING, at some point, to flow from the contradictions. I make this mistake all the time. It’s born partly of my own very limited privilege, my particular psychopathology, and the immense positivity of the teachers I was so lucky to have, especially at the University of Michigan in the late 70s. My wife and daughter have learned, pretty casually, to bat it to the floor and kill it when it gets out of hand. As Keynes observed, no one gets out alive.

    2. Olga

      Yes, it is (military might behind finance), though the question for today is, how much longer will it remain ‘mighty,’ given that miic is mostly just a way for some corporations to enrich themselves as opposed to maintaining a strictly defence/offence force.

    3. John k

      Yes. We can bomb… little ones and big ones, on weak opponents. That’s about it, militarily. We do chaos.
      Financial imperialism, too… convincing weak countries they have to borrow from us so they can ‘afford’ to buy their own currency to pay their own workers to do infra… granted, steel etc imports are another matter.
      IMO houthis attack on saudi is a game changer. Now everybody can bomb! Progress.

      1. Petter

        Just a thought here – it hasn’t been all chaos. It’s the US Navy that since the end of WWII has guaranteed freedom of the seas, freedom of navigation – guaranteeing the safety of the sea lanes.
        Granted, there are suggestions that the current US president (his name slips he now) may be tinkering with this.

        1. rob

          oh yeah, tell that to the iranians.

          I don’t think the navy has actually been a reason for anything. They are just a consideration. There is no…. “service” to a greater mankind. IMO

          1. Petter

            The Iranians – right. That’s what I was referring to by tinkering. No doubt, the dominance of the US Navy was set up to serve US interests, although it wouldn’t surprise me if the arrangers believed they were serving mankind too. A win win. Through a glass darkly.

        2. JTMcPhee

          Like by enforcing embargos (acts of war) and seizing tankers and freighters, and doing such a great job of addressing the piracy along the sorry coast of Somalia and such places? By facilitating and enforcing imperial adventures in Central America and South America and now Africa, contributing to the overthrow of governments headed by people who dare to try to take back from the privileged and give back to the disenfranchised and impoverished mopes? And by being such a great source of liquidity in massive corruption and waste in all its operations? As the author points out in relation to Super Imperialism, “freedom of navigation,” as in “free flow of capital” only means “freedom” for US corporations and “interests,” (supply) chains for the rest.

          To John K: An observation by Frank Herbert, from “Dune” — “Who can destroy a thing controls a thing.” The veto of last resort. The Navy and the rest of the Imperium have a diminishing monopoly on the ability to destroy, and there seems to be an increasing number of people who really, really want to see their lives and homes and political economies become “free” from the coercions of capital and imperium. Of course local warlords and dictators and home-grown “capitalists” will still be doing their best to maintain their status,, against the best that the mopery can do…

        3. xkeyscored

          What have you been smoking?
          It was the US Navy that blockaded Cuba, and damned near started WWIII.
          A US navy ship that got shot at by North Vietnam in the Gulf of Tonkin, then didn’t, but in the meantime started the full-on war there nonetheless.
          And the CIA that helped mine Nicaraguan harbours – all part of a noble humanitarian effort to guarantee the freedom and safety of sea lanes, no doubt.
          (Apologies if this comment appears twice; I’m having trouble with my internet connection and NC’s moderation purgatory.)

    4. Tomonthebeach

      I think xkeyscored is correct to point out that the US military (MIC) is in the error term of this global equation.

      One might argue that maintaining 800 US bases in 80 foreign countries (Danny Sjursen’s final US History Chapter in Truthdig this week) those bases likely sustain the illusion that there is never a need to panic – the US is always there to prevent global chaos because it’s rigged system (e.g. Baker) has a stake in stability. The fact that the cost of those bases is (unbeknown to Trump) an international tax of sorts extracted from our rigged monetary system (yes, Donny, they are contributing after all), it does seem, especially in light of Öncü’s and Hudson’s points, that those countries are getting an indirect benefit – the global monetary order DOD helps enforce.

      Sadly, our military adventures have increased monetary chaos; not decreased it. So it looks like the US version of Imperial Rome is increasingly vulnerable to losing the dollar’s economic leverage that conveniently US presidents have employed to impose their will on unwilling countries like N. Korea, Venezuela, and Iran.

  5. Summer

    “I must add that in the US most real assets, especially those the US government deems strategic, are not up for sale to the foreigners. So foreigners do not have many options. What the US Department of State calls free trade on its website means that the US can freely trade whatever it wants. But, the others cannot…”

    That’s worth an article of its own. What exactly does the govt deem strategic and how has that fluctuated over time? How does it vary with what citizens deem strategic and important?
    Has that ship already sailed? Or is it just in the dock and christened?

      1. Sabri Öncü

        You cannot buy Apple or MicroSoft, for example. You can buy some of their shares, but a Chinese sovereign wealth fund cannot buy enough shares to control Apple or MicroSoft.

        1. Tyronius

          ‘He who can copy the software controls a thing’, apologies to Frank Herbert.

          Why buy the company when you can simply steal the intellectual property and put it to work for yourself?

          1. Sabri Öncü

            Sure. However, you cannot resell it publicly under the current laws and regulations. Intellectual property should be abolished, but, currently, it exists.

  6. tegnost

    Am I wrong in thinking that the impetus for a global currency (probably some kind of block chain?) is to prevent the crisis to the elites that a switch to the renminbi would engender? If that’s true, is it because the productive assets have been hoovered up and now all the productive assets are somewhere else, i.e. in china, and now china can turn the tide. Maybe sheds some light on the quest for a TPP…?

  7. Summer

    I read some of this again. And I wouldn’t call any of this the “end of super imperialism.”
    These accounts are describing a form of “super-duper imperialism” to come. One that is further removed from representative accountability for spending at a national level.
    The monetary system doesn’t have a mind of its own, moving by natural forces.
    The people in power with the same connections are still in place.

  8. Olga

    Thanks for posting this; will definitely chew over it again – in slow motion.
    In fact, it seems to me that details matter less than the fact that we can have a conversation about how the economy works. Providing a platform to educate us about the ins and outs of the economy and finance is, in my view, one of the most important functions NC fulfills. It dawned on me in 2008 (a bit late, I admit) that the only thing that matters is for a person to understand (to the extent possible) the economic forces that drive our world. Everything else is pretty much just noise.

    1. Tony Wright

      Sorry, I disagree there. In my view the only thing that matters is for a person to understand the ECOLOGICAL forces that drive the world. Trouble is, most people ( including the vast majority of decision makers) are woefully and culpably ignorant of ecology.
      Hence the polluted, overpopulated mess we humans have made of this planet, resulting in the (ongoing ) sixth great extinction since the big bang. All our own work.

  9. Tom Pfotzer

    I’m trying to set out, in a simplistic form, the current global currency, trade and production facts, and then ask the question “what aspects, if any, of all this should I care about?”.

    Let’s start with what I consider to be “the key facts” of global currency, trade, and production:

    a. Nations trade, and trade needs stable reference values (stable currency A to currency B valuations). That was what Bretton Woods and its successors have done since the handoff from UK to US in 1944.

    b. Trade grew massively post-WWII. Therefore the pool of “reference currency” had to grow, and it did in the form of dollar-denominated bonds. T-bills and the like. Now that stock of “money” is massive, and there are derivatives (bets on its movement) that are much more massive. The size of the debt and the bets on it are now threateningly large.

    c. The big trading blocks have their own inter-regional “reserve currency”. Japan, EU, China are the big ones, and of course the US’s dollar. Each of these “trading currencies” are being manipulated to improve competitive position of one block .vs. the others, and that’s called “competitive devaluation”

    d. The trading blocks are all creating debt (expanding money supply) and throwing it at anything that moves in order to stimulate within-block demand, and goose their internal GDPs. Japan led the way as it needed to compensate for loss of market-share to China, but the Japanese central banks’ methods of forcing savers to spend have been copied the world over.

    e. The locus of econ activity is shifting again. First it was Europe/England-to-US, now US-to-Asia. Asia is where the growth will be in the next few decades. The West bet that it could get control of that growth via exporting tech/capital into China. That bet has largely failed, hence the trade war. The takeaway is that West isn’t in control of growth any longer.

    f. Automation has steadily increased its share of the “factors of production” by progressively eliminating labor from the production equation. The rate of substitution is still accelerating. The role of capital in production is increasing, and the concentration of capital’s effects are increasing (a few companies / enterprises own all production of a class of good). This – along with globalized labor arbitrage – are the primary factors in declining real wages and hence reduced demand in the West.

    ===== Now, I’d like to ask NC folk a few questions:

    Q1: So why do we care about negative interest rates? Aren’t they just an incremental step toward further demand-stim and competitive devaluation? So what if they crossed the zero-bound, it’s been trending in that direction for decades. We’ve been throwing debt-money at stupid ideas at a dizzying rate for years. We don’t care what we’re buying, so long as we’re generating econ activity within-block. What’s the big deal?

    Q2: Why do we care if we denominate trade in dollars, Euros, or whatever? So long as the currencies of the txn stay relatively stable for the duration of the order-payment cycle, who cares which currencies we use?

    Q2a: So if people don’t use the USD for the trade, and maybe hold less (a lot less) dollars, what impact does that have on the rest of the world? Will trade stop or reduce?

    Q2b: What impact does that have on the US household (wage impact, specifically). Keep in mind that what we can’t buy from rest-of-world, we can make here with only a few exceptions.

    Q2c: Is the impact going to be on these few who hold massive quanties of dollar-denominated assets or are attempting to control key production capacities (the so-called “rent-seekers”) or is the impact going to be on the average household?

    1. xkeyscored

      re Q2 and Q2a:
      I think if people stop using the US dollar, the US’ll have to find another way to fund its military, which, if you ask me, is what underpins this whole hall of mirrors Ponzi scam whereby the world buys Treasury Bonds knowing the US will never pay its debt.
      What’s more, US sanctions will have much less effect if countries are regularly trading in other currencies.

      1. John k

        The us will always pay its dollar debts. The us will never run out of the dollars it creates. The foreigner knows this, and has no fear he will not be paid in full, including interest.
        The foreigner, having been paid for his interest-bearing treasury and now holding dollars, will be able to purchase a variety of products from the us. Including hogs, wheat, cars, real estate, most securities, and so on, of course at the then prevailing price, and, if he chooses, export any goods to his home country, and all with no threat of an export duty.
        What’s the problem?

        Some day foreign governments will tire of holding treasuries, such as when they stop exporting more than they import and lose the need to hold foreign paper. If at that time foreign individual savers trust their own currencies as much or more than they trust the dollar, meaning they too will stop saving, or accumulating, dollars, then the us will stop importing more goods than they export.
        Meanwhile China has currency export controls, so the ren will not soon be a reserve currency. Germany and Japan remain convinced they are best served by exporting goods and importing paper… and perhaps, for them, with rapidly ageing populations, they need to build up credits for future imports.
        Anyway, no change in balance of trade is in sight regardless of trump tariffs. Recession is another matter entirely… It feels a lot like September 2007.

        1. lordkoos

          Perhaps I don’t understand, but OK, the US repays its debts, but since the value of the dollar continues to shrink in real terms, then what?

          1. Tom Pfotzer

            I don’t agree that “the U.S. repays its debts”.

            I think a more accurate statement might be “the U.S. rolls over its debts with newer and larger debts that pay less interest”.

            And it’s not just the U.S.; it’s all the world’s central banks that are playing this game. They are re-financing at a lower rate.

            Here in the U.S., we must absolutely re-fi at a lower rate, or we won’t be able to pay the interest on …. $1T of new debt per annum.

            Foreign purchase of U.S. debt peaked few years back, and is now declining. Most new U.S. debt is being purchased by … US nationals.

            I wonder if this isn’t the weak-link in the deficit spending plan…e.g. the willingness and capacity of Japan’s or the US’s senior citizens to keep buying Federal debt instruments.

            Wonder how much longer that’s going to be possible.

        2. xkeyscored

          The us will always pay its dollar debts. The us will never run out of the dollars it creates. The foreigner knows this, and has no fear he will not be paid in full, including interest.
          The US will always pay its debts, but it will never pay its debt.
          The foreigner knows this, but, so long as confidence in the US currency and military continues, doesn’t care.
          When the world loses confidence in having its debt repaid in any meaningful way, it’s down to the military to maintain US hegemony. And who still has confidence in them for anything useful?

    2. JTMcPhee

      “Trade” and its concomitant “growth” are the cancers in our world’s body. Trade means combustion (I disinclude financial shenanigans that move at the speed of light and all that, but note that blockchain involves a whole lot of combustion-based electricity-operated computation.) Filth-spewing ships moving stuff (much or most of it just junk with negative environmental value) across oceans, jets spewing carbon and water vapor in the upper atmosphere to move elites and their stuff from one place to another.

      I’m sure my understanding on Russia’s situation is far from complete, but I understand they are close to autarchy, able to provide internally most of what they need. That’s likely to become the preferred and then mandatory state of things as the current schema of combustion-based consumption dies.

      It’s an article of faith, based on long propagandization of the populace, that “trade” is good — what is good about the “trade” in weapons, the shipping of single-use plastics from here to there, the opportunities for free booting among the financial elites that wrap these big transactions in in rent and fraud? How does the current state of “trade” or the “model” it supposedly was built on contribute to “peace and prosperity,” as opposed to looting by the few?

      1. xkeyscored

        Few countries are in the position of Russia or the USA, able to provide internally most of what they need. At least if they want to join the twentieth century, never mind the twenty-first.
        Democratic Kampuchea, or the Khmer Rouge, had a stab at autarky. They couldn’t really do it – had to export stuff (mainly rice to China) in order to import what they couldn’t produce, and it didn’t look like they were going anywhere beyond an agrarian economy before they were ousted.
        Which is not to say that all trade is good, any more than all production is good. Far from it.

  10. Wukchumni

    The situation is a complete flip-flop from Bretton Woods.

    The Europeans (in particular) made a run on our supplies of all that glitters and wanted to exchange their greenbacks for the real thing.

    Now, nobody really wants any other country’s money, negative interest rates and all, like so much Kryptonite.

      1. Tom Pfotzer

        Yes. This is the part that is so blindingly missing from the discussion. Debt itself isn’t necessarily bad. It’s bad when you take on debt to buy cigarettes (figuratively) and might be genius if you take on debt to acquire new production capacity.

        We are spending all this seed corn on “stupid”. Why don’t we have some national contest for “best use of all this debt”, and see what comes of it?

  11. Laudyms

    Traditionally Imperialists cannibalized the rest of the world. Today they are turning to eating their own.

  12. Tomonthebeach

    My take on this magnificent article is that many countries are fed up with US mismanagement of the USD. Some surely abhor that the US uses its dollar to impose sanctions on sovereign countries with which it disagrees or countries whose policies are messing with US multinat corporate profits. Some might think that all their woes are attributable to the USD and the rigged system that it enables. I think that they are justified, but only to a point.

    Such a new global currency might ease the EU’s economic stagnation dilemma caused by un-united states which have ceded their sovereign currencies to enhance international trade but in doing so did not cede sovereign control over state budgets as in the USA. Thus, EU countries have found themselves drowning in debts and strangled by externally-imposed austerity for which they cannot print money – only foment disunity.

    It is perhaps simple-minded to speculate, but it seems that a global currency might risk spreading the EU dilemma to the global market – the consequences might be far worse than 2007 or whatever new catastrophe Trump might unleash on the world tomorrow.

  13. notabanktoadie

    Many modellers considered this as a flaw because negative nominal interest rates were unimaginable then. T. Sabri Öncü

    But obvious in hindsight since: The MOST the inherently risk-free debt of monetary sovereigns should return is ZERO percent. Otherwise we have welfare proportional to account balance. Subtract overhead costs and the return is NEGATIVE.

    But in return for giving up welfare proportional to account balance and other reforms, citizens may instead have an equal Citizen’s Dividend to replace all fiat creation beyond that created by deficit spending for the general welfare.

    The explicit purpose of a Citizen’s Dividend would be to counter price deflation, so the more price deflation to counter, the larger the Citizen’s Dividend can be.

    Then please note that de-privileging the banks, another necessary reform, would, by itself, create a lot of price deflation to counter as purely private banks with purely voluntary depositors would not able to safely create new deposits on the scale needed to replace existing deposits as they are repaid.

    Also eliminating boondoggles such as excessive military spending would also be deflationary and thus allow a larger Citizen’s Dividend (and/or greater deficit spending in other areas).

    1. notabanktoadie


      The sale of private* Central Bank assets at market yields and/or inherently risk-free sovereign debt at negative yields would create another source of deflation to counter with a Citizen’s Dividend.

      *e.g. Mortgage Backed Securities, e.g. gold.

  14. Wow

    Touches on, without going into, the whole Eurodollar charade. THE best explanation of which I have come across is the crystal clear Jeff Snider on the excellent Macro Voices Podcast (Eurodollar University series). Absolute must listen series. PS re previous US LNG/sanctions post, whilst energy cost is a key component in everything, the Russian-EU sanctions are IMHO about the $ and conjuring false demand for $’s going forward, essential to save the empire as ROW dedollarises. About flow volumes (hence “terrorism”/wars always in hydrocarbon producing regions) and more importantly the pricing currency. World is moving away from the forced use of $ for energy pricing-payment because of the mega debasement-debt of $ regime

  15. Acacia

    Many claim that a return to the gold standard would be a big step towards repairing the broken IMFS. I wonder what Mr. Öncü thinks about this?

    My recollection is that Polanyi argued the gold standard was in effect the brainchild of market liberals:

    The gold standard was merely an attempt to extend the domestic market system to the international field; the balance-of-power system was a superstructure erected upon and, partly, worked through the gold standard; the liberal state was itself a creation of the self-regulating market.

    On his account, though, the gold standard posed significant stress on national economies. Polanyi saw tariff wars, protectionism, and the accelerated imperialism of the later nineteenth century as consequences of these stresses.

    Has the situation fundamentally changed today? Is a return to the gold standard possible, desirable, or do the invariants of Polanyi’s analysis stand?

    1. Yves Smith

      The gold standard is not a good idea because it is deflationary. On top of that, it doesn’t even have its supposedly desirable feature of preserving the value of currencies because countries cheated regularly and depreciate the value of their currency in gold terms.

Comments are closed.