The fall of the American Empire

 Every empire falls. Whether in a slow gradual loss of power, like our friends the tea sipping British or in total world changing kick in the pants like the fall of wine imbibing Rome. Everyone falls, so how will the American Empire go out? My best guess is by severe economic collapse.

Economic collapse could never happen to us, could it?

 The American dollar has been trading freely on the international market since the “Nixon Shock” in 1971. It has largely dominated the global landscape for decades, often being preferred to local currencies in countries where rapid inflation and political instability can decrease the value of money overnight. But this could never happen to an economic super power, could it?

Yes, this is exactly what happened to another economic superpower you may have heard of; Russia. When Russia defaulted on its debt in 1998 this caused drastic inflation of around 100% on domestic goods and nearly 400% on imports. You might be thinking “But that’s Russia; it’s a completely different economic system”. While this is partially correct, the differences in the economy actually helped Russia recover from the crisis in about two years. Many people in Russia were already using bartering systems to trade goods and food so they were able to continue to operate despite the failed rubble. Try trading your hand-knitted scarf for a Grande Americano next time your in Starbucks to see how that would work here. Also the world economy does not primarily use the Ruble as a currency or even a currency standard which reduced the impact on the world markets. Still, this could ever happen in America, could it?

The American Tea party on October 1st, 2013 threatened to do just that. By refusing to approve the increase of the debt limit the Tea Party was threatening to default on the national debt. The results of this could have been dramatic enough to bring an end to the American Empire. Financial analysts suggested that the result of this debt default would have been far worse and lasted far longer than Russia’s financial crisis of 1998.  They have speculated that the result would have been 23 times worse than the bankruptcy that kicked of the “Great Recession” of 2009.

But what would that actually look like? Well you certainly can’t use the “23 times worse” as an actual equation being as America had experienced a 5% unemployment increase in the “Great Recession”. But let’s assume a less extreme result for unemployment, only 4 times worse, the 25% unemployment rate of the Great Depression. Family incomes halved during the Great Depression so let’s take our national average of $50,000 and decrease it to $25,000. This would, of course, displace millions of mortgage defaulting and renting Americans into shacks, tents, caves and sewers spreading disease and increasing crime to unprecedented levels never before experienced by the American people. Martial law would be declared to contain looting riots and violent protests as people got more and more desperate.

Wait. Wouldn’t our allies help? Of course they would want to, but unfortunately our economy was the strongest part of theirs and now they too are in the midst of their own Depressions. In fact, this has caused the entire world economy to virtually collapse. The few major world players who have stopped stockpiling the US dollar and avoided commodities dependency will survive to become the next superpower.  So in the mean time, buy some gold, learn Norwegian and when it all goes down say hello to the new World Emperor; King Haakon the Eighth.