At the end of Second World War the British Empire still ruled nearly a quarter of the globe. But the war bankrupted Britain. Its once mighty empire quickly collapsed and the United States inherited much of the British Imperium.
Six decades later the United States is close to bankruptcy thanks to a national orgy of borrowing, the replacement of manufacturing by financial manipulation, ruinous foreign wars and a government whose stunning incompetence and arrant stupidity was exceeded only by its reckless imperial arrogance.
The financial panic now gripping the planet, and the ignominious collapse of Wall Street, showed the American colossus had feet of clay. Washington's furious printing of untold billions of new dollars to prop up its sinking economy, finance this year's $1 trillion deficit and pay debts may unleash a storm of dangerous inflation.
The world balance of power is already shifting. For example, Pakistan's new president, Asif Zardari, went cap in hand this week to China, seeking up to $6 billion US in emergency loans. Pakistan is on the verge of bankruptcy and may shortly default on its debt.
But Pakistan's patron, the United States, which has been renting that nation's politicians and army for $1.2 billion per annum to support the occupation of Afghanistan, can't spare any cash for Pakistan. So Pakistan is turning to China, which has $19 billion in foreign exchange reserves -- the world's largest. The U.S.-led occupation of Afghanistan is likely to be adversely affected by Washington's new pauper status.
Bankrupt people, companies and nations have to sell assets to meet their debt obligations. China and Japan alone hold over $1.5 trillion of U.S. government securities (IOUs).
Their nervous central bankers now want real assets rather than more paper.
So there is talk of America's Asian creditors converting their IOUs into shares in U.S. corporations and property.
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Pakistan's move into China's financial embrace is a harbinger of things to come. Unless the U.S. quickly repairs its economy, its world power could slip away as quickly as post-war Britain's, leaving China, Japan, Russia, the EU and India as the world's new super powers.
I do not believe a quick fix of the U.S. economy is possible. We've outsourced our manufacturing sectors and continue to be ruled by political elites whose fealty is to the financial elites. Our most significant exports are pot, porn, and weapons. What quick fix is possible?
