17.01.2016 Author: F. William Engdahl

Travails of a Bankrupt Hegemon

4353452222Slightly more than seven decades ago, when the United Nations was officially founded in San Francisco, there was no question in the world about who was the Great Power, the World Hegemon. Today the situation has radically altered to the severe disadvantage of Washington and her ability to dictate terms to the rest of the world in economics, politics, and the greatly-misused expression “human rights and democracy-building.” That disadvantage may, ironically, be a blessing in disguise for us all.

In 1945, the United States Federal Reserve controlled the overwhelming majority of the world’s monetary gold. As war approached in Europe in 1939, European gold flooded into the United States for safety. In 1935 US official gold reserves were valued at just over $9 billion. By 1940 after the onset of war in Europe, it had leapt to $20 billion. As desperate European countries sought to finance their war effort, their gold went to the United States to purchase essential goods. By the time of the June 1944 international monetary conference at Bretton Woods, the United States Federal Reserve controlled fully 70% of world monetary gold, a staggering advantage in what was then a Bretton Woods Gold Exchange System with the US dollar at its heart. That wasn’t even calculating the captured gold of the defeated Axis powers of Germany or Japan, where exact facts and data are buried in layers of deception and rumor to this day.

To grasp the full dimension of the internal crisis and foreign policy dilemmas facing Washington today, it’s useful to go back to the nature of the immediate postwar “triumphalism” of US policy circles in the wake of their emergence from the war.

An ‘American Empire’ emerges

One influential geopolitical thinker of the postwar American Century, sometimes referred to as “the first Cold Warrior,” was James Burnham. During the war he had been one of Wild Bill Donovan’s US Government intelligence operatives in the pre-CIA intelligence operation called Office of Strategic Services (OSS). Burnham was one of many American Trotskyist Marxists recruited by the US intelligence. After the war, Burnham, swung from far left to far right, much as fellow former Trotskyist, Irving Kristol, the so-called Godfather of the neo-cons. Burnham together with William F. Buckley, Jr. founded the arch-conservative National Review to propagate Cold War anti-Soviet missives and pro-free market propaganda, invariably serving the foreign policy agenda of the CIA and State Department.

In 1947 Burnham wrote a major paean to America’s new world power titled The Struggle for the World. The book was adapted from a Top Secret OSS memo Burnham had prepared for the US Delegation to Yalta about the Soviet geopolitical strategy in 1944.

Burnham described in the most positive terms what he called, “an American Empire which will be, if not literally worldwide in formal boundaries, capable of exercising decisive world control.” This is what Time-Life magazine founder, Henry Luce in his 1941 essay termed, “The American Century.”

Burnham’s vision and recommendations for his American world control were stark and unequivocal:

The United States cannot within the allotted time win the leadership of a viable world political order merely by appeals to rational conviction…Power must be there, with the known readiness to use it, whether in the indirect form of paralyzing economic sanctions, or in the direct explosion of bombs. As the ultimate reserve in the power series there would be the monopoly control of atomic weapons.

The reference to “direct explosion of bombs” from Burnham’s 1944 draft was a presaging of the August 1945 decision by President Truman to drop the atomic bomb on Japan, not to secure Japanese surrender which was already clear, but, rather to show the Soviet Union, as well as Western Europe, which power would rule the postwar world. The American Century was to be a “no nonsense” enterprise. As Burnham put it, “Independence and freedom are, after all, abstractions.”

Within that American-controlled economic space, encompassing more than 560 million people, lay a vast potential market beyond even the enormous expanse of the prewar British Empire. The United States, a mere two years into its postwar ambitions, held extraordinary power over much of the world in an informal economic empire. It had done so by using the mechanisms of the Bretton Woods institutions of the IMF and World Bank, through its control of broad western European economic policy via the Marshall Plan and the Paris-based Organization for Economic Cooperation and Development (OECD), through the role of the dollar as the world reserve currency, and the heart of world finance, and above all, through the major New York banks of the Wall Street money cartel and their allied civil servants in Washington at the Federal Reserve and US Treasury Department.

In 1948 George Kennan, architect of US Cold War Soviet “Containment” policy, noted in an internal US State Department memo the essence of the mentality of those special interests around the brothers Rockefeller and the New York Council on Foreign Relations (CFR), who were busy then defining that emerging American informal empire. Kennan’s memo outlined the postwar agenda of the US power establishment very succinctly:

…[W]e have about 50% of the world’s wealth but only 6.3% of its population…. In this situation, we cannot fail to be the object of envy and resentment. Our real task in the coming period is to devise a pattern of relationships which will permit us to maintain this position of disparity without positive detriment to our national security. To do so, we will have to dispense with all sentimentality and day-dreaming; and our attention will have to be concentrated everywhere on our immediate national objectives. We need not deceive ourselves that we can afford today the luxury of altruism and world-benefaction. 

Kennan outlined the real nature of post-war US policies. Kennan was coldly honest and realistic about the true postwar goal of the US establishment. It was US domination of the world, or at least as much of it as it could seize and hold onto in 1948. That was the CFR’s proposed Grand Area.

Since 1945 the United States has formally been involved as combatant in twenty two wars, major and minor, from Korea to Vietnam, from Grenada and Panama to Syria and Libya, wars all to grab and hold that global empire.

Now, its domestic economy a hollowed-out shell, its transportation infrastructure in horrendous decline, its skilled labor force increasingly non-existent, its university engineering and science students mostly from abroad–mainly China and India–the United States of America is in the throes of a terminal decline, a decline caused by no one but her own people who tolerated the looting and destruction of a once-beautiful nation by a greedy, power-addicted cabal of bad people with names like Rockefeller, Gates, Russell, DuPont, Buffett and others whose names are hardly known to the broad public.

The crisis that the USA faces today as World Hegemon is the fact the nation has become bankrupt, morally, spiritually, intellectually and economically, in an eerie manner much as the British Empire after onset of their Great Depression of 1873.

A few basic indicators says volumes about the rapidly-growing limits to America’s global power projection and why Washington’s “bully” tactics are being increasingly scorned by the rest of the world.

USA Debt then and now

Today, unlike at the start of the 1930s Great Depression, the Federal Government in Washington must carry a staggering debt level to finance its ever-more impotent attempts to hold onto its global control. At the end of September, 2016 the total combined Federal, state and municipal US debt will likely pass the staggering amount of $ 22.4 trillion, with $19.3 trillion of it from the Federal government. If private corporate and household debt is added, today Americans owe a staggering total of $60 trillion. Forty years ago in 1974 total debt– the combination of government, business, mortgage, and consumer debt–was $2.2 trillion. About 50% of that Federal debt today is held by foreign countries, most by China and Japan, Russia and EU central banks.

This Federal Reserve graph of total USA debt, public and private shows clearly how and when the United States began its now precipitous decline as a Great Power

The only comparable time when US Federal debt as a share of GDP was anywhere near that of today was in 1946 at the end of the Second World War when Debt-to-GDP topped 119%. In 2014 total public state, federal and local US debt topped 120% of GDP.

The difference between 1946 and 2016 lies not in comparing the raw numbers. Then the US was the victor dictating terms to the vanquished. In 1946 Washington was at the center of global power. The US dollar was in demand everywhere, “as good as gold.” US industry was the world leader in innovation and technological efficiency. Detroit was the global symbol for making superb, affordable cars, and more of them than any other nation. US steel output was unexcelled. Research at US universities was unparalleled, aided by an influx of European and other war refugee scientists such as Albert Einstein. Most of the so-called “free world” rushed under the US nuclear umbrella known as NATO. They were to pay a hefty price for that umbrella.

Faking the numbers is no recovery…

Today, some 45 years after President Nixon unilaterally abrogated the Bretton Woods Treaty and declared the Federal Reserve would no longer buy US dollars held abroad for gold, the real US economy is a shambles. From time to time I’ve noted the absurd and politically-motivated lies that pass for “official US Government economic statistics.” It’s gotten successively worse since the first lying tricks ordered by President Lyndon Johnson to hide the soaring US debt during the Vietnam War era in the late 1960’s.

According to the widely-respected calculations by economist John Williams at the Shadow Government Statistics site, actual US unemployment in November 2015 was 22.9%, when we include the “long-term discouraged workers”–those who were defined out of official existence in 1994. That’s far from the Obama Labor Department fantasy level of 5% unemployed. One-fifth of the workforce jobless is a level previously reached over the past century only during the 1930’s Great Depression.

John Williams’ adjusted unemployment estimates explain the otherwise curious data released, without elaboration, by the same US Government, on the number of “working-age Americans not working.” Today, officially, more than 100 million Americans over the age of 16 are not working. That ain’t because they are sitting on the beach clipping coupons on their zero-interest-rate bonds. It’s because there are no jobs for them; there is no economic future for them in today’s America. Many young people even begin to look at fighting Washington’s wars as an option that at least gives a steady paycheck. This in fact is turning the United States into a Sparta, a war nation that thrives on blood. Not healthy.

Worst hit are the young just graduating college or high school, where last year of the new additions to the working age population, less than four in 10 found jobs. As one economist, Stephen Moore, noted, “for every three Americans added to the working age population age 16 and older, only one new job (1.07) has been created under Obama. At this pace, America will soon officially have a zero unemployment rate. But that will only be because no one will be looking for work.” Under Labor Department definitions those “not looking” because they have given up, do not exist. Veeeeery clever, Bureau of Labor Statistics!

America’s Homeless Crisis

Germany and Sweden have their refugee crisis, the direct result of a US-instigated series of wars going from Afghanistan to Iraq to Libya and now to Syria. The United States, however, has a human crisis of a quite different nature–soaring numbers of homeless.

As the number of permanent unemployed rises across America, much as during the Great Depression, today the number of cities where homelessness has reached crisis proportions is exploding.

In the once-thriving California city, Los Angeles, a 50-block area of downtown nick-named Skid Row is described as “the worst man-made disaster in the US.” More recently, Portland, Oregon; Denver, Colorado; and Seattle, Washington, as well as the entire state of Hawaii have become the latest to take drastic emergency measures to try to deal with spreading homeless populations.

In addition, the nation’s capital, Washington DC, as well as 22 other cities, are experiencing dramatic rises in homeless. In Washington, DC, the number of homeless rose by 28 percent and the number of homeless families went up by 60 percent in the past year. Chicago, Illinois; Baltimore, Maryland; Philadelphia, Pennsylvania and San Francisco, California are as well suffering from the same problem.

Wrong National Priorities

The root of the crisis lies in a nation that is being led by corrupt Washington Presidents, Generals, Congressmen who prostitute themselves to a seemingly endless hog trough of corruption. None excels in this official corruption more than the US Pentagon and its incestuous role with the corrupt military industrial complex.

Russia’s recent military engagement in Syria has raised eyebrows the world over, including in Washington, at the level of precision and sophistication the newly-reorganized Russian military has demonstrated. Weapon after weapon the Russian air forces have deployed seem to outclass its US counterparts. In one area, however, the US has no equal. That is in military contracting corruption.

In 2014 the US Armed Forces paper, Stars and Stripes, reported that, “Nearly three decades after US taxpayers gasped over $640 toilet seats and other Cold War military waste, the Department of Defense remains the last federal department still unable to conduct a financial audit despite laws passed in the 1990s that require the accounting.”

They continued, “In other words, the US military has turned into a black hole, into which billions of taxpayer dollars have disappeared, without any clear evidence on how, when, and to whom the money went. The fact is that the US government now subcontracts almost everything out to private companies (who collectively spend billions lobbying Congress and funding political campaigns), and this is particularly true when it comes to the Pentagon.”

Austrian journalist, Einar Schlereth, in a recent analysis published by Sputnik News, comparing the Russian state military industry system to the private US one, notes that, “Russia’s system of military spending is the diametric opposite of America’s. While the United States has privatized their military industry, in Russia it is in state hands. All profits from arms sales go to the Russian government, not to the makers or the multinationals. The arms manufacturers are [effectively] part of the government.”

“Just like in the US, there is no financial accounting of their operations, but there are financial reports reviewed each year by the defense minister and, moreover, by the president and the prime minister –i.e. by people who are responsible to the electorate, and not only to the aristocracy of large shareholders.”

Recent estimates by the American Society of Civil Engineers put America’s national infrastructure deficit in excess of $3.6 trillions required for building or replacing antiquated water systems, electricity power lines, highways, rail lines, sewer systems. That includes more than 10% of all bridges defective, one third of national highways, airports and runways. In this situation, it would be interesting to see the voter reaction were Donald Trump or any US Presidential candidate to have the courage or sanity to suggest a shift in national economic priorities away from making wars with Russia, China, Syria and turning those over-budget Pentagon “swords” into plowshares. We should have done it in 1990 when the Soviet Union ceased to exist as an adversary.

Such are the travails of a bankrupt hegemon today.

F. William Engdahl is strategic risk consultant and lecturer, he holds a degree in politics from Princeton University and is a best-selling author on oil and geopolitics, exclusively for the online magazine “New Eastern Outlook”.


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