The Coronavirus is not going to fulfill the daydreams of anti-imperialist pundits and put an end to the current global order. But it will pack several years worth of ordinary decline into a single year. Then, the normal course of events will resume.
If you’ve looked at the US debt clock anytime in the last month or so, you might have noticed something different about it. Normally, while the debt goes up, the GDP goes up nearly as fast, so that their ratio (the number that really matters) increases by at most two or three percent per year.
I’ve talked before about how this is largely the result of the powers that be inflating the currency to cover up a two-decade-long decline in the size of the real economy. Nevertheless, it gets the job done – the nominal economy grows fast enough to keep the debt from getting out of hand, and the system plods onward.
But now, with the Coronavirus shutdown in full swing, spending is way higher than usual, and GDP is decreasing, so we can expect Washington to close out the year with a debt-to-GDP ratio of about 130 percent (for comparison, it was around 112 percent this January).
Will this crash the global economy? Not by a long shot. (Remember all the people who looked at the trillion-dollar-deficits during Obama’s first term and said that hyperinflation was just around the corner? Well, they were wrong).
What this really means is just that five or six years of ordinary decline have been packed into one year of virus-boosted decline.
To look at another side of America’s rolling crisis, lots of people are predicting that the record-high unemployment rate in America will lead to record numbers of suicides and overdose deaths by the end of the year. But Americans, especially poor whites, already had dreadfully high rates of deaths of despair. That’s what you get in deindustrialized economy where imports are paid for through the exportation of huge amounts of fiat money – there just isn’t a good market for real, honest labor. The Coronavirus is only speeding things up.
At the bottom of all the news that’s coming our way this year is a rather unpleasant fact: declining empires handle crises poorly.
Why is the United States an empire? Because it consumes more resources than it produces. Why do so many people not believe it’s an empire? Because it hasn’t adopted the costly strategy of conquering huge parts of the world and administering their territory directly. The American elite has found it more effective to control the global financial system, hold sole authority to print the global currency, and pull off the occasional coup or invasion in an oil-rich country whose policies don’t favor American interests. (Think Iran in 1953, Iraq in 2003, Libya in 2011, or Syria and Venezuela today).
Remember the Ledeen Doctrine? “Every ten years or so, the United States needs to pick up some small crappy little country and throw it against the wall, just to show the world we mean business.”
Well, America’s ability to pick up crappy little countries is melting away these days. The Venezuela coup was indecisive. The Syria war ended with Russia, Turkey, and Hezbollah sitting at the negotiation table. And so forth.
Two days ago, Iran launched its first military satellite. People like Mike Pompeo want to make this look like practice for building a nuclear ICBM; in reality, the satellites themselves will be the last major piece missing from Iran’s defensive armament. The Iranians already have hypersonic cruise missiles, and with the ability to track targets from space, the Americans will have no choice but to clear their navy out of the region whenever tensions flare up.
The ultimate guarantor of American dominance – the global demand for dollars – remains in place for now. But even there, the empire is sawing out its own perch. Trade sanctions (basically, America’s de facto power, as the world’s one sovereign nation, to regulate commerce between all other nations) are easier to enforce when said nations use American money, which is why so many countries are beginning the transition from dollars to Yuan.
It will take a while – two or three decades, mostly likely – before the dollar has been displaced. After that, America will face a steep rise in the cost of imports, and severe inflation as dollars are sent home from every corner of the world. In short, we will have to deal with an economic meltdown like we haven’t seen since the Great Depression.
After another decade or two of turmoil, America or its successor states will clamber their way back to normalcy. Who will benefit from this? The American working man. In a country where imports have to be paid for by an equal value of exports, there is no outsourcing of jobs. The people on top will likely never have it as good as they do now, but the people on the bottom will find that their skills are in much higher demand in a country that isn’t flooded with cheap imports and swarming with foreign laborers.
But it will be a long, rough road between here and there, and we had better get to work preparing for it.