America needs to get serious about economy
Editor’s note: Author James Buckley is a longtime Montecito resident.
It happens to the best and the biggest. Always. Over the 5,000-year history of human endeavor, they’ve all fallen.
Every one of them.
Empires, that is.
The Romans swallowed up the entire Mediterranean basin before its empire outgrew and outspent itself. More recently, the formidable British Empire — in which the sun never set — faded on the horizon after a solid 250-year run.
Cleopatra borrowed, caroused and spent her country into oblivion, though she saved it from the fate of the unfortunate Carthaginians, whose capital, Carthage, was razed and the fertile soil around it salted by the Roman army so that nothing could/would ever grow again.
The Spanish built an enormous and wealthy empire with their holdings in the New World after the “discovery” of the Americas; they amassed the world’s largest hoard of gold and silver. It was a glorious time to be Spanish and they ruled the roost for the next 200 years, when they weren’t fighting with the French or the English.
The United Kingdom solidified the extension of its 250-year turn after defeating the combined French and Spanish naval fleets at the Battle of Trafalgar. The U.S. joined the club as one of the Masters of the Universe in the middle of the 19th century.
More recently, there were the Soviets, whose socialist republics made up, I believe, the largest empire in all recorded history. But that empire’s 72-year life span is just a long weekend in a historian’s eye.
One thing the aforementioned collapses have in common is the debasing of their various currencies. (Cleopatra notoriously shaved the edges of Egypt’s coin of the realm by 10% or so, thereby instantly increasing her wealth by … about 10%.)
The Romans did something similar, as did the Spanish later in history. Hence, the advent of lined indentations on the edges of coins.
In the Soviet Union, the ruble had nothing whatsoever backing it (neither does any currency in use today), but it worked as an internal measure of trade when something worth buying appeared on sale. When the wall between East and West Berlin came tumbling down, so did the ruble, followed rather quickly by the death of the Union of Soviet Socialist Republics.
The once mighty British sterling succumbed to the power of the then almighty U.S. dollar in the early 1960s and the U.S. dollar became the preferred unit of international trade, the world’s reserve currency.
The U.S. was once truly rich.
But a series of incompetent and feckless politicians, beginning with Lyndon B. Johnson and his congressional partners in 1964, facing the combination of the Vietnam War and the “War on Poverty,” and with the advantage of a lop-sided Democrat advantage in the U.S. Senate and House of Representatives, opened the floodgates to a spending tsunami. All sides gave up trying to balance the federal budget. And over those years, the value of what one U.S. dollar could buy continued to erode.
Unfortunately, just as a new Republican majority and a repentant President Bill Clinton nearly righted the spending ship and actually balanced the federal budget for a few fleeting years in the late 1990s, the World Trade Center was turned into a pile of rubble, necessitating a bonanza of spending and budget deficits.
Better known as “business as usual.”
Now that we have had four spendthrift presidents in a row (Bush, Obama, Trump, Biden), working hand-in-pocket with their congressional enablers, the fiscal and monetary guardrails have been removed. There are no roadblocks to spending. A trillion-dollar bailout, why not? Let’s make sure the bankers get their promised bonuses! A $2 trillion spending bill?
Let’s make it $3 trillion, our out-of-control spenders and public unions in New York and California need some relief too!
How about sending everyone in America a big check!? Not a problem.
The U.S. has now become the biggest freeloader in history and simply prints money … because it can.
Zimbabwe tried that a decade ago. Zimbabwean President Robert Mugabe oversaw an administration that spent so freely and drove inflation so high that it ended up issuing a $100 trillion bill before everything completely collapsed. (Those Zimbabwe bills, by the way, have way more value today than they ever did while in circulation. You can buy half-a-dozen Zimbabwe $100 trillion bills online for about $50).
I recall a newscast during the mid-1980s collapse of the Argentine Peso. During an interview with an Argentinean resident outside a supermarket, the woman being interviewed said what struck her about inflation is that she had just purchased a pack of chewing gum and realized it cost the same as her house had cost about 10 years earlier.
While not as dramatic as the Argentine hyperinflation of the 1980s, the same house in California that you may have purchased, say, in 1975, for $38,000 now sells for upward of a million dollars. And get in line to buy that house as there will probably be a dozen people vying for it with higher bids.
Which, I guess, goes to show you that putting your money under the mattress turned out to have been really bad investment advice.
So where do we go from here?
No one really knows (well, OK, someone does but she’s hunkered down in a basement hideaway under the Rocky Mountains and isn’t available for press interviews), but we do know this: The devaluation of the U.S. dollar continues unabated and won’t end until a reliable replacement appears. When that happens — and it surely will — the fallout will be significant.
When talk of “End of Empires” arises, what one hears mostly today is speculation that the United States of America, after nearly 250 years of growth and prosperity, is nearing the end of its period of world dominance.
And, from this perspective at least, I have to agree it looks bad.
It would also be a signal that we’ve reached the End of Empire.
This doesn’t have to happen, of course. Even though we’ve piled up over $30,000,000,000,000 in debt, we can still salvage a positive economic future if Americans take spending, saving and taxation seriously again.
But unless you are a free-breathing professional diver, don’t hold your breath.
James Buckley welcomes comments from readers and will respond to them in his column. Email him at firstname.lastname@example.org.