4 Scenarios for the Coming Collapse of the American Empire
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Such negative trends are encouraging increasingly sharp criticism of the dollar's role as the world’s reserve currency. “Other countries are no longer willing to buy into the idea that the U.S. knows best on economic policy,” observed Kenneth S. Rogoff, a former chief economist at the International Monetary Fund. In mid-2009, with the world's central banks holding an astronomical $4 trillion in U.S. Treasury notes, Russian president Dimitri Medvedev insisted that it was time to end “the artificially maintained unipolar system” based on “one formerly strong reserve currency.”
Simultaneously, China's central bank governor suggested that the future might lie with a global reserve currency “disconnected from individual nations” (that is, the U.S. dollar). Take these as signposts of a world to come, and of a possible attempt, as economist Michael Hudson has argued , “to hasten the bankruptcy of the U.S. financial-military world order.”
Economic Decline: Scenario 2020
After years of swelling deficits fed by incessant warfare in distant lands, in 2020, as long expected, the U.S. dollar finally loses its special status as the world's reserve currency. Suddenly, the cost of imports soars. Unable to pay for swelling deficits by selling now-devalued Treasury notes abroad, Washington is finally forced to slash its bloated military budget. Under pressure at home and abroad, Washington slowly pulls U.S. forces back from hundreds of overseas bases to a continental perimeter. By now, however, it is far too late.
Faced with a fading superpower incapable of paying the bills, China, India, Iran, Russia, and other powers, great and regional, provocatively challenge U.S. dominion over the oceans, space, and cyberspace. Meanwhile, amid soaring prices, ever-rising unemployment, and a continuing decline in real wages, domestic divisions widen into violent clashes and divisive debates, often over remarkably irrelevant issues. Riding a political tide of disillusionment and despair, a far-right patriot captures the presidency with thundering rhetoric, demanding respect for American authority and threatening military retaliation or economic reprisal. The world pays next to no attention as the American Century ends in silence.
Oil Shock: Present Situation
One casualty of America's waning economic power has been its lock on global oil supplies. Speeding by America's gas-guzzling economy in the passing lane, China became the world's number one energy consumer this summer, a position the U.S. had held for over a century. Energy specialist Michael Klare has argued that this change means China will “set the pace in shaping our global future.”
By 2025, Iran and Russia will control almost half of the world's natural gas supply, which will potentially give them enormous leverage over energy-starved Europe. Add petroleum reserves to the mix and, as the National Intelligence Council has warned , in just 15 years two countries, Russia and Iran, could “emerge as energy kingpins.”
Despite remarkable ingenuity, the major oil powers are now draining the big basins of petroleum reserves that are amenable to easy, cheap extraction. The real lesson of the Deepwater Horizon oil disaster in the Gulf of Mexico was not BP's sloppy safety standards, but the simple fact everyone saw on “spillcam”: one of the corporate energy giants had little choice but to search for what Klare calls “tough oil” miles beneath the surface of the ocean to keep its profits up.
Compounding the problem, the Chinese and Indians have suddenly become far heavier energy consumers. Even if fossil fuel supplies were to remain constant (which they won’t), demand, and so costs, are almost certain to rise -- and sharply at that. Other developed nations are meeting this threat aggressively by plunging into experimental programs to develop alternative energy sources. The United States has taken a different path, doing far too little to develop alternative sources while, in the last three decades, doubling its dependence on foreign oil imports. Between 1973 and 2007, oil imports have risen from 36% of energy consumed in the U.S. to 66%.