by Mark English

The foreign, defense and trade policies of the United States and the overt and covert operations designed to implement and support them have, over the last 80 years or so, had profound effects on the world. I used to think those effects were positive on the whole. Like so many other foreign consumers of American popular culture, I had absorbed from childhood the usual cinematic clichés concerning the fundamental probity of generations of US leaders and their agents, both civilian and military. Moreover, it was obvious that old empires had failed and it seemed reasonable to see the United States as having taken on the role of a de facto imperial power, keeping the sea lanes open and stepping in where necessary to deal with threats to peace and security. The fact that many of us had family who had been saved or protected by US military operations further encouraged and reinforced such views.

What about the deliberate mass killing of civilians by Allied forces during World War 2, the firebombing of cities in Europe and Japan, or the Hiroshima and Nagasaki catastrophes? We were inclined to see these as lapses and not representative of the true (and basically benign) nature of US interventions. But such an interpretation has become more and more difficult to sustain.

It is just possible that, for a time, there was some truth to the myth of the essential benignity of US power. But, since the Vietnam War, and certainly since the exposure of the egregious deceptions involved in the lead-up to the invasion of Iraq, that myth has lost all plausibility.

In the course of a recent discussion on this site, E.J. Winner claimed that people outside the US often fail to appreciate just how combative ordinary Americans are. Quoting General George S. Patton’s remark that “all real Americans love the sting and clash of battle,” he suggested that, “[d]espite the occasional revulsion against war, Americans are on the whole a violent people.”

On the whole? Violent, compared to which other nationalities? Forgive me for being skeptical. Such generalizations may sometimes be meaningful in respect of countries with relatively homogeneous cultures but not, I think, in respect of countries as large and diverse as today’s United States.

Nonetheless, my interlocutor had two specific and not implausible points to make regarding “the nuances of the context” in which American foreign policy develops and is carried out. Many Americans, he claimed, are brought up to believe “that they have a special place on this earth,” this feeling of specialness or exceptionalism being reinforced by the knowledge that “the US has the most powerful military the world has ever seen.”

His second point was that governing elites have a responsibility to constrain and manage these unfortunate inclinations in the context of foreign affairs.

“[Hillary] Clinton may not have understood that, but her advisors would have. […] Some of Trump’s original advisors understood that – so he got rid of them and surrounded himself with yes-men.”

There are many ways the facts can be analysed here. I would be more inclined to emphasize the isolationist and anti-imperial strands of American culture and to see particular (usually elite) interest groups as having manipulated public opinion in generally hawkish directions. The neoconservative movement, for example, has a well-documented history. Neoconservatives and others committed to various versions of American exceptionalism have profoundly influenced US foreign policy and encouraged high levels of military spending and extensive covert and direct military interventions under successive administrations.

Due to fiscal constraints such policies are clearly unsustainable however. US military power is inextricably bound up with and dependent on economic factors and the dominant role that the US dollar has played in world trade. The dollar-based financial system has been failing for years and now seems to be imploding.

I talked about some of these things on my personal blog in January, as a novel coronavirus was silently spreading in the city of Wuhan and beyond.

A few extracts:

The Federal Reserve responded to the 2008 financial crisis by lowering interest rates and pumping hundreds of billions of dollars into the system. This was supposed to be a short-term emergency operation. But the expansionary policies continued. A precarious economy increasingly dependent on government spending and a financial system increasingly dependent on cheap credit led the Federal Reserve (and other central banks) to suppress interest rates by any means possible, including by injecting money directly into the financial system through the purchase of securities from commercial banks and other financial institutions (i.e. quantitative easing). Such policies have facilitated and encouraged further borrowing and malinvestment on an unprecedented scale. The problems are now systemic.

Price signals, which are key drivers of any functioning market, have become so distorted that they can no longer be trusted. Fixed-interest securities, shares and many other financial instruments appear to be massively overvalued. Government and central bank interventions are largely to blame for this but other factors – such as the rise of index funds and other forms of passive investing – have contributed to the problem.

I see it as extremely significant that attempts made in recent years by the Federal Reserve gradually to raise interest rates towards more normal levels and to wind back quantitative easing have failed. In both cases, the Fed has reversed course.

In the event of another financial crisis occurring, what would happen? Interest rates are extremely low and central bank options are limited. Defaults and/or falling equity prices would destroy large amounts of paper wealth. In the short term, this could lead to a period of dollar strength but – if the actions of the Federal Reserve in recent times are any guide – the money-printing would be stepped up. This could easily lead to serious inflation and an undermining of international confidence in the dollar. Of course, no one can predict exactly how (or when) the endgame will play out but there is little doubt that the US dollar’s days as world reserve currency are numbered.

That crisis is now upon us. For the time being the dollar is strong and analysts at Goldman Sachs and Bank of America are predicting that it will strengthen further in the near term against most other currencies.

The larger question relates to the sustainability of the US dollar-based financial system. As this system underpins America’s prosperity as well as its geopolitical status and power, radical changes would have radical implications for America’s place and role in the world.


8 responses to “Endgame”

  1. Charles Justice

    You’re right, we will see inflation, but it is something we didn’t see after 2008 because of the tremendous overcapacity of the American Economy, and the powerful growth of the Chinese Economy. One way to look at inflation is to see it as too much money chasing too few goods. In that sense it will be inevitable. Economies are contracting, the global economy will contract, fewer goods will be produced, so prices will inevitably go up. On a more serious note. The United States had an important role to play as a world leader. It contributed to overall human flourishing. Trump’s abdication of responsibility in everything he does is imperilling world order. A better leader might have stopped Putin from backing Assad’s massacre of his own population, and the subsequent politically destabilizing surge of refugees out of Syria. The Coronavirus is a terrifying situation that opens new possibilities for Trump to cause incalculable damage. In these times I say, “May God have mercy on us.” in spite of my unbelief.

  2. To say Americans are largely a violent people is not to say that they are militaristic, the way German or Japanese culture was before WWII; nor that they are imperialistic in the sense that Britain was or that Mussolini’s Italy hoped to be (and failed). Rather, Americans are distrustful of others, expect a certain due from the world, and will lash out when they don’t get this (and individually as well – that’s why we love guns).

    Theodore Roosevelt was, domestically (in my opinion) one of the three greatest Presidents in US history. But he had, as George Will remarked, a “bloodthirsty streak in him,” and he was openly imperialistic. Not in the sense that he wanted colonies in an economic sense, but in the sense of demonstrating America’s might globally. Bush II/ Iraq II shows clearly what happens when leaders come close to ‘unleashing the beast,’ so to speak. Polls showed that more than 80% of the population supported that war going into it; I suspect they would have supported nuking Baghdad, although they would have expressed regret afterward (our particular brand of Protestantism). That’s why a President needs a team that can deter our worst instincts.

    Cheney managed to manipulate the team of Bush II – a dolt – to pursue his neocolonialist – or as you say Neo-Con – vision; But even he was not fool enough to think we could just evaporate the Mid-East without repercussions. Unfortunately Trump is a fool – a narcissistic. impulsive fool, that’s what makes him dangerous. Fortunately he sees the world in personal-financial (not economic) terms, and sees no percentage in world war; but if he did…. Anyway, part of the unfolding Covid crisis in the US is that he is clearly trying to figure out a way to monetize the crisis, probably – no, undeniably – hoping to cash in on it somehow.

    As to the main argument of your essay: I don’t know economics enough to disagree with it directly. However, my suspicion is that it is too hopeful. The printing of 2 trillion dollars in the current effort at economic support (a mistake in my opinion, since we haven’t seen the worst of the crisis as yet and can’t predict it), while suggesting an inevitable inflation/ recession cycle, could make America and its dollar more, not less, central to the world economy; we’ll see. (I should also remark that I don’t agree with Dan Kaufman’s assessment that the crisis will lead to a diminution of globalism, but rather could lead to its increase – this is not an argument about the value of globalism, simply a remark on its possible future).

    However, there’s no denying (in my opinion) that the crisis will change the very shape and structure of societies, both East and West. Not in a way that benefits my liberalism (although it does reveal that we are some form or other of socialist in a crisis), and not in a way that benefits your conservatism (although it reveals we are more concerned with our own families and communities than with global or progressive issues).

    Some 20 years ago, I was reading of the conflict between Hindu and Buddhist philosophers in ancient India, while also becoming more concerned over the dangers of over-population of the world. It became clear to me that the US, going forward, would find itself pressed into either the model established by the fragmented but culturally engulfing social structure of Hindu India, or that of the homogeneous and rigidly bureaucratic culture of China – simply because those two nations have had to deal with over-population for now many centuries. That opinion hasn’t changed; and the Covid crisis may be the beginning of an era of super-viruses, Thus I fear this choice does not confront the US only. I have long thought the political future of an over-populated Earth would be found in the management of large populations; now it appears it will be found in management of large sick populations.

  3. Damn that first paragraph is spot on.

  4. Charles Justice

    “The United States had an important role to play as a world leader. It contributed to overall human flourishing.”

    You use the past tense, I see, presenting the election of Donald Trump as some kind of watershed moment. By contrast, I see a country projecting/exporting its changing culture over many decades; and a long series of foreign interventions, some more defensible than others.

  5. ejwinner

    Thank you for elaborating on your original remarks. I generally shy away from generalizations relating to national characteristics, and this applies especially (as I said in the OP) when talking about countries as large and diverse as the US. I don’t deny, however, that Americans have been brought up to believe certain things about their country, nor that an awareness of US military and cultural preeminence inevitably plays into the way Americans see themselves.

    “Polls showed that more than 80% of the population supported that war going into it; I suspect they would have supported nuking Baghdad, although they would have expressed regret afterward (our particular brand of Protestantism).”

    Support for the invasion of Iraq was arguably the result of the doctored intelligence report which claimed that Saddam had WMD and posed an imminent threat. Even our Prime Minister believed this (as did I and many other ordinary people).

    “The printing of 2 trillion dollars in the current effort at economic support (a mistake in my opinion, since we haven’t seen the worst of the crisis as yet and can’t predict it), while suggesting an inevitable inflation/recession cycle, could make America and its dollar more, not less, central to the world economy… ”

    The dollar *is* central. But it will not remain central for long if it continues to be rapidly debased.

  6. Charles Justice

    National leaders can make judgemental mistakes, but there was a level of international cooperation that was fairly stable after the second world war. I think Trump has irrevocably harmed America’s role as a global leader. It takes years to build up relationships between countries and to sustain a level of trust, and Trump, in four years has demolished that. It may never come back. A definite sign of America’s decline if there ever was one.

  7. al

    “Theodore Roosevelt was, domestically (in my opinion) one of the three greatest Presidents in US history.”

    Interesting when one considers that the presidencies of Washington, Lincoln, and FDR were domestically (and internationally) existential. Who of the three gets demoted? Somewhere 4 – 10, no problem.

    “… nor that they are imperialistic.”

    Then there’s that Manifest Destiny thing. If this was 1847 I’d be typing this in Mexico. Jackson’s Indian removal was pure imperialism, etc.

    Besides slavery allowing folks from the borderlands to immigrate back in the 18th century was a huge mistake. Honor cultures will always be problematic.

    The current economic crisis is a perfect example why one doesn’t do pro-cyclical tax cuts and use 2% as a ceiling instead of an average. Trump and the Republicans are too stupid to realize that pushing on a string is a bad idea. Inflation isn’t going to be a problem – even hyper-inflations can be quickly cured. Deflation is another matter.

    What I’m noticing is that folks might be pulling back. Example: a friend of mine and her husband are retired, have a high five figure income and no mortgage. She recently asked me to check out washing machines. I did so at Costco this week and when I reported (around a grand) she said they decided to save the whole $2,400. Just a straw in the wind, but …

  8. […] [This is a slightly edited and shortened version of a piece published April 1 at The Electric Agora.] […]