The Brain Of The U.S. Overclass Works Sloooooooooooowwwwwwwwwwly

In 1992, when it was first becoming clear the U.S. was running large, permanent trade deficits, a book came out by William Greider called Who Will Tell the People. In it Greider quoted George Soros saying this about the American Empire: "There are many examples in history where military power was sustained by exacting tributes, but there is no precedent for maintaining military hegemony on borrowed money."

Ten years later, in the summer of 2002, I was struck by the way the U.S. foreign debt was still growing explosively, yet the Bush administration was apparently starting out on a new spree of imperial aggrandizement. I assumed this would sooner or later lead us to a situation like that of England during the Suez crisis in 1956. (Like America today, the British had been running their empire with borrowed money—borrowed mostly from us. So when we decided they had to stop attacking Egypt, they were forced to give up immediately.)

I mentioned this to Greider, who unsurprisingly had been thinking along the same lines. And he wrote a column about it in September, 2002:

The imperial ambitions of the Bush Administration, post-9/11, are founded on quicksand and are eventually sure to founder, but for fundamental reasons not currently under discussion...

The US financial position is rapidly deteriorating, due mainly to America's persistent and growing trade deficit...

Elite opinion, after years of offering various faulty explanations for the persistent trade deficits, has now decided they do not matter...

British power was fundamentally eclipsed in 1914, but the United States provided the financial nurture to keep it upright, as a kind of dummy leader in world affairs, until after World War II. Washington decisively pulled the plug in 1956, when Britain (along with France and Israel) invaded Egypt to capture the nationalized Suez Canal. It was the last gasp of British colonialism, and Washington disapproved. By withholding an IMF loan to London, the United States crashed the pound, forced Britain to withdraw from war and its prime minister to resign in disgrace. The Brits were finally relieved of their delusions.

Now, a mere six years later, the Council on Foreign Relations has finally noticed this may be a problem. A new report they've published called "Sovereign Wealth and Sovereign Power" says exactly the same thing:

The lesson of Suez for the United States today is clear: political might is often linked to financial might, and a debtor’s capacity to project military power hinges on the support of its creditors...[I]n some ways the United States’ current financial position is more precarious than Britain’s position in the 1950s...The United States’ main sources of financing are not allies. Without financing from China, Russia, and the Gulf states, the dollar would fall sharply, U.S. interest rates would rise, and the U.S. government would find it far more difficult to sustain its global role at an acceptable domestic cost.

This is notable because the CFR is the mind-crushingly dull heart of the U.S. establishment. They're still not quite sure which way rain falls. (Henry has contributed a terribly convincing piece to Foreign Affairs about how it falls up, although he says he may now need to reexamine the data.)

So if the news has reached even them that the building is on fire, we can be certain the entire structure is about to collapse.

—Jonathan Schwarz