AS WITH the collapse of other empires, the US is in a steep decline socially and economically at home and financially and militarily abroad. In the first quarter of this year, interest payments hit $929billion on an annualised basis, as much as the nation spends on defence.
One of the founders of the US Constitution, Thomas Jefferson, warned against excess debt and ‘foreign entanglements and costly alliances’. Biden’s US is doing both on a grand scale as it continues its 20-year attack on Russia through Ukraine and provokes China over Taiwan.
The USA is threatening abroad and sick at home. Someone is murdered every 15 hours and 54 minutes in Chicago; you are more likely to be murdered in Chicago than die as a civilian in the Ukraine-Russia war. Walmart, a major donor to the Democratic Party which rules Chicago, is closing four of its eight Chicago stores due to rampant theft and looting.
Since the Covid crisis began stoking social and business controls and causing poverty, there has been an unprecedented exodus from Democrat controlled cities across the U.S. The top 10 cities which homeowners have been fleeing are San Francisco, Los Angeles, New York City, Washington, DC, Boston, Chicago, Detroit, Denver, Seattle and Philadelphia.
The US national debt is $32trillion which is 129 per cent of gross domestic product (compare 102 per cent for the UK, 91 per cent for France and 46 per cent for Germany).
The US has lower inflation than Europe, much lower gas prices (about one fifth of Europe’s during 2022) and is now the biggest gas exporter in the world but much of this is due to the war waged principally by the US against Russia from which Europe is suffering sanctions on their trade with Russia, very high energy prices and de-industrialisation.
This is further exacerbated by Biden’s ludicrously named Inflation Reduction Act which is spending $369billion on green energy and industrial subsidies for companies on US soil. This is a very big distortion of international trade from which other countries will suffer as their companies are tempted to leave for the green subsidy pastures of the USA.
It follows similar distorting subsidies in the US Infrastructure Bill and the Chips Act, aimed at boosting domestic production of key microchips. The affect on allies was seemingly ignored. Meanwhile German air-conditioning heat pump manufacturer Viessmann has been taken over by US rival Carrier Group. (An ironic equivalent to the introduction of the Euro causing poverty in many EU countries with German companies then snapping up their commercial assets!)
All this chimes with the Democrats’ arrogant dismissal of the rest of the world with former US Secretary of State Hillary Clinton calling the US ‘the exceptional nation’ while the barely literate Joe Biden brayed: ‘I’ll paraphrase the phrase of my old neighborhood: The rest of the countries, the world is not a patch in our jeans, if we do what we wanna do, we need to do.’
As Barbara Tuchman wrote of the US in The March of Folly: From Troy to Vietnam, ‘The process of gaining power employs means which degrade or brutalize the seeker, who awakes to find that power has been possessed at the cost of virtue or moral purpose lost.’
The US is in fact in the process of losing power – at home in its unsustainable debt, projected to rise to 195 per cent of GDP by 2053, and abroad by industrially sinking rapidly by comparison with other countries:
The booming US national debt is naturally a worry for those who hold US bonds, like the Chinese. A country which cannot control its spending and its debt is not a safe investment and this graph of China’s holdings of US Treasuries over the last decade is an ominous sign as the Chinese rapidly disengage from their support of the US economy.
Neither do Americans have much faith in their currency and the banking system, shown by the largest decline in US commercial bank deposits since 1934. The recent bank failures, Silicon Valley Bank, First Republic Bank, Silvergate and Signature Bank plus the crypto exchange FTX, show track records of increasingly irresponsible behaviour as banks under pressure (from Government manipulations of interest rates) sought ever-riskier investments on the one hand and took large deposits from individuals which were not covered by the Federal Deposit Insurance scheme on the other.
As the US (like other major Western economies) came out of the massive money-printing and record low interest rates during Covid lockdowns, interest rates have risen from virtually nothing to nearly 5 per cent, putting pressure on the incompetent banks who did not prepare for this. Some get into trouble, depositors panic, rumours spread.
Electronic banking allows frighteningly quick and large outflows from banks which get into trouble. SVB lost $42billion in one day! Banks can either raise the rates they pay depositors, which reduces their profitability, or they can continue to keep savings rates low, and bleed deposits. Either way, banks’ ability to avoid losses and continue to lend are impaired.
As of March this year, $850billion of deposits have left the banking system – sucked into Government bonds and money market funds.
Source: St. Louis FRED
Moody’s Investor Service has downgraded the US banking sector due to
- rising interest rates
- funding risks
- weaker capitalisation
- commercial real estate risks (offices post Covid – see below)
Bloomberg reported that large American bankruptcies ($50million-plus in liabilities) in the first quarter of this year reached their third highest level this century.
Meanwhile the US social collapse accelerates. Bankrupt Democrat-governed California has defaulted on $18.6billion in debt, and in San Francisco almost half of the surveyed commercial areas observed human and animal faeces.
Deliberately losing control of the US border has not only permitted millions of illegal immigrants but also the smuggling of killer drugs like Fentanyl. For those under 50, fentanyl-involved deaths exceed every cause by a large margin. Poisonings, driven by fentanyl, have grown from one of 17 deaths 20 years ago to one in five today.
US drug streets: This video is disturbing. Half of it is enough, it then repeats:
San Francisco is in crisis as a staggering commercial office vacancy rate resulted from a combination of pandemic-era work-from-home policies, and people fleeing the city’s notorious violence and faeces-covered streets have made the once-thriving city into a ghost town.
With $1.5trillion-plus in commercial real estate debt set to mature by 2025, the biggest problem is the record high office vacancy rate. In the US, office space available for lease has hit 16.4 per cent, with some cities seeing much higher rates. In Chicago, the vacancy rate is a staggering 20 per cent, while in San Francisco 13 tech companies have 3.5million square feet of space available for sublease – ironically with their own technology and work-from-home philosophy contributing to the collapse in the value of their leases.
Nothing shows more vividly the decline of the US internationally than its debt-to-GDP ratio since 1948 and the decline of the US dollar as a reserve currency since the 2008 crisis.
1948: US debt 96 per cent of GDP
2008: $13trillion, 63 per cent of GDP
2023: $32trillion, 129 per cent of GDP
No other country has the expensive international infrastructure of military bases, defence spending and self-imposed ‘commitments’ as the USA. But the US debt has failed to finance real investment at home or abroad where the dollar is declining as a reserve currency and indeed potentially (now that Saudi Arabia, India, Brazil and others are aligning with Russia and China) as the accepted petro-currency.
The graph shows the big decline in the US dollar’s percentage of global reserves:
The world is splitting into two major blocs – the West and the Rest. The Russia/China/India/Brazil bloc has a purchasing power parity GDP of $48trillion and the USA/UK/Germany/France/Japan bloc a PPP GDP of $43trillion. Almost every day a country reports that China has replaced the US as its main trading partner.
Politically Russia and China – thanks to US neocon aggression through Europe, Ukraine and Taiwan – are emerging as two new ‘multipolarity’ challenges to the West, attracting support in Africa, Asia and South America. As the leader of the West, the US’s decline at home and abroad is dangerous for everyone. And with a barely sentient President pressing on with a war which will be lost at enormous human and economic cost to Ukrainians, refusing to listen even to his own defence and Intelligence experts, the future for America is bleak.
This article appeared in Freenations on June 19, 2023, and is republished by kind permission.