One of the favorite myths of the Republican Party is that Reagan Won The Cold War, and he did it without firing a shot. How is that possible? He spent them into oblivion.

President Reagan spent $3 trillion on defense, well above the $2.2 trillion baseline. What did that extra $800 billion buy? The end of the Cold War -- saving, perhaps, a billion lives from nuclear extinction.

Another myth of the Republican Party is that Deficits Don't Matter.

"You know, Paul, Reagan proved deficits don't matter."

Welcome to the Land of Doublethink. Orwell would recognize it. Deficit spending brought down the Soviet Empire within a decade, but America can engage in deficit spending for an eternity.

The fact is that history is very clear - empires always end with bankruptcy. Military defeat and societal breakdowns always come afterwards.

In the late 1980's Paul Kennedy wrote The Rise and Fall of the Great Powers. This book, more than anything else, got me interested in macroeconomics. 10 years later, Kennedy wrote an article in The Atlantic in which he coined the term that largely summed up an important idea from his book - Imperial Overstretch.

imperial overstretch n. The extension of an empire beyond its ability to maintain or expand its military and economic commitments.

It didn't take long for right-wing commentators to attack him. I remember debating Republicans online at the time. It was obvious that they hadn't read the book because they were convinced that Kennedy was predicting the immediate collapse of the American Empire, and every day that passed without America falling into the abyss was proof that he was wrong.

But the fact of the matter is that empires are expensive. Prolonged wars lead to first monetary inflation, and then price inflation. (more than half of the federal discretionary budget since 2003 has been dedicated to military spending) Foreign conquest tends to lead to other foreign wars, and eventually, ruin.

"As the dynamic of imperial overstretch became clearer, many of the great powers decided to solve their security dilemmas through even bolder preventive offensives. None of these efforts worked. To secure their European holdings, Napoleon and Hitler marched to Moscow, only to be engulfed in the Russian winter. Kaiser Wilhelm's Germany tried to break the allies' encirclement through unrestricted submarine warfare, which brought America's industrial might into the war against it. Imperial Japan, facing a quagmire in China and a U.S. oil embargo, tried to break what it saw as impending encirclement by seizing the Indonesian oil fields and preventively attacking Pearl Harbor. All sought security through expansion, and all ended in imperial collapse." —Jack Snyder, "Imperial Temptation," The National Interest, Spring 2003

Paul Roberts has pointed out that if the world was serious about stopping Bush's empire building, they could. They could do it without firing a single gun.

The Bush Regime's ability to wage war is dependent upon foreign financing. The Regime's wars are financed with red ink, which means the hundreds of billions of dollars must be borrowed. As American consumers are spending more than they earn on consumption, the money cannot be borrowed from Americans.

The US is totally dependent upon foreigners to finance its budget and trade deficits. By financing these deficits, foreign governments are complicit in the Bush Regime's military aggressions and war crimes.[...] If the rest of the world would simply stop purchasing US Treasuries, and instead dump their surplus dollars into the foreign exchange market, the Bush Regime would be overwhelmed with economic crisis and unable to wage war. The arrogant hubris associated with the "sole superpower" myth would burst like the bubble it is.

The collapse of the dollar would also end the US government's ability to subvert other countries by purchasing their leaders to do America's will.

The collapse of the dollar has been in the works since shortly after Bush took office.



The dollar has steadily declined since early 2002, and this has run parallel to the worsening federal budget situation.

With all this debt, America is starting to encounter a problem mostly associated to the third-world - interest payments squeezing out needed services. In Fiscal Year 2006, the U. S. Government spent $406 Billion of your money on interest payments* to the holders of the National Debt. Compare that to NASA at $15 Billion, Education at $61 Billion, and Department of Transportation at $56 Billion.

At this point you need to remember that we are increasingly borrowing from overseas. That means that money is getting extracted directly out of the country and sent to nation's whose economies compete with ours (and in some cases, countries that are hostile to us).

"If the people were to ever find out what we have done, we would be chased down the streets and lynched." - George H. W. Bush, cited in the June, 1992 Sarah McClendon Newsletter

But how much is too much? How much imperialism can America afford? When does a little empire become too much empire and the economy breaks?

To answer this question, we must look at what history teaches us. Sure, there will always be people who say "it is different this time". Those people probably bought internet stocks in 1999 and believed President Bush when he told us that people "hate our freedoms".

I'm going to skip right past the moral issues here and focus on the bottom line. Considering how often the public supports foreign conquest, morality is rarely an impediment anyway.




All historical comparisons start with Rome, and the best way to track Rome's finances is with their currency. In Roman days (and every day until the past century), when the government wanted to spend more on a war then it could afford it had two choices: they could borrow from the wealthy, or they could debase their currency. In Roman days they cut the silver and gold content of their coins and put more base metals into them. That way they produced more coins at no further cost.



By 274 A.D. the silver content on Roman coins was virtually nil. There was 20 parts of copper for each part of silver. By no small coincidence, the period from 235 to 284 saw the near collapse of the Roman Empire. Of the 25 Emperors that ruled in this period, only two weren't murdered or killed in battle.

All that currency debasement (what today's media would call "inflation") managed to buy the Roman Empire about another 150 years. When the Huns invaded, the Romans had nothing left to fight with.

Today, when the government wants to fight a war it can't afford, it always has the option of simply printing more money out of thin air (a modern form of debasement).

Do you think our government would do something like that?






Spain and the Hasburg Empire was the first example Paul Kennedy used in his book. In 1519, when Charles V of Spain became both the Holy Roman Emperor and the ruler of Hasburg lands in Austria, Spain was the the premier power in the world. Cortez conquered the Aztecs in 1521, and Pizarro conquered the Incas in 1533. King Louis died in Hungary, and Charles V became ruler there as well.

Economically, Spain could draw on more resources than any other nation. Yet 140 years later, Spain was relegated to a second-rate power. What happened in-between? The Netherlands and Ottomans happened in-between.

The inheritances of Austria and Hungary gave the Hapsburg Empire lands that lay directly in the path of the expanding Ottoman Empire. The gift of those lands was truly a white elephant. That was just bad luck. What wasn't bad luck was what happened in the Netherlands.

One of the countries that the Hapsburg Empire inherited was the Netherlands, and one of the decisions of Charles V and Phillip II of Spain was to convert the country to Catholicism. This led directly to the 80 Years War.

"The war in the Netherlands has been the total ruin of this monarchy." - a Spanish councillor, from Rise and Fall

Between 1566 and 1654, the Spanish spent 218 million ducats on the war in the Netherlands. During that same period of time the Spanish crown only received 121 million ducats from their colonies in the Indies.

To give you an idea of the size of this expenditure, consider what the Spanish colonizers were doing to the Incas at the time. Every Incan family was forced to send one family member to work in the gold and silver mines so Spain could afford their wars. When a family member died, which usually happened every year or two, the family was forced to volunteer another member for work in the mines. They rarely saw the light of day. 80% of the male population of the 16 Peruvian provinces died in the Potosi mine, or similar mines. By 1783, 45,000 tons of silver was extracted from Potosi alone. 7,000 of those tons went to the crown. And yet, that still wasn't enough to pay for just the war to convert the Netherlands to Catholicism. Fully one quarter of the Spanish government's total spendings went to the military adventure in the Netherlands, decade after decade.

“Every peso coin minted in Potosi has cost the life of 10 Indians who have died in the depths of the mines.” - Fray Antonio de la Calancha, 1638

So if taxes, theft, and slave labor didn't pay for Spain's wars, how did they
manage? The monarchy borrowed heavily from bankers in the form of interest-bearing government bonds known as juros. Eventually even interest payments on previous debt became too much. Spain declared full or partial bankruptcy five times by 1627.

Of course sometimes borrowing just isn't enough. For Spain this meant seizing gold and silver that belonged to private individuals and giving them juros in exchange. America has taken a true third-world method instead - selling off infrastructure.

DeFazio continued, "When you look at the Chicago Skyway, that's even worse. They are not even reinvesting the proceeds of the sale in transportation. They're using them for operating costs. That would be like anybody selling their assets in order to live. You can't sell your assets very long to put food on the table—before long you're out of assets. Chicago has sold an asset, which will be extraordinarily profitable for the company that got it."

Ralph Nader, too, has been vocal in opposing the privatization deals. Last February he wrote a scathing letter to Mitch Daniels, comparing the toll road lease to the Louisiana Purchase, "only Indiana is the France of this deal. You are taking a minuscule up-front payment in return for a large downstream private profit to a foreign company which is being handed a captive customer base." Nader says he and other consumer advocates were late to recognize the trend. "Who would have dreamed" that the nation would begin actually selling off its core assets, he told Mother Jones. "That's new. They caught everybody napping."

Why didn't the Spanish just let the Netherlands be free? It was remote and hard to defend. There was so much more empire to exploit. Why bankrupt the nation in what was ultimately a losing cause anyway? Listen to this quote and tell me that it doesn't sound like something straight out of the Cold War.

"The first and greatest dangers are those that threaten Lombardy, the Netherlands and Germany. A defeat in any of these three is fatal for this Monarchy, so much so that if the defeat in those parts is a great one, the rest of the monarchy will collapse; for Germany will be followed by Italy and the Netherlands, and the Netherlands will be followed by America; and Lombardy will be followed by Naples and Sicily, without the possibility of being able to defend either." [cited from Rise and Fall]

The "domino theory" is hardly new. It was used by Spanish lords 400 years ago, it was used by American politicians and generals 40 years ago, and it is being used by the Bush Administration today. Every time it was used, it not only failed, it made things worse.

This is the end of Part 1. In Part 2 I'll compare the experiences of the French and British Empires to ours.