Watch America destroy its own empire

Summary: A provocative essay by a sophisticated european observer makes the case that America is destroying its own Empire. A word to the wise …

US Sanctions

US Sanctions reach a Turning Point

By Karsten Riise at Martin van Creveld’s website.
Posted with the author’s generous permission.

A defining moment for the US sanctions regime.

Each year, the USA finds a new country or group of countries to target with sanctions {see the list}. Each year the USA adds about 1,000 individuals to its ever longer sanctions list {Ed. – roughly 35,000 people and entities now}. Now, US sanctions are coming to a turning point.

Up till now, the EU – representing around the same percentage of the world economy as the USA – was sitting put, as the USA grew its sanctions regime to ever more bizarre proportions. Together, the USA and the EU constituted nearly half of the world economy, and US sanctions previously “only” used to target the other half of the world’s economies. Hitherto, the EU had no compelling reasons to strain is relations with the USA because of US sanctions not affecting themselves.

But now, “secondary sanctions” regarding Iran also hit hard at strategic EU companies and financial institutions and negatively affect EU global strategic interests in energy from the Persian Gulf. US sanctions in effect attack the liberty, security and sovereignty of its biggest group of friends, the EU.

Thus, we have now come to a defining moment for the global sanctions regime, run by the USA.

The US economy is already less than a quarter of the world’s GDP in USD dollars, and in 2023 it will fall to only just about one fifth of the world (source: IMF). The non-US part, the 4 fifths of the world economy (now including the EU and China), constitute an increasingly advanced group, and they are about to collude against the US sanctions regime. Collusion is the result of parallel interests, and the EU may not actually (or at least not publicly) coordinate all its counter-sanctions with other major power centers.

We talk about the world’s most powerful and complex political-economic structures starting to fundamentally change, here.

So we need to analyze the bigger picture, how complete systems of counter-strategies against present and possible future US sanctions are being planned and implemented by strong powers around the world – all directed (but maybe only sometimes coordinated) against the USA. These systems of counter-strategies will include, but not be limited to, the following:

Finance.

Payment transfer streams will develop to avoid US banks – hurting the global position of the USA’s major “growth-industry”. It will be a chance (as well as a good excuse) for the EU, China, Japan, India and everybody else, to nationalistically promote THEIR banks in the international system, at the expense of US banks.

Looking at the long-term trend, the US financial industry has become really the ONLY big growth industry which drives upwards the USA economy. No other sector in the US economy has the combination of size and growth, which finance has (weapons are a bit the same, but finance is unique in size) – so this will be very hard for the USA.

US banks hitherto have a central role in facilitating all global money transfers, and a lot of international money transfers between third-countries somehow technically go via the USA. This system architecture will now be stopped – not just by China, but also by the EU, and probably by India.

Everybody outside the USA will be reluctant to let their money be touched by US financial institutions, or let their money touch US shores even for a milli-second. And of course, the EU and China know how to engineer legal and technical solutions for this.

The growth of US credit card systems will be impeded. Instead, cards from China, the EU (and India?) will take bigger shares of this profitable and fast growing world market. Russia was the first country on this trend, kicking out all US credit card companies, and inviting in the Chinese credit card system. The EU may well strengthen the role of EU credit cards, and create actions which “incidentally” (oops!?) will hurt US credit cards in EU markets. The finance center of London, UK will after Brexit be caught in this cross-fire between the EU and the USA – if the UK sides with the USA against EU counter-sanction initiatives, the EU may develop strong tools to draw UK credit-card business into EU-jurisdiction.

New global IT money transfer system regimes, which counteract US influence on SWIFT, will erode US political influence. The SWIFT system is based in Brussels, but under heavy US political influence. Russia has already built itself an alternative to that. The EU can no longer accept that the US might be able to hurt EU companies on their SWIFT transfers. The EU will therefore have to take actions either to liberate SWIFT from US control, or to create a parallel EU-system.

Editor’s note: This is already happening. Russia has an alternative to SWIFT system. Ripple is another new competitor.

Avoid Wall Street.

Why should countries take up loans in the US, if they can have the same loans without risk of future sanctions from China or even the EU?

The IPO of the Saudi ARAMCO oil company has been stalled – unconfirmed information states that fear of US courts reaching out against Saudi assets after 11 September, is part of the reason. Already, the trend is that the biggest IPOs in the world move to Asia.

De-dollarization.

The EU now will shift trade of energy from dollars to Euro – this trend will also diminish dollars in other international trade. Trillions of international dollars flowing around in trade may come back “home” to the USA – risking inflation and economic crisis.  Gold is according to unconfirmed reports being speedily bought up by governments, not only by Russia and China, but even Turkey, recently also hit by US sanctions.

Strategic supply.

Airbus cannot deliver airplanes to Iran, because, among other things, vital parts are sourced in the USA. This will change. Strategic supply chains will morph to avoid US sub-suppliers, carriers (ships, airplanes, IT), technology, service partners etc. – fundamentally hurting the US global position. We are not speaking used-cars, here, we speak strategic business sectors. The EU and China may not state this anti-US sourcing publicly as an official policy, they will just pull the strings to do it VERY effectively in strategic sectors.

Also, US deliveries in other strategic sectors like food (grain and soy from US farmers) and US energy will be affected by counter-sanctions. China sheds US soybeans and pushes their price down – the EU (less dependent hereof) may then offer to pick-up cheap surplus soybeans from the USA as a bargaining card. The idea of larger US delivery of LNG to the EU probably will be mostly words, but the amounts of LNG from the USA to the EU may possibly increase marginally. The EU may even come to a cold calculation, that the EU in the gas sector might have a more maneuverable partner with Russia than with the USA. The EU has in several aspects a substantially advantageous size-relation towards Russia, and not towards the USA, and while Russia enjoys a good relationship with China, Russia will like to balance its relations too.

Tourism and education.

Tourism is one of the fastest growing industries in the world, and the USA sells its cultural influence to all tourists coming. University education is not only a strategic business to finance national research – Universities are also a cornerstone for the USA to influence future management generations around the world. Why not send tourists and students to other places than the USA? Chinese tourists and students are of significant importance to the USA, and China has plenty of other destinations to send tourists and students, other than to the USA.

Using the state to shield business.

As a counter-sanction, the EU now moves central banks and state-owned companies into the fray in financing, and as business partners and intermediate partners, when dealing with Iran. US sanctions on EU state-owned entities can then amount to a US declaration of (economic) war, not only against EU private entities, but directly against EU states.

Buying other than US weapons.

The EU recently is implementing a grand and ambitious strategy to increase its own weapons-industry – independent of the USA. To increase the volume strength of EU weapons-makers, the EU will need to minimize imports of US weapons. The EU will have to make their own, only importing as few items as possible from the USA. Saudi Arabia is by far one of the world’s biggest arms purchasers – and nearly all is bought form the USA. However, should the romance between the leaderships of Saudi Arabia and the USA cool down, Saudi Arabia would be well advised to diversify their weapons sources too. And Saudi Arabia even already has Eurofighters from the EU and embryonic arms-relations with Russia and to build on.

The collusion against the USA.

US trade war unites the EU, China, India, and the rest of the world (even the UK) against US interests. With aggressive, unilateral trade-war, started by the US, all the rest of the world will now have even more motives to coordinate their counter-strategies to the US sanctions regime.

The EU may seem slow to react – and this may lure US politicians in their hubris to believe that the EU cannot or will not. But believe me, the EU will – because this has become a strategic must. The EU has seen the hand-writing of US sanctions on their wall – they will think this through, plan and make deep preparations to free EU sovereignty from US control. Just read between the lines of EU’s Commission President Jean-Claude Juncker’s recent State of the Union speech. When the EU rolls out their US counter-sanction measures, it will be big, comprehensive and VERY effective.

Negative changes for the USA will last.

Once alternative systems to US banks, finance, the US dollars etc. have developed and matured, they will NOT go away. The USA is in its hubris about to destroy its global claim for economic hegemony – and that is a good thing.

—————————————-

Karsten Riise Kristensen

About the author

From his LinkedIn profile — Karsten Riise Kristensen has a MSc in Economics & Business Administration and a distinguished career in business. He was CEO of DaimlerChrysler Scandinavia Holding AS, and is now a partner of Change Management (which he founded in 2001 to assist companies in the process of change).

He is bearish on America, as he explains in “US Position is Untenable.” See my rebuttal to his analysis.

For More Information

Ideas! For ideas about using your Holiday cash, see my recommended books and films at Amazon.

If you liked this post, like us on Facebook and follow us on Twitter. See all posts about the American Empire, and especially these…

  1. Niall Ferguson, poet-laureate of the American Empire.
  2. A wonderful discussion about the American Empire.Ultimately Primacy Is Its Own Justification (Imperial rule #12).
  3. A warning from the past. Might the American Empire drag down America?
  4. The American Empire, as seen by a Major General of the PLA.
  5. Advice from Kipling & Orwell about America’s empire. Let’s listen.
  6. A anthropologist explains what happened to the American Empire.

Books about the American Empire

American Empire: The Realities and Consequences of U.S. Diplomacy by Andrew Bacevich (2002).

Colossus: The Rise and Fall of the American Empire by Niall Ferguson (2004).

American Empire by Andrew Bacevich
By Andrew Bacevich. Available at Amazon.
Colossus: The Rise and Fall of the American Empire
Available at Amazon.

22 thoughts on “Watch America destroy its own empire

    1. IMO, it is neither. It is the fact that as we encouraged globalization, elitists used the changes as an opportunity to implement changes they desired. Prior to Reagan, it was “fair trade.” Then it was “free trade.” Now, we are back to “fair trade.” The reality of sanctions, doing much that is useful, is suspect. From a 10,000 foot view, if we are such a big economy, and we need to change trade to fair, just how fair is it for us to institute policies that make trade more difficult? This inherent contradiction is glossed over. The methodology of promoting that we are somehow increasing our total trade in political speeches, when are actually decreasing both trade and effectiveness of our trading mechanisms with our policies, is as our host says “a gift to our rulers.”

      The business of America is business. If only that were true!

  1. Excellent article.

    The EU’s desire for the Euro to supplant (or match) the USD is long-standing but now is probably the weakest moment for the Euro since its inception. Events in just the last few days possibly signal the departure of Italy from the Euro-structure unless they do an about-face or retreat.

    As for the UK, it is happy to play its long-standing intermediary role and divide-and-rule in the forex markets..

    If the EU is perceived to be manipulating SWIFT to its own benefit in any way there would be massive pushback from countries all around the globe.. but building a “by-pass” around the US is inevitable. I would also note that this augurs ill for the SEC/Treasury’s practice of levying fines outside their jurisdiction using access to SWIFT as a stick to beat recalcitrant payers.

    and P.S. EU is about to get 20% smaller economically… despite whatever stiff-upper-lip they may be projecting.

  2. The latest in a long line of premature — probably — economic and power / policy obits for America. The idea as noted of a Brexit given TO grabbing a larger market share is given the overall nature of its remain — at least for a while — is basically a fantasy. All empires to through peaks and valleys before permanent decline. My bet is that this is a value previous empires Rome, Spain, Brit all had to small internal economies to survive without a colonial network The jury is very much out as to whether this iteration of the middle kingdom will succeed where all there have failed — feeding the middle to keep it from sucking the coasts into a socio-political black hole.

    1. Rick,

      I believe you are conflating America with the American Empire. America rose without an Empire, according to the Founders’ vision.

      Our empire is unlike those of other nations: it is unprofitable for the nation. We pay the vast costs to maintain it, but profitable only a few special interests get the benefits.

      Returning to the Founders’ vision will make us stronger. For example, instead of a global military with hundreds of bases garrisoning the world, we can rebuild our rotting public infrastructure.

  3. There seems to be a parallel here to the UK after WWII. They were part of the winning by side but immediately disbanded their empire and became subservient to American interests.

    1. Mandy,

      The British Empire disintegrated , but not because the Brits disbanded it. The Brit colonies left for the same reasons the US did 1776, and by the same means: war or threat of war.

      The British Empire was brutally extractive.

  4. The average American has not seen any real wage improvement since Nixon, despite the various technologies that have been introduced. Why would he want the status quo to continue?
    The empire failed to provide benefit for its populace, so it has lost support. Why is anyone surprised?

    1. Etudiant,

      The average American might want lots of stuff, but that does not mean he will fight for change. It’s the difference between peons and citizens. Time will tell which we are.

  5. Damn the empire, anyway. We built it to contain communist global domination, and that being done, did we disband it? No. In their greed and hubris the military-industrial-financial complex found it too tempting to create new enemies, depress the middle and lower classes, prosecute useless wars far from home, bully other nations, and act surprised when both the american people and the world shoved back. “You have sat too long for any good you have been doing lately… Depart, I say; and let us have done with you. In the name of God, go!”

  6. Unlikely for a variety of reasons

    1. Exports are only a small % of GDP for the US (12-15%); so any trade wars etc. will have much less impact on the US economy. Germany and China will be in deep trouble….
    2. The shale oil and gas revolution have left the US economy in an excellent shape – both for raw materials and energy. If there is a war in the middle east – the impact to the US wont be as great as for most other economies.
    3.The US is swinging back to introversion. Most countries have relied upon the US to keep the peace , keep the seal lanes open etc. etc. There could be many more wars start up as the US pulls back – and countries will have to re-arm quickly. The US is almost an island and the coming conventional wars will hardly impact the US. Remove the US management and protection and most countries lose vast swathes of their economic and security wherewithal
    4. The US has a generally highly efficient market based economy. countries like China will continue to waste much more money on inefficient government driven projects.
    5. As well as an efficient market based economy, the US also has huge amounts of capital available to fund key projects.
    6. The American system of government – as setup by the founding fathers seems to be working rather well. As the US pulls back areas like Europe will start to rip them selves apart like they have done so many times before (e.g. WWI and WWII) – think of EU`s UK brexit, Catalonia’s and Scotland’s independence movement etc…
    7. Even though the debt is rather high – the US is a wealthy country. It`s total value must be of the order of 200 – 400 Trillion $s – so although the debt may come payable. it might be a little painful, but it can be relatively easily done.
    8. From a demographics point of view the population is aging slowly. However, because of immigration and slightly higher birth rates the US will be in much better shape than most advanced economies. Some say China will become old before they become rich… Japan sells more adult diapers than baby diapers etc..
    9. The US has a deep technology base. If we needed to do another Manhattan project e.g. to get fusion going – the US is better placed than most countries
    10. Many more items….

    1. You are criticizing a series of defensive measures as if they are offensive. So your note is off the mark. The Europeans simply do not want to hurt their ability to get their gas from Russia and their oil from Iran without having to suffer ther effects of US sanctions. So in a basic sense the US may not be hurt but these measures will ensure that Europe will not be harmed.albertdeko@gmail.com

  7. Creveat – I was born in the UK and live in Australia, although I have travelled a fair bit in the US, so my knowledge is limited to an outsiders look in.

    The US is facing what the UK faced after WW 2, but the role of the US has been that of a Policeman and not a brutal true colonialist.

    The US has of late used it power in a bias way, but a steady withdrawal from the global military bases would help balance the books, re-directing this expenditure to the US infrastructure would stimulate growth and have a larger multiplier effect than overseas expenditure. US alliances are not irrecoverably damaged.

    Military sales may actually increase as the US Policeman leaves countries to look out for themselves, boosting exports there.

    To be able to supply 80/85 % of your GDP needs domestically is a great situation to be in, sure debt is high, but it is globally, this will weigh heavily on all economies for maybe the next 50 years. That said the state of the infrastructure is poor, so the investment dollars will achieve a higher return at the start.

    If anything I think the US did reverse colonisation, its elites set up military bases initially for all the right reasons stopping communism; but from about the 1980’s then failed to scale them back and continued to over invest abroad. This over investment was paid for by a quite brutal expropriation of wealth from the poor and then the middle class at home.

    I am 55, so too old to move really, but if I could I would even now; the US has a free market, stable democracy (even with the Hollywoodisation), economically dynamic and not too old for an industrialised economy, my children’s chances would be greater.

    AI is coming and somehow its joblessness and adaptations, will I think be better dealt with in the US, Withdrawl from trade is a worry, I would have preferred massive tax incentives to invest in robot manufacturing in the US and bringing clerical work outsourced to overseas back into the US, even if there are very few direct jobs as it is computerised the tax is paid at home and this can help create jobs in the infrastructure upgrades and so on.

    The EU is falling apart I lived in Spain in the 1990’s (1990 – 1996) in Barcelona and even then they all wanted out of Spain. No one likes the Germans, just their money and jobs. The EU is far less integrated than people think. I have spoken to English people here and they talk about the damage to their careers as they can’t work in the EU, ask them if they speak a European language and they get angry. I speak Spanish and Catalan, my first wife was a Catalan. It takes at least 3 years just to function commercially in a language and the movement is much less for that reason than the US where moving South Spanish helps, but English is universally the first national language (for now). In California I used my Spanish a fair bit.

    In a world of dumb and dumber, sure the US is dumb (sometimes), but hell the rest of are often dumber. It is like the tale of the one eyed man….The US is not easier streets ahead anymore, but look at GDP /capita and social mobility it is doing OK. Trump is a real pain, but the majority of Brits would swop him for Mrs.May!

    1. Just a guy,

      Your description of US foreign policy is inaccurate.

      We have a long history of overthrowing elected governments that would not support US interests.

      We have helped overthrow secular governments in Afghanistan, Iraq, Libya – and are trying to do so in Syria. All replaced by theocratic Islamic governments.

      That is just the tip of history. Not much actual “policing”.

  8. ending the empire with intentionality may well be the best decision the united states could make. where empires have ended intentionally, e.g. 20th century britain and ussr, the home country has recovered relatively quickly. where empires ended only after long and determined resistance, the results have been much more severe for the homeland. c.f., spain, rome. as this entry correctly notes, the costs of the u.s. empire exceed the benefits. it is time to cut our losses

    1. Jay,

      I agree. But there are no signs of us ending the empire. It has strong bipartisan support. The representative of the deep state who wrote the anonymous NYT explained why: even if we elected someone who opposes it (Trump is just insufficiently enthusiastic), they’ll work to stop him.

      Nor is there much evidence that the US public strongly opposes the empire.

    1. I have it. Couldn’t get through it. Bonner is a fun and smart guy, and has an impressively long record of being almost always wrong about a wide range of economic and financial matters.

      His company,s flagship is the free Daily Reckoning newsletter, been consistently doomsterous for several decades, during one of the greatest periods of global prosperity since the invention of agriculture.

      His first book was “Financial Reckoning Day: how to survive the soft depression of the 21st century” (2003). It’s 15 years later and the economy is growing at 4%. No depression, soft or hard, visible in the US.

      Being so consistently wrong has made Bonner a wealthy man. That says something about America.

      I suggest you find something better to read.

    2. Sven,

      Economics is really boring. I suggest starting with the Icon graphic guides. Strongly recommend. They are well-written and accurate. Also, fun to read. If you want more details about a specific subject, go to Wikipedia.

      A list of their books: http://www.introducingbooks.com/graphic-guides/

      http://www.introducingbooks.com/ib-title/introducing-economics/

      http://www.introducingbooks.com/ib-title/introducing-capitalism/

      http://www.introducingbooks.com/ib-title/introducing-keynes/

      Check back if you would like more advanced books. My library is in 75 boxes in my basement. A carpenter is coming next month to convert our formal dining room into a library (we do little formal dining). Somewhere in there are some good books that meet you need.

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