The Sun Never Sets on the American Empire
In America there has always been the perception that there exists a mandate of national success. We adhered to a policy of expanding at all costs in our early stages, and of maintaining order at all costs when we grew. We've matured as an economy and at one point consistently reported far and away the largest yearly GDP of any nation. Many seem to think that the day of American hegemony will never end, but I would like to kindly defer to history.
What causes empires to decline? There are just as many ways that cause them to fall as there are reasons why they became empires in the first place.
China was able to innovate and flourish as long as its own society allowed. If it could have overcome its own complacency and proceeded on its path of a rapid technological rise it could have seen a brighter future leading into the second millennia. Agricultural gains saw a population explosion but their society favored stability and the growth of the government. There was little perceived reward in trying new things, and the best and the brightest were funneled into the bureaucracy. This fact in and of itself stifled any chance at a vibrant private sector, and would lead to the dearth of technological innovation they would experience for centuries. It is this fact, not outside invaders or the revolts of the peasant class, that constricted the rise of the Chinese empire as a stable empire spanning the millennia.
Spain and Portugal grew rich off of their New World gold and silver and became complacent bystanders to their own falls. They contributed little of value else wise and were unable to suppress the rise of their competitors. Having only bothered to consume they forgot that there did not exist an unlimited amount of civilizations to ransack in an unlimited amount of undiscovered lands. Failing to see this fact they did not bother to invest in anything that would return them real value over time, and instead saw their deficit of influence and wealth grow with no way to stem the losses. The Spanish fleet not being defeated would have been irrelevant, because that would only have prolonged the course they were already on.
The British (and all other maritime and colonial powers during Pax Britannica) relied on inflows from their servant nations to fund their opulence. Like others before them they worked hard to convince the people they conquered that their culture and wisdom was superior. They had to enforce the idea that there was no reason to not be happy to be a part of a powerful and historically unique empire, and that making interim goods that were shipped off and turned into finished goods was a useful and helpful endeavor. Never mind the fact that basic economics ensured that they saw little of the benefits of such trade agreements, because if anyone noticed there was always the helpful and ever-present British navy to correct anyone on those facts. Britain only recently realized that it would take a lot of bloodshed to maintain their empire, and relinquished control of their sovereign empire over a rather long period of time.
The United States of America seemed to have become an invincible force after the end of the Cold War, with no major power rivaling us economically or militarily. Agricultural advances allowed crop yields and output to grow at a fast enough paces to feed the world. We once manufactured products that people around the world coveted. Our consumer goods were the envy of the world, and people clamored to purchase them. Technological advances allowed us to boost productivity, and uses of patents and the defense of them ensured that innovators were coddled and rewarded. Consumption grew, as did our appetite for borrowing. Leaders of industry realized that we could produce the things we sold in other countries at a lower cost to them, and did so at an increasing rate. As economies of the world opened up we saw this as a golden opportunity to shift the burden of production overseas. We continued to tailor our focus on the consumer. Our standard of living rose, and we sought to increase our life spans and increase our enjoyment of life through medical advancements and focus on products destined for the hands of consumers in America.
Soon we discovered that we were not actually producing much of anything, yet were the largest economy in the world. We recognized the inherent danger in this. Economies of scale only work when the underlying economy is producing something of worth. So to fund our purchases we had to become the largest money changer in the history of the world. Nations purchased our debt on the flawed logic that our nation is too big to fail. Trade deficits have been ignored for decades and there have been no real attempts to remedy that problem. Our economy has grown solely because our country's consumers continued to consume at an increasing pace, and the irony is that the consumers were never really able to pay for any of it. To see no growth was unacceptable, and so a plan had to be concocted that we will be unable to back out of. We had to convince the world that our economy would never stop growing, and that no level of debt was too high for us to pay off. We had to convince the world that we could somehow be the large cap company that never stopped growing at a previously set rate, that we would always be able to pay dividends, never mind the fact that our payout ratio will flood into the double digits.
We tried to sell the idea that technology would explode exponentially, resulting in a bubble that we never recovered from. We tried again to convince the world that we were worth enough to warrant our spending. We decided that if people would not invest in the prospect of what may come of our future genius, perhaps they would invest in what we had presently. And so we took our largest asset, housing, and embarked upon the great asset bubble of the twenty-first century. We had to convince everyone that an asset with no real worth other than the ability to shelter a family could appreciate as an investment into infinity. We succeeded for years in this fashion. We convinced ourselves and the world that prices would never fall, and that any investment in housing and related securities at any amount was worthwhile. The problem was that something that returns nothing and holds no worth other than the promise of a higher future price is not really an investment at all. And yet we became caught up in our own fantasies. Those who were not able buy, bought. Those were who not able to lend, lent. Those who objected had their voices stifled. There remained few whose interests were to not see asset prices inflate. Many stood to gain from the further bankrupting of our nation, and none left to protect our future interests as a stable and continued presence in the world.
There are those who will wonder if Keynesian economics can save us. There are those that say that our best policymakers and corporate minds have a vested interest in seeing us through this depression. They forget that Keynesian economics implies that bubbles must be avoided through policies ensuring that the economy is on stable ground. What is not realized is that we have been in a bear of real growth for decades. The people of this nation have seen double digit inflation and no real earnings growth because we as a nation have not been productive. A nation’s people cannot continue to consume when a small fraction actually produces. We are attempting to fix this problem in the wrong way. We are simply slowing the descent of asset prices by using stopgap policies of creating money that cannot be paid back at any point in the future.
No empire has ever improved their situation by simply staying the course. Rome could never hope to overcome its stagnation by continuing to lose battles on its fringes. China could never hope to grow as a local power by continuing to focus on its corrupt bureaucracy. Spain and Portugal could never hope to evolve into an industrialized producer society by continuing to have net outflows of precious metals. Britain could never hope to win over its colonies by continuing to ignore their cries for equity and equality. America can never hope to repay its debts by continuing to issue new promises of debts.
The sun is not always shining on the American empire. Our invincible armada cannot weather this typhoon unless we change direction. We had a chance to create something meaningful with our intellectual capital and we missed it. The forward-looking thinking we never had has always been silenced by our desire to consume and profit from the nothingness of the present. We are not even three hundred years into our existence as a nation, not even one hundred years into our existence as a hegemony, and yet we continue to believe we can be that first unique divergence from the tides of history. Perhaps all we will be left with is our optimism. I, for one, hope I am wrong.
What causes empires to decline? There are just as many ways that cause them to fall as there are reasons why they became empires in the first place.
China was able to innovate and flourish as long as its own society allowed. If it could have overcome its own complacency and proceeded on its path of a rapid technological rise it could have seen a brighter future leading into the second millennia. Agricultural gains saw a population explosion but their society favored stability and the growth of the government. There was little perceived reward in trying new things, and the best and the brightest were funneled into the bureaucracy. This fact in and of itself stifled any chance at a vibrant private sector, and would lead to the dearth of technological innovation they would experience for centuries. It is this fact, not outside invaders or the revolts of the peasant class, that constricted the rise of the Chinese empire as a stable empire spanning the millennia.
Spain and Portugal grew rich off of their New World gold and silver and became complacent bystanders to their own falls. They contributed little of value else wise and were unable to suppress the rise of their competitors. Having only bothered to consume they forgot that there did not exist an unlimited amount of civilizations to ransack in an unlimited amount of undiscovered lands. Failing to see this fact they did not bother to invest in anything that would return them real value over time, and instead saw their deficit of influence and wealth grow with no way to stem the losses. The Spanish fleet not being defeated would have been irrelevant, because that would only have prolonged the course they were already on.
The British (and all other maritime and colonial powers during Pax Britannica) relied on inflows from their servant nations to fund their opulence. Like others before them they worked hard to convince the people they conquered that their culture and wisdom was superior. They had to enforce the idea that there was no reason to not be happy to be a part of a powerful and historically unique empire, and that making interim goods that were shipped off and turned into finished goods was a useful and helpful endeavor. Never mind the fact that basic economics ensured that they saw little of the benefits of such trade agreements, because if anyone noticed there was always the helpful and ever-present British navy to correct anyone on those facts. Britain only recently realized that it would take a lot of bloodshed to maintain their empire, and relinquished control of their sovereign empire over a rather long period of time.
The United States of America seemed to have become an invincible force after the end of the Cold War, with no major power rivaling us economically or militarily. Agricultural advances allowed crop yields and output to grow at a fast enough paces to feed the world. We once manufactured products that people around the world coveted. Our consumer goods were the envy of the world, and people clamored to purchase them. Technological advances allowed us to boost productivity, and uses of patents and the defense of them ensured that innovators were coddled and rewarded. Consumption grew, as did our appetite for borrowing. Leaders of industry realized that we could produce the things we sold in other countries at a lower cost to them, and did so at an increasing rate. As economies of the world opened up we saw this as a golden opportunity to shift the burden of production overseas. We continued to tailor our focus on the consumer. Our standard of living rose, and we sought to increase our life spans and increase our enjoyment of life through medical advancements and focus on products destined for the hands of consumers in America.
Soon we discovered that we were not actually producing much of anything, yet were the largest economy in the world. We recognized the inherent danger in this. Economies of scale only work when the underlying economy is producing something of worth. So to fund our purchases we had to become the largest money changer in the history of the world. Nations purchased our debt on the flawed logic that our nation is too big to fail. Trade deficits have been ignored for decades and there have been no real attempts to remedy that problem. Our economy has grown solely because our country's consumers continued to consume at an increasing pace, and the irony is that the consumers were never really able to pay for any of it. To see no growth was unacceptable, and so a plan had to be concocted that we will be unable to back out of. We had to convince the world that our economy would never stop growing, and that no level of debt was too high for us to pay off. We had to convince the world that we could somehow be the large cap company that never stopped growing at a previously set rate, that we would always be able to pay dividends, never mind the fact that our payout ratio will flood into the double digits.
We tried to sell the idea that technology would explode exponentially, resulting in a bubble that we never recovered from. We tried again to convince the world that we were worth enough to warrant our spending. We decided that if people would not invest in the prospect of what may come of our future genius, perhaps they would invest in what we had presently. And so we took our largest asset, housing, and embarked upon the great asset bubble of the twenty-first century. We had to convince everyone that an asset with no real worth other than the ability to shelter a family could appreciate as an investment into infinity. We succeeded for years in this fashion. We convinced ourselves and the world that prices would never fall, and that any investment in housing and related securities at any amount was worthwhile. The problem was that something that returns nothing and holds no worth other than the promise of a higher future price is not really an investment at all. And yet we became caught up in our own fantasies. Those who were not able buy, bought. Those were who not able to lend, lent. Those who objected had their voices stifled. There remained few whose interests were to not see asset prices inflate. Many stood to gain from the further bankrupting of our nation, and none left to protect our future interests as a stable and continued presence in the world.
There are those who will wonder if Keynesian economics can save us. There are those that say that our best policymakers and corporate minds have a vested interest in seeing us through this depression. They forget that Keynesian economics implies that bubbles must be avoided through policies ensuring that the economy is on stable ground. What is not realized is that we have been in a bear of real growth for decades. The people of this nation have seen double digit inflation and no real earnings growth because we as a nation have not been productive. A nation’s people cannot continue to consume when a small fraction actually produces. We are attempting to fix this problem in the wrong way. We are simply slowing the descent of asset prices by using stopgap policies of creating money that cannot be paid back at any point in the future.
No empire has ever improved their situation by simply staying the course. Rome could never hope to overcome its stagnation by continuing to lose battles on its fringes. China could never hope to grow as a local power by continuing to focus on its corrupt bureaucracy. Spain and Portugal could never hope to evolve into an industrialized producer society by continuing to have net outflows of precious metals. Britain could never hope to win over its colonies by continuing to ignore their cries for equity and equality. America can never hope to repay its debts by continuing to issue new promises of debts.
The sun is not always shining on the American empire. Our invincible armada cannot weather this typhoon unless we change direction. We had a chance to create something meaningful with our intellectual capital and we missed it. The forward-looking thinking we never had has always been silenced by our desire to consume and profit from the nothingness of the present. We are not even three hundred years into our existence as a nation, not even one hundred years into our existence as a hegemony, and yet we continue to believe we can be that first unique divergence from the tides of history. Perhaps all we will be left with is our optimism. I, for one, hope I am wrong.
thnx n regrds
MANISH SINGH
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