What Cost the American Empire?

by Bill Haynes

Few Americans know that our great republic has become an empire with tentacles stretching to some 130 countries around the globe. Large contingents of American soldiers occupy Germany, Japan, and South Korea. Smaller detachments can be found in other countries. Huge bases, which supply the US Navy ships that dominate the seas, stretch from Japan to the Azores. Now, the US is building bases for a long (permanent?) stay in Afghanistan. No detachments for Afghanistan; the situation there requires an occupying force.

After World War II, the reason for US troops to be stationed around the globe was to contain the USSR and the spread of communism. Even with the collapse of the USSR more than ten years ago, US troops remain spread around the globe. This is to maintain the American Empire. There is no other reason.

When the USSR fell apart, it withdrew its troops from the Warsaw Pact nations and the once-feared Russian army became a shell of its former self. US troops could have been pulled out of Europe, yet they remain and are a constant reminder to the Europeans that the US carries the big stick. While Germany may disagree with the US in some areas, the issue of US troops on German soil never rises. Only France had the hubris to tell the Americans to get out. The US also lost important bases in the Philippines. Overall, though, since WWII the American Empire has expanded.

Rule by Force

An empire imposes its will on its "territories" by force. Often, there is the pretense of protection, such is the case today with American Empire and was the case with the British Empire. Frankly, the British Empire was brutal, with India probably suffering the worst under British rule. The American Colonies, in a rebellion that shocked the world, threw off the British yoke and set the example for other countries under the Union Jack thumb. (If King George had not been so arrogant, imposing high taxes and boarding British troops in Colonists' homes, we could be British subjects today. The prominent Colonists at the time considered themselves loyal Englishmen but objected to George's heavy thumb. George should have lightened up a little.)

The most famous empire was the Roman Empire, which stretched from what are now England, Spain, and Portugal in the North and West to Iraq, Syria, and southeastern Turkey in the East. To the south, Egypt and Palestine fell under Rome's rule. The Roman Empire was known not only for the many people it conquered and large area it ruled, but also because it lasted some 1300 years. Other empires, although important in their times, pale in comparison to the Roman Empire.

Before Rome, Greece had its fling with empire. Egypt had a great run as well. In Asia, the Mongols controlled the largest geographic empire in history, but the Mongol Empire was only one of many Asian empires. In more recent history, Britain, France, Spain, Portugal, the Netherlands, Germany, and Japan have had empires.

The Aims of Empire are Economic

Rome extracted tribute from the people it conquered: grain from Egypt, gold and silver from Spain, copper from Cyprus, and tin from Britain. The Balkans supplied iron ore and gold, and Greece and Italy mined marble for Rome's buildings. The forests of Asia Minor and Central Europe provided lumber. Of course, all conquered peoples supplied slaves to Rome.

During Spain's 200-year empire, it robbed the Incas and Aztecs of their gold and silver. Such huge quantities of gold and silver did the conquistadors bring home that Spain suffered from inflation. (Remember, inflation [rising prices] is caused by an increase in the money supply, and gold and silver were the monies of the time.)

After the discovery of North America, all the European imperialists sought a foothold. Initially, it was the hope for gold and the fur trade, but when it was learned that the climate in the South was ideal for growing cotton, Great Britain encouraged the practice of slavery to keep the cost down. Great Britain wanted cheap cotton for its textile mills, which produced greater profits than did the growing of cotton. (In fact, some historians maintain that Great Britain was so determined to have cheap cotton that it fanned the flames that led to the Civil War.)

France gave up part of its empire in North America when it sold its Louisiana Territory to the new United States of America. Spain lost its North American territories piecemeal. During the War of 1812, Spain made the mistake of letting the British use Pensacola as a naval base. So, in 1814, General Andrew Jackson marched to Pensacola and took the place. Afterwards, Jackson led excursions into Spain's Florida Territory in the First Seminole War, establishing US hegemony over the region. The thousands of American settlers who had rushed to Florida also helped. In 1819, Spain ceded Florida to the US. By 1825, Spain had lost its North American colonies.

Germany, Britain, Portugal, and the Dutch had great success in Africa, where they mined valuable ores and shipped home foodstuffs. (Afrikaans, South Africa's second official language, is a combination of Dutch, English, German, French, and Bantu.) In India, the Brits plundered the land, taking home agricultural products and anything else it wanted. Portugal once claimed Brazil as a colony.

Sage Advice Ignored

George Washington's admonition to avoid foreign entanglements has long been forgotten. If our first president's warning is even brought up during a talking heads discussion, which today frame the political issues, it is dismissed as irrelevant in today's world, or not even addressed. Only Pat Buchanan talks about the American Empire. In fact, he wrote A Republic, Not an Empire to warn against the dangers of empire.

Although Buchanan's book became a bestseller, its impact has been minimal. Talking heads programs, where most Americans get their political "knowledge," defend the direction of US foreign policy, which has gone far beyond foreign entanglements to empire. Further, our leaders deny a foreign policy of empire. They claim only to be "looking after US interests."

With treaties of foreign entanglements, we are involved in other nations' affairs. Through empire, we attempt to run other nations' affairs. The best examples are Germany and Japan, defeated more than fifty years ago and still under the thumb of US empire.

Although historically Germany has been the counterbalancing force against Russian dominance of Europe, the US prohibits the Germans from building a substantial military. Instead, a couple hundred thousand US troops are based in Germany under the pretense of defending against Russian aggression. In Japan, a similar situation exists.

Japan has stood against China's domination of Asia. Yet, Japan is not permitted to build a military of significance. Instead, the US 7th Fleet is supposed to contain China. In reality, US troops in Germany and the 7th Fleet also keep Europe and Asia following the "US line." The result is that we extract tribute, even as did the Roman Empire, only in a more sophisticated manner.

The Dollar: the World's Premier Reserve Currency

A reserve currency is one that central banks hold as backing for their currencies. The 1944 Bretton Woods agreement made the US dollar the world's only reserve currency. Then, the dollar was redeemable in gold by foreigners; however, in 1971 Nixon closed the gold window, leaving dollar holders stuck with paper.

In recent years other currencies have grown in stature and are now accepted as reserve currencies. For instance, the US Treasury counts euros and yen, along with gold, in its reserve holdings. Still, the dollar is the world's principal reserve currency, and the bulk of central bank paper assets are dollars.

As the table shows, many of the top 15 central banks hold as reserves significant quantities of both gold and paper currencies (mostly dollars). Yet, only the US and France hold at least 50% of their reserves in gold. Most countries, notably Japan, China, and Taiwan, hold the bulk of their reserves in dollars.

     

Gold’s %

Rank

Country

Tons

of reserves

1

United States

8149.0

55.9

2

Germany

3445.8

38.0

3

IMF

3217.3

NA

4

France

3024.6

50.2

5

Italy

2451.8

49.1

6

Switzerland

2014.7

35.7

7

Netherlands

875.6

45.6

8

ECB

766.9

NA

9

Japan

765.2

1.7

10

Portugal

606.8

37.2

11

Spain

523.4

14.2

12

China

500.1

2.0

13

Taiwan

421.8

3.2

14

Russia

386.8

8.7

15

India

357.8

5.9

When central banks want to alter the make-up of their reserves, they have few options. They can sell dollars for euros or yen, or sell euros or yen for dollars. And, they can sell paper currencies for gold. China did that in December 2001 when it bought 105 tons of gold. The Bank of England earlier this year finished dumping 395 tons, the proceeds of which supposedly were converted 40% to dollars, 40% to euros, and 20% to yen.

Considering the low prices that the BoE got for its gold and the low interest it is receiving, especially on its yen and dollar investments, that had to be one of the worst investment calls of the decade. Maybe not as bad as the major Wall Street brokerage houses that recommended Enron all the way to bankruptcy, but selling gold below $300 and buying low-interest paper assets was not a brilliant move.

How the US Collects Tribute

The US collects tribute via its trade deficit. Its current accounts deficit (which includes goods and services) will hit about $500 billion this year, which means Americans will receive this year $500 billion more in goods and services from foreigners than we will deliver to them. The US has been running deficits for decades, and, according to Bridgewater Associates, foreigners currently hold 48% of the US Treasury bond market. (Foreigners also own 24% of our corporate bond market and 22% of all US corporations. In total, foreigners hold $8 trillion of US financial assets.)

It boils down to this: We get goods, and foreigners get little pieces of paper called dollars, which, as we all know, the Fed prints at will and are not redeemable in gold. Since we are running a trade deficit, it means foreigners are selling us more goods than they are buying from us; therefore, they have excess dollars, which are used to purchase Treasury bonds. By accepting and holding our dollars, foreigners are financing our trade deficit and our deficit spending. Economists call this exporting inflation. We print the paper money and foreigners end up with it.

Back in the days before Nixon closed the gold window, a trade deficit meant that gold flowed out of Ft. Knox into the surplus nations' vaults. Now, foreigners get only dollars.

It is true that foreigners collect interest on the US Treasury debt they own. But, the interest is paid in dollars, which the Federal Reserve — it is now getting redundant to say — prints at will. So, the interest piles up and buys still more US Treasury bonds. The workings are much like what Marco Polo discovered when he visited China in the mid-1200s.

There the great Mongol emperor Kublai Khan had devised an ingenious scheme for enriching himself and financing his empire, chicanery that Europeans had never seen but would later employ with much pain. Kahn printed paper money from mulberry tree bark, stamped the money with his official seal, and declared it legal tender. Anyone caught refusing the paper money was killed.

When traders visited the land, they first offered their goods to Khan's agents, which paid with the paper money. This did not upset the traders because they knew that no merchant would refuse the great Khan's paper money. So, traders filled their ships or loaded their caravans with goods purchased with the paper money. Kublai was ahead of his time.

Today, few economists fear paper money, unless a country prints too much. The printing of a little is okay because "a little inflation" is accepted as benign. Kublai Kahn's paper, however, illustrates just how dangerous paper money is. If the merchants arriving with goods to trade had taken home Kahn's mulberry paper money, they would have returned with nothing of value because except in Kahn's empire the paper money was worthless.

The paper dollar illustrates the dangers of paper money today. As long as the rest of the world accepts dollars (buys US Treasury debt and, in some countries, uses dollars for money), the status quo continues. Yet, because dollars are not redeemable in gold, they have real purchasing power only in the United States. If (when?) dollars are rejected abroad, they can be spent only here. Considering that the US, under its free trade rush to globalization, has exported much of its manufacturing capacity, what will foreigners buy with dollars? We do not have that much to export, hence our massive balance of trade deficit.

It was not until the early 1700s that John Law laid to waste the French economy with paper money. Following World War I, Germany's Weimar Republic destroyed its economy and the paper Riechsmark via the printing press. Now, the United States is forcing the paper dollar on the world.

At first glance, one might say that the foreigners hold significant US assets and, therefore, could greatly influence US policies, politically and economically. Not exactly. There is an old saying about debt that goes something like this: If I owe you $100, you got me. But, if I owe you $100,000, I got you. Besides, did you ever try collecting from an 800-pound gorilla? Remember, the US is the world's sole military power.

Japan, which dearly loves to run a trade surplus with the US — which means we run a trade deficit with them — may be the perfect example. The Bank of Japan owns some $461 billion in US Treasury debt, but dumping those dollars for yen is not a serious option. The US would frown on it. Besides, Japan believes the solution to its economic woes lies in a weak yen, which makes exports cheaper. If Japan sold dollars, that would cause the yen to rise against the dollar, making exports to the US more expensive. So, we print the dollars and the Japanese stick them in their vaults and proclaim them assets.

Although nowadays we run a bigger trade deficit with China than with Japan, the Japanese's stash of $461 billion (mostly in US Treasury notes, bills, and bonds) dwarfs the Chinese central bank's holdings of $264 billion. Taiwan, another big exporter to the US, holds about $157 billion in Treasury debt.

(The US trade deficit with these three Asian countries raises some interesting questions, the primary one being Why do they do it? For Japan, it is a way of life. The US has dominated the country since WWII, and Japan depends on the US military for defense. Further, Japan, as evidenced by the paltry amount of gold it holds in its reserves (1.7%), is hooked on paper.

(Taiwan, which holds only 3.2% of its reserves in gold, also depends on the US, namely the 7th Fleet, for its security. China considers the island nation to be a renegade state that must return to the fold. For the US, however, Taiwan is a major source of computer chips that support US technology. Letting Taiwan fall to China — without first having Taiwan's chip-producing facilities and technology relocated — would be an unmitigated disaster for the US economy — and the US military. Yes, the US is stupid enough to let the microchips needed for its military to be produced abroad.

China has only 2% of its reserves in gold. Yet, holding all those dollars without complaint is not that bad a deal for China. That is because US corporations are moving massive amounts of manufacturing capability to China. Along with the plants comes technology. So, China does get physical plants and technology in return for holding dollars. When US companies quit moving there, or when China believes it can "go it alone," China may be a seller of dollars, but that's probably far into the future.)

Enter the Euro

Europeans have long resented the US being able to finance its affairs with printing press money. But, with the USSR looking down their throats, Europeans tolerated it. US troops stood as a shield against USSR aggression. With the collapse of the USSR, however, Europe moved swiftly to join the US in the enviable position of being able to print a paper currency qualified to be called a reserve currency.

First came the European Common Market; then the euro, one currency for the European Union. Already, the euro claims reserve status. (The US holds euros — and yen — as part of its reserves.) Over time, the euro could become serious competition for the dollar. For example, OPEC could start pricing oil in euros, but that would be a bold move for now considering US influence because of its economic and military might. However, no military force backs (enforces the acceptance of?) the euro. The dollar remains king of the hill.

Might Makes Right?

No country today even begins to compare militarily with the United States, and President Bush has said it will remain that way. In a June 2 speech at West Point, Bush said, “America has — and intends to keep — military strengths beyond challenge, thereby making the destabilizing arms races of other eras pointless and limiting rivalries to trade and other pursuits of peace.” Other nations can pursue trade, but they can forget about challenging US military supremacy.

If there were any doubt about Bush's intentions, on August 7, he followed up the West Point statement with, "There is no telling how many wars it will take to secure freedom in the homeland." To secure "homeland freedom," the President has told us that a regime change in Iraq is a must and that he is prepared to invade to make that change. If that is not empire talk, what is?

Empire Exposed

In his A Republic, Not an Empire, Pat Buchanan made the first loud assertion that the United States had gone down the road to empire. Despite the book being a bestseller, the book's theme was lost on Americans. When the media do not discuss a matter, it is the same as if it did not exist. Nevertheless, slowly the message is getting out.

Bill Buckler, in his newsletter The Privateer, has pulled no punches. The United States is imperialistic. European critics of US policy are screaming, but the US media ignore the cries. Yet, with European news accessible via the Internet, some Americans are getting information outside the controlled US media.

Now, though, comes Jay Bookman, writing in the Atlanta Journal-Constitution an editorial titled The president's real goal in Iraq. Bookman's fourth paragraph:

"This war [with Iraq], should it come, is intended to mark the official emergence of the United States as a full-fledged global empire, seizing sole responsibility and authority as planetary policeman. It would be the culmination of a plan 10 years or more in the making, carried out by those who believe the United States must seize the opportunity for global domination, even if it means becoming the “American imperialists” that our enemies always claimed we were."

The article goes on to ask poignant questions, like why does the Bush administration seem unconcerned about an exit strategy from Iraq? "Because we won't be leaving," Bookman answers. He also notes that the Bush administration dismisses the option of containing and deterring Iraq, as we did the Soviet Union for 45 years. Even if containment and deterrence worked, they would not allow the expansion of American power. "Besides, they [the Iraqis] are beneath us as an empire. Rome did not stoop to containment; it conquered."

To support his assertions, Bookman draws from a position paper written in 2000. Titled Rebuilding America's Defenses, it was prepared by an establishment group called the Project for the New American Century. The report lists 27 persons as having attended meetings or contributed papers in preparations of the report. Six of those have since assumed key defense and foreign policy positions in the Bush administration.

The Bush administration, in its Security Strategy, a document in which each administration outlines its approach to defending the country, seems to have adopted the concepts proffered in Rebuilding America's Defenses. Bookman writes:

"To address the terrorism threat, the president’s report lays out a newly aggressive military and foreign policy, embracing pre-emptive attack against perceived enemies. It speaks in blunt terms of what it calls u2018American internationalism,' of ignoring international opinion if that suits U.S. interests. u2018The best defense is a good offense,' the document asserts.

"It dismisses deterrence as a Cold War relic and instead talks of u2018convincing or compelling states to accept their sovereign responsibilities.'

"In essence, it lays out a plan for permanent U.S. military and economic domination of every region on the globe, unfettered by international treaty or concern. And to make that plan a reality, it envisions a stark expansion of our global military presence.

"u2018The United States will require bases and stations within and beyond Western Europe and Northeast Asia,' the document warns, u2018as well as temporary access arrangements for the long-distance deployment of U.S. troops.'

"The report’s repeated references to terrorism are misleading, however, because the approach of the new National Security Strategy was clearly not inspired by the events of Sept. 11. They can be found in much the same language in the report issued in September 2000 by the Project for the New American Century, a group of conservative interventionists outraged by the thought that the United States might be forfeiting its chance at a global empire."

Bush representatives, supporters, and cabinet members deny assertions that the United States has become imperialistic. (Secretary of Defense Donald Rumsfeld: "The United States does not covet other nations' territory.") Yet, 57 years after WWII, we still have major bases in Germany and Japan. Now comes Iraq and the Middle East, and foreign policy makers are not talking paternalistic; they are sounding quite imperialistic.

And, the day before the UN passed Resolution 1441, which sanctions a US-led attack if Iraq does not comply completely with UN inspection of Iraqi facilities suspected of working on or building WMDs, President Bush said from the White House: "We have no territorial ambitions. We don't seek an empire." This brings to mind the adage Actions speak louder than words.

Donald Kagan, a professor of classical Greek history at Yale University and an influential advocate of a more aggressive foreign policy, co-chaired the 2000 New Century project. As a private citizen, he can be more blunt in what he thinks US foreign policy should be. Still, Kagan and others shy away from terms such as empire, knowing the connotations. Yet, they talk imperialistic. From the Bookman article:

"Kagan, for example, willingly embraces the idea that the United States would establish permanent military bases in a post-war Iraq.

”‘I think that’s highly possible,' he says. u2018We will probably need a major concentration of forces in the Middle East over a long period of time. That will come at a price, but think of the price of not having it. When we have economic problems, it’s been caused by disruptions in our oil supply. If we have a force in Iraq, there will be no disruption in oil supplies.'

"Rumsfeld and Kagan believe that a successful war against Iraq will produce other benefits, such as serving an object lesson for nations such as Iran and Syria. Rumsfeld, as befits his sensitive position, puts it rather gently. If a regime change were to take place in Iraq, other nations pursuing weapons of mass destruction u2018would get the message that having them . . . is attracting attention that is not favorable and is not helpful,' he says.

"Kagan is more blunt: ‘People worry a lot about how the Arab street is going to react,' he notes. u2018Well, I see that the Arab street has gotten very, very quiet since we started blowing things up.'”

The Cost of Empire is High

The best way to figure how the federal government is doing financially is to monitor its debt growth. In fiscal 2001, US debt increased $133 billion. In 2002, it climbed $421 billion. In October, the first month of fiscal 2003, US Treasury debt rose $55 billion. Considering that Gulf War II has not yet started and that the recession (denied by the government) is only getting started, multiplying $55 billion X 12 may understate this year's deficit. Consider also that only last June Congress raised, after much political posturing, the official debt limit to $6.4 trillion. Exploding federal deficits soon will slam the US up against that debt limit.

In 2000, we spent $281 billion on our military, which was more than the next 11 nations combined. In 2003, our expenditures will rise to $378 billion. The increase in our defense budget from 1999–2003 will be more than the total amount spent annually by China, our next largest competitor. Further, we have a balance of trade deficit and a budget deficit to be financed. Luckily, the US is about to gain control of a lot of oil, the world's second largest reserves.

All that Iraqi Oil

Supposedly, revenues from the sale of Iraqi oil will be used to "establish a benevolent regime in Baghdad," but the economic benefits to the US will be enormous. The US consumes 25% of the world's oil and imports more than half the oil it uses. Lower oil prices would go a long way toward boosting the US economy and would help slash the US trade deficit. Obviously, the rest of the industrialized world would benefit also. The Commerce Department has said so, according to an Investor's Business Daily article.

"A war on Iraq could boost the global economy by eliminating a terrorist threat and releasing fresh oil supplies onto world markets." Of course, that "fresh oil" is the oil that Iraq is not permitted to pump because of sanctions from the 1990 Gulf War. After Gulf War II, if it goes as smoothly as its advocates say it will, Western World technology, capital, and expertise will be rushed to the region.