The Curse of Empires
"...Empire is an impressive notion but an ill-fated ambition of most large countries. Sooner or later it becomes a huge liability..."
dailyreckoning.com
Dr. Marc Faber
We now know that the United States is an empire. According to an article which appeared in the International Herald Tribune recently, the consensus view of some of the most notable U.S. commentators and scholars is that today, America is no mere superpower or hegemon but a full blown empire in the Roman and British sense. And, according to columnist Charles Krauthammer, it is a fact that no country has been as dominant culturally, economically, technologically and militarily in the history of the world since the Roman Empire.
Our future leaders could do worse than be praised for their tenacity, their penetrating intellects and their ability to bring prosperity to distant parts of the world under America's soft imperial influence. The more successful our foreign policy, the more leverage America will have in the world. Thus, the more likely that future historians will look back on the 21st-century United States as an empire as well as a republic, however different from that of Rome and every other empire throughout history.
This is all great. The bad news, however, is economic. All great empires experienced, over time, accelerating inflation, rising interest rates, and a sharp depreciation of their currency.
Inflation Conquers Rome
The Roman Empire's problems were numerous, including continuous border wars, internal discontent and strife, a heavy dependence on imported goods which led to a chronic trade deficit, slave rebellions, peasant uprisings in the provinces, power struggles between the rich eastern provinces and the poor ones in the west, plagues, and poor leadership. All of these problems required vast sums of money to be solved or, as was usually the case, to be postponed. But each time a new problem cropped up, the money printing press was turned on, which led to a further debasement of the currency and higher and higher inflation rates - two factors whose importance in the fall of Rome cannot be overlooked.
In fact, I would argue that as soon as the rich landowners and merchant families began to understand that the Roman currency was going to be successively debased, the shortage of gold and bullion in the empire was aggravated. These families began to hoard precious metals as the only real store of value, thus removing them from circulation.
A few observations about the Roman Empire may be in order since the Pax Americana has been compared to the Pax Romana. At the zenith of the Roman Empire under Augustus, it is true that, for a short time at least, there was peace in most parts of the empire. But aside from this relatively short period, Rome was continuously engaged in wars along its borders or had to take care of uprisings in the provinces and even on the Italian peninsula.
While it is true that the United States is at present militarily far superior to any other nation, it's not necessarily a fact that should make us complacent. The Roman Empire also reached its largest extent under the emperor Trajan. But by then several wars to protect the empire had already been extremely costly in terms of human losses. The economy on the Italian peninsula had already badly deteriorated, after the price of wine fell in response to the loss of an export market for the goods.
This is an important parallel to the United States. In the same way that Italian wines lost out to wines cultivated in other provinces of the Roman Empire, which brought about economic decay on the Italian peninsula, U.S. manufacturing is gradually being undermined by new centers of production south of the border and in Asia, especially now in China.
Empire is an impressive notion but an ill-fated ambition of most large countries. Sooner or later it becomes a huge liability. In fact, based on historical evidence, I am surprised that anyone would wish to have an empire. Its maintenance proves far too costly in the long run. Inevitably, empires experience inflation, rising interest rates, a depreciating currency, default on their debts, or a combination thereof. The title of empire should not be one that America is anxious to seek.
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Dr. Marc Faber is the editor of The Gloom, Boom and Doom Report and a major contributor to Strategic Investment. Dr. Faber has been headquartered in Hong Kong for nearly 20 years, during which time he has specialized in Asian markets and advised major clients seeking down and out bargains with deep hidden value - unknown to the average investing public - bargains with immense upside potential. |
