Ideology Only Goes So Far
As discussed, last week, it seems demonstrable that the U.S. is acting on a virulent ideology of Messianic Global Manifest Destiny. This emerging ideology sees the U.S. as destined to not only be central in the world but to control the entire world. There are many proponents of this deviant and dangerous worldview. One does not have to look far to see the “think tanks” that produce such blatantly immoral justifications for this belief system. Groups such as the Atlantic Council, the Center for American Progress, and the Council on Foreign Relations to name but three. They are of course, supported by almost the entire corporate media complex.
The problem for these true believers is that ideology only goes so far. One does not need to be an economic determinist to understand that if the right pockets are not being lined then the whole thing grinds to a halt. Certainly, a lot of the ideology itself is just self-serving cover for naked economic gain. In other ways the economic interests arise to take advantage of the growing intellectual zeitgeist to gain otherwise unobtainable profits. Whichever came first the dollars, or the belief structure is a chicken and egg problem, at this point it does not matter as the two are completely intertwined. As always, the money follows the conviction and vice versa.
A Nefarious List of Clients
In the case of the U.S. empire the list of clients benefitting from the ideology of Messianic Global Manifest Destiny is long and sordid. First, of course, are government employees. They always benefit from the expenditure of someone else’s money, The jobs and status that this confers always makes them interested in an ever-expanding scope of governmental power at home and abroad.
Next up are the defense contractors. This is so obvious as to barely need explaining. Never forget that any war, fought anywhere benefits the U.S. arms industry. According to the International Peace Research Institute in Stockholm the U.S. accounts for 38% of all global arms exports from 2017 to 2021. The war in Ukraine, for instance, is being fought primarily with old Soviet weapons from the old Warsaw Pact countries. Yet, all that they give to Ukraine will be replaced by U.S. armaments, courtesy of the always ready to lend a hand U.S. arms cabal. It is looking so rosy for the industry that Raytheon, for one, recently offered a much improved financial guidance that points the way to sweet breezy good times ahead.
It is not just war that makes for profitable imperial clients. The normal run of a U.S. dominated imperial trading system makes multinational corporations one of the largest benefactors of the U.S. empire. This is certainly true of exporters particularly, but no one benefits more than the financial and banking sectors of the U.S. economy.
Monetary Imperialism; the Foundation of Empire
Undergirding all of this is the preeminent place that U.S. finance has in the world economy. The key to understanding this domination is the notion of a “Reserve Currency”. This is the reality that backing up all other currencies in the world is one “reserve” currency. Currently that currency is the United States dollar. This, as will be explained below, allows a nation to inflate its currency much more than it could otherwise. As with all policy, inflation has discrete winners (and losers). I explained here, how it is the financial services sector and the banking class that wins. They win even more when you take this process into the international arena.
Here is an abstract of an excellent article, by Hans-Hermann Hoppe explaining this phenomenon. What is important is to understand that there is no advantage to inflating your currency if you are not a reserve currency. Two nations of roughly equal economic weight, not possessing a reserve currency can only inflate (give themselves unwarranted extra purchasing power) for a brief time relative to their equal trading partner.
Now when a nation gains the status of having the reserve currency everything changes. A nation gains this, in part, by having a dynamic economy, but mostly from having a powerful military (the two are obviously linked). This is why the British Pound was, not coincidentally, the reserve currency until the U.S. dollar supplanted it in the aftermath of WWI. Let me quote from Hoppe to show how this works:
In this case too we can distinguish between two stages of development. Exemplary of the first one is the system that was established at Bretton Woods. The U.S. is off the gold standard domestically, but it assumes the responsibility of redeeming paper dollars into gold (at fixed parity) vis-à-vis the German central bank, while the German central bank promises to exchange paper marks into paper dollars (at fixed parity). It would seem that Germany is still on the gold standard, for marks can be redeemed into dollars and dollars into gold. De facto, however, matters are completely different. The German central bank is pressured not to make use of its right to redeem dollar notes into gold but to use its dollars instead as reserves on top of which it creates mark notes. I will explain what is now in existence in the starkest possible terms in order to make the situation as clear as possible. Now let’s say the U.S. central bank creates $50,000 out of thin air and uses this money to buy DM 150,000 (assuming an exchange rate of 1:3) from the German central bank and then turns around and buys, let’s say, a Mercedes for this price. What does the German bank do with its $50,000? Does it buy something in the U.S. or insist on redeeming this sum into gold? The answer is of course, No. Rather, the $50,000 are registered as an increase in the bank’s dollar reserves, and given this increase, the German bank then creates an additional DM 150,000 out of thin air, and turns around and buys itself a new Mercedes, too.
Obviously, the U.S. now has a trade deficit with Germany: imports exceed exports. However, this is a “deficit without tears” (13) because no payment (exports) is being made for the imported Mercedes, and the dollar does not fall against the mark. Instead, a system of two-fold exploitation is imposed on the German public. First, it gets ripped off by the U.S. central bank, then, facilitated by the first rip-off, it gets ripped off once more by its own central bank. We can call this system monetary imperialism.
That the U.S. still must redeem national currencies in gold is an impediment to complete monetary imperialism as other nations may act as a check on the creation of unwarranted U.S. purchasing power. This is in fact what France was doing prior to the ending of the gold standard in August of 1971, as it was redeeming lots of U.S. gold. The dollar was now free floating, yet still, by virtue of the U.S. military, the reserve currency. Again from Hoppe’s explanation:
The second stage is like stage one except that gold no longer plays a role. All countries are on a pure fiat money standard. The U.S. initiates the process of inflation, and by using dollars as reserve currency, U.S. inflation is exported to U.S.-dominated countries, while goods flow into the U.S. in the same way as described before. Yet a run on the U.S. gold reserves is no longer possible, of course. Even this system is unsatisfactory, however. In a world of many countries, and even if the U.S. is a superpower with troops stationed in well over 100 countries around the globe, this system of coordinated inflation is bound to crack again and again. On the one hand, a U.S.-dominated country might suffer more inflation than the U.S., its currency would depreciate against the dollar, and in order to save government-connected investors in those countries, the U.S. might be compelled to engage in expensive bailout operations, i.e., buying up the falling currency in order to stabilize it. On the other hand (and this is potentially even more dangerous), a U.S.-dominated country may inflate less than the U.S., its currency would appreciate against the dollar, and, if this became a trend, the dollar would lose trust and might be abandoned in favor of the other, harder currency.
As the final solution in the drive toward monetary imperialism and as a decisive intermediate step in the drive toward world government, the U.S. has been working long and hard to establish a U.S.-controlled world central bank issuing a single, world-wide accepted paper currency. (14) Only then are all obstacles to government counterfeiting eliminated because then the currency can no longer rise or fall against any other as no other currencies are left. The monetary integration currently under way in Europe, the establishment of a Europe-wide EURO, is an important step in this direction. The EURO will be more inflationary than the least inflationary of the previously existing national European currencies, the German mark. And it is easier for the U.S. central bank to “cooperate” with a single European central bank than with some fifteen or so different banks. Moreover, whereas these fifteen odd banks also could (and in fact did) use other reserve currencies besides the dollar, namely those of other European currencies (notably the German mark), with these other currencies gone, what else but the dollar can the European bank use for this purpose?
I know for many this is “eyes glaze over” stuff. Yet it is crucial to grasp the main tenets of monetary imperialism. It is to the benefit of the entire financial class and the multinational corporate community to be able to foist an unwarranted purchasing power (inflation) on the rest of the world. This rarely helps those lower down the economic ladder as they don’t get ahold of the newly created money soon enough to offset a general rise in prices.
This also explains the economic rationale to ever expanding U.S. imperial control. When you get ahold of the notion of what the economic benefit to all this Global Manifest Destiny is (even if you don’t get all the intricacies) you start to see why there is such a drive to continually expand the U.S. empire. The money does indeed dovetail with the Messianic true believers.
This, however, cannot last forever. The laws of economics will win out in the end. The system will crack under the weight of all this money creation fueled by both imperial spending and domestic entitlement programs, or military overextension and defeat. The end will not be pretty (if it is even survivable), as it was not for the British empire when it crumbled, and the Pound lost its reserve currency status. Unless we intentionally, and painfully unwind this system it will end as badly, or worse.
The unwinding of this system is another long series of posts. For the moment progress starts by understanding who benefits from the violent imposition of U.S. power. It’s like step one of a twelve-step program; admit you have a problem. Well, we have a violent, unrighteously acquired wealth problem.
Praise Be to God