In today’s issue:

  • Osama bin Laden’s fiscal subversion lives on
  • Calamity Jane on an oversized French lion
  • What set the empire on a downward course

[Ed note: The first finance book I ever read was Empire of Debt, by Bill Bonner and Addison Wiggin. It warned about the path the American empire was embarking on. With interest on the national debt set to exceed defence spending this year, we may be nearing the reckoning they warned about. But where did it all start to go wrong? Here’s Bill Bonner, writing from Poitou, France…] 

“We are continuing this policy in bleeding America to the point of bankruptcy.”

– Osama bin Laden

The trap was obvious. But we jumped in anyway.

On Sunday, a week ago, we went to a sung Latin mass at the church of St. Roch. Almost every seat was taken, with hundreds of people participating… most of whom knew the appropriate Latin responses.

Turn away from materialism,” said the priest, thundering from a pulpit in the center of the église. “Things… your Facebook… your new dresses and vacations are a distraction. You need to focus on God.”

Not a very original theme. But the worshippers seemed happy with it.

After the service, we strolled over to the nearby Tuileries garden.

All of a sudden, fifty-five years vanished. A memory… almost more vivid than the present… came upon us. We recalled our first visit to the park more than a half century ago when we were a student, doing our junior year abroad.

It was a winter day… in 1969. The sun, barely visible through the thin clouds, seemed to hang in the sky like the ash on a cigarette, waiting for nightfall.

The park — much less frequented by tourists then than now — was still open.

Sarah, a friend from school, was with us. Tall and confident, she was fearless. When men stared at her on the subway, she would stare back, until they looked away. She had been kicked out of private schools in the US, so her parents sent her to Paris where she was supposed to be studying art history.

We were walking through the park when she saw the sculpture of an oversized lion. (A statue by Cain, 1873). Tempted, she jumped on its back like Calamity Jane on a wild horse.

You weren’t supposed to walk on the grass, let alone leap onto a venerable statue. And when we heard the gendarme’s whistle, she dismounted and we continued our walk.

Sarah was a ‘free spirit’. But so were we all, Americans… young, proud, free, ambitious… and much admired, even in Paris.

We were the ‘good guys’ back then. At least, we thought so. Yes, we made mistakes; the Vietnam war, for example. But it would soon be over. And we had learned our lesson; we wouldn’t do that again! Or so we thought.

Our money was good. Our credit record was unblemished. American universities were turning out more scientists and engineers than ever. China was a starving ‘Third World’ country. The Soviet Union was led by geriatric incompetents, following a playbook that was sure to fail. And for the US, it was onward and upward… and we, the Class of ’70, unbent, untempered and untested, would lead the way.

But that was before two critical ‘hinge points of history’ creaked… and closed off the future we expected.

First, only two years after our initial visit to Paris, in 1971, Nixon’s new ‘credit dollar’ — a pure paper form of money, with nothing behind it save the ‘full faith and credit of the US government’ — became lawful money. Back then, the faith and the credit of the USA was unquestioned. But though it went mostly unnoticed, the money switcheroo turned the US from a country that earned its way honestly, to one that lived by printing more and more credit dollars.

In just a few months, balanced budgets were history… trade surpluses turned into trade deficits… wage gains came to an end… and the foundation of a $100 trillion debt pile was laid.

The second major hinge point came thirty years later. Once again, we were in Paris… and walking through the Tuileries garden on our way home from the office. That memory came back too… unbidden, like a recurring nightmare… and a feeling of doom. We recalled the employees gathering around a screen to watch the smoke rising from the World Trade Center… and then, unbelievably, the towers collapsed.

One of our French staff members came up to us, with a gesture of solidarity and sympathy, and said: “We are all Americans now.” That was probably the last time we enjoyed the world’s sincere respect and approval.

Walking through the Tuileries garden, that September, twenty-three years ago, we had a sense that things would never be the same… that the peace and prosperity of the US-led world had come to an end.

It was not that we feared more terrorist attacks. 9/11 was the most daring and successful terrorist assault in history. It was unlikely to be repeated… and unlikely to threaten the empire of ‘the West.’

What we felt coming, like a bull driven mad by a fly, was the US response. The 9/11 attack was so successful, from the terrorists’ point of view, not just that it brought down the iconic towers of the globalized order — the World Trade Center towers. The real achievement was in provoking US policymakers to strangle themselves.

At that point, 2001, the US government had $6 trillion in debt. Still manageable. The federal budget was still more or less in balance. And our real rival — the Soviet Union — had given up ten years before.

Instead of calmly pursuing the perps, at negligible cost… and otherwise sticking with the principles of a fiscally responsible, law-abiding civil society…the Bush administration, now in the grip of the neocons, the firepower industry and Israeli hard-liners, launched a pointless war against nobody in particular (aka terrorists).

US troops were soon on the march — against Iraq — which made no sense; Iraq’s leader, Saddam Hussein, was as much opposed to ‘terrorists’ as the US. And the 9/11 terrorists were almost all Saudis, not a single Iraqi among them. But Saudi Arabia had a secret pact with the US… and was also a major holder of US Treasury bonds.

The resulting wars cost the US approximately $8 trillion… and as many as one million deaths.

They also set the empire on a downward course, ruining itself with fruitless wars and endless deficits.


Bill Bonner
Fortune & Freedom

PS How will America attempt to escape from all this debt? The same way our UK government is planning to do it. Find out here.