By Llewellyn H. Rockwell, Jr.
Ludwig von Mises Institue
March 27, 2006


Empire of Debt: The Rise of an Epic Financial Crisis, William
Bonner and Addison Wiggin, John Wiley & Sons.

Two hundred years ago, when the United States was a modest
commercial republic, the president could take a walk down
Pennsylvania Avenue—by himself—and talk to anyone who
approached him. If he wasn’t on a walk outdoors, he was most
likely at home, and you could speak to him by knocking on the
door of the White House and presenting yourself.

The Hamiltonians and their agenda of mercantilism, paper
money, and presidential exaltation had been humiliated in the
election of 1800. Jeffersonianism had prevailed against them.
And though Jefferson made some missteps during his
presidency—not even Jefferson could be fully trusted with
power—the policy bias was clear: frugality, free trade, peace,
hard money, and decentralized government.

Today? The president moves about like Caesar Augustus, with a
vast, graded court of civil and military aides, doctors,
secretaries, valets, hairdressers, makeup artists, bodyguards,
drivers, baggage handlers, cooks, food tasters, Praetorian
guards, snipers, centurions, bulletproof limos, a portable
hospital, and an armored rostrum. And that’s when he travels
in the U.S.

When Bush visited Ottawa, members of Parliament were refused
entry into their own legislature by the massed power of the
Secret Service, in violation of Canadian law. When Bush
visited London, 5,000 additional police were assigned to
protect him. Parks and streets and neighborhoods were closed.
Riflemen thronged the roofs. The queen was horrified by the
trashed condition of the grounds and great rooms of Buckingham
Palace, but that meant nothing relative to the security of the emperor.

He counts far more than any other human being on earth. So, of
course, every event is staged to the extreme. The president is
spoken to by no regular person. There are as many walls that
separate us from him as between the supposed government of
Iraq and its people or the old Soviet Politburo and the
Russian people. These people live and breathe fear.

The paranoia of the Bush circle has infected the whole regime.

The entire government—elected officials, appointed staff,
permanent bureaucracy—has shifted in the last decade from
pretending to be the people’s servants to admitting that they
regard the people as a threat. Thus do we see the stream of
legislation permitting ever more powers to spy, confiscate,
and jail without trial.

Never has sociologist Franz Oppenheimer’s view of the state
been more clearly on display: it is there to dominate,
exploit, and protect itself against any challenges to its
power. It clings to power like Gollum holding the ring. And
that power is deployed not for the purpose of protecting
people but for protecting the state and its interests. When
Oppenheimer theorized in 1908 that this was the true nature of
the state, he was shouted down and pilloried for denying the
doctrine of government as a social compact. Now his claims
read like a description of the day’s political news.

Most Americans are aware that something has gone very wrong,
but they are at a loss to sort of out the causes, especially
the ones that are most invisible. This is where the smashing
book by William Bonner and Addison Wiggin, titled Empire of
Debt, performs an extraordinary service. In addition to being
accomplished financial analysts, Bonner and Wiggin are
talented historical writers. And they put this talent to work
in the cause of examining the political and economic effects of empire.

The authors not only provide a frightening picture of the mess
that the U.S. government has made at home and abroad, they
also understand the crucial role that the monetary regime has
played in this debacle. They show how the legal right to
counterfeit—that’s what the Federal Reserve grants the
government—has changed the structure of the government and led
to the loss of liberty and the rise of an imperial power
unlike any in history.

In the commercial republic of Jefferson, money was gold and
silver. Government had no power to print currency. It was not
even allowed to tax directly. What money it had came from
tariff revenue, and pressure from exporters and importers kept
it low. Even if Jefferson had wanted to establish a tyranny,
there was no means to do so. If the wall of separation between
money and the state was not as high as it might have been,
there was still a barrier that put a curb on power-mongering.
Today, however, all the money government could ever want is
easily available via a monetary policy that depends critically
on the capacity of the Fed to create currency out of thin air.
The Fed’s printing presses back every debt note issued by the
Fed, and the new currency is sopped up by foreign central
banks and private holdings around the world, particularly
among Asian nations. The dollar is, for now, the world reserve
currency, which permits the U.S. to sustain a world empire
without paying the price—again, for now.

The critical turning point is one I remember well. Richard
Nixon enacted, by imperial decree, a purely fiat dollar,
repudiating solemn promises to redeem in gold. After that,
with the printing presses running 24/7, the Pax Americana
could be "financed." To understand the connection requires
that we understand two fields of study that are usually kept
separate: foreign-policy analytics and monetary economics. It
is in understanding this relationship that our authors excel.
Alan Greenspan had pretended to be against it all, but given
the chance for power, he happily repudiated his restrictionist
gold-standard views and supplied the credit for the expensive
wars, the expensive bread, and the expensive circuses that
have wrecked empires from Rome to London. His successor
promises even more of the same.

With the end of the last remnants of the gold standard, "all
the restraints, inhibitions, and modesty of the Old Republic
[were] blown away," note Bonner and Wiggin. "In their place
has emerged a vainglorious system of conceit, deceit, debt,
and delusion," with special financial significance for the
country and individuals. The authors note in passing that, for
example, the U.S. military could be cut 75 percent and still
give the government the biggest, most technologically advanced
army in the world.

While the loss of gold money was a turning point, the imperial
urge has much deeper roots. It all started, say the authors,
when the balmy Teddy Roosevelt began riding rough over small,
poor nations. They might have gone back further in time.
Robert E. Lee, writing Lord Acton, feared that the federal
victory over the South would mean despotism at home and empire
abroad. It wasn’t too many years later when the religious
maniac McKinley launched an attack on Spain, seizing colonies
in grand fashion and murdering any natives who objected. Or we
might even look back further. The hardcore might even see the
United States’ imperial career beginning with its conquest and
colonization of northern Mexico. Maybe its roots are in the
Colonial era with New England’s religio-cultural drive to
improve and perfect the world through coercion and belligerence.

Regardless of the roots, the modern history is undeniably
disgraceful. In the midst of my favorite chapter, "Woodrow
Crosses the Rubicon," the authors pause to repudiate the great
killer-presidents and to praise instead men like Warren G.
Harding. He was pro-peace, and he pardoned the antiwar hero
Eugene Debs, who had been jailed and his health destroyed by
Wilson for criticizing conscription. Further, they note that
there is no Harding Law, no Harding Building in D.C., no war
he started, and no government program he launched.
"Remember," Wilson had proclaimed, "that God ordained that I
should be the next president of the United States." How many
Americans know that Wilson invaded Mexico before Europe,
raising the federal war banner over Veracruz, and set off a
reign of terror at home in which Germans, or those thought to
be German, were lynched and those who dissented from his
national socialism were jailed?

Wilson also established the Federal Reserve, the income-tax
police, and the direct election of senators. The latter wiped
out an original buttress to states’ rights and led to more and
more centralization, as senators saw themselves as
representatives of D.C. to their states rather than of the
state legislatures to the central government. Frank Chodorov
called it "The Revolution of 1913."

The Federal Reserve’s monetary manipulations to finance World
War I, and then the boom of the 1920s, led to the Great
Depression and then the Roosevelt revolution towards massive
statism. After it and Trumanism and Modern Republicanism,
Americans live, said John T. Flynn, "in the war-torn,
debt-ridden, tax-harried wreckage of a once imposing edifice
of the free society which rose out of the American Revolution
on the foundation of the U.S. Constitution."

The impulse to empire helps make sense out of our huge
deficits and debts or such costly and obvious blunders as the
invasion of Iraq or the war on terror. It is as if America
were committing suicide, our authors say, first by bankrupting
the economy and then by creating endless enemies all over the world.

With this comes a belligerent and blind nationalism that has
affected the whole culture in one degree or another. But then,
in an empire, the people must become "hollow dummies," said
Orwell. They must believe they are superior to others, and
have a right to tell others what to do. Americans seem to go
beyond even this. They believe that other countries actually
want to be invaded and occupied and shaped into mini-Americas
by the United States. All we have to do is "get their
dictators off their backs, and the men will start building
shopping malls and the women dressing like Britney Spears."
Did the Swiss puzzle and plot over what kind of government the
Iraqis should have? Did they set out to make the rest of the
world more like Switzerland and think that other peoples
secretly yearned to be Swiss themselves? No, these are imperial inanities.

Paying tribute to As We Go Marching, John T. Flynn’s great
analysis of New Deal fascism, our authors understand the
glorification of militarism and war that lies at the heart of
right-wing statism. As Flynn quoted an Italian fascist,
today’s red-state fascists also see the mass death and
destruction of war as "the great anvil of fire and blood on
which strong peoples are hammered."

Once upon a time France had a great empire. Frenchmen thought
they had the best language, the best culture, the best
government, the best economy, the best schools, the best
builders, the best army. And it was their duty to civilize the
globe. Now, after French imperial bankruptcy and the
destruction of the franc, we have the mission civilisatrice to
spread freedom and democracy. Or so the president informs us.
But then, no one’s business is too small or too remote to be
of no interest to the U.S. state. From its globe-girdling
military bases and its world-circling spy satellites, the U.S.
watches everything, everywhere, always. Not a sparrow falls
without "triggering a monitoring device in the Pentagon."
Yet citizens of the empire exult, just as in Rome:

The average American reacted just as the average Roman had
reacted. When the purple was hoisted, he stood up and
saluted. It made him feel like a big shot. If Americans were
bossing people around in Asia or the Middle East, it made
him feel more important. His homeland team was winning all
over the world. And if it did not always seem to be on the
winning side, he knew he must support his troops and stand
behind their commander-in-chief. No one wants to carp and
criticize when soldiers take the field. It is unpatriotic.

So, keep the soldiers in the field all the time.

American business is still heroically capitalistic,
entrepreneurs brilliant and brave at creatively serving the
needs of the people, though hogtied by the vastest government
in history. On top of that, every aspect of the economy is
distorted by the expansionary policies of the Federal Reserve,
resulting—in just one instance—in a huge housing bubble.

Thanks to the incentives created by the welfare state and the
Fed, Americans tend to consume more than they earn. Stocks
today trade for about 20 times earnings, whereas the norm is
12-15 times. House prices usually increase at the rate of
inflation, not 10 times as fast. A global power monopoly is
also abnormal. At some point, all the myths cherished by the
imperial people, say our authors, must go to "humbug heaven."

After all, the long-term mean value of paper currency is zero.
Is the dollar magic, so that it is permanently immune from the
norm? For the last 100 years, it has lost value more quickly
than the Roman denarius after Nero. No surprise, since it is
much easier to create unlimited numbers of dollars than to
mint coins with at least some silver or gold in them. On the
other hand, by the time of the last emperor, the
denarius—which started as pure silver—had .02 percent precious
metal content. That is, the denarius had lost, over hundreds
of years, 99.98 percent of its value. Since the founding of
the Fed in 1913, the dollar has lost 95 percent.

Something else that will revert to the norm: wages. There is
no inherent reason that a plumber with a U.S. flag pin should
earn more than one with a crescent moon. In India, real
incomes have doubled in the last 10 years. In the U.S. they
have been stagnant or worse. The inequitable draining of the
world’s resources into America, made possible by the military
empire and its financial structure since Bretton Woods, is
also coming to an end.

The authors call themselves conservatives, but they quote
Confessions of an Economic Hitman approvingly and see through
the Cold War humbug about the Communist Conspiracy, the
terrorism of the previous scam. Nor do they fall for the
mythology that surrounds the big-spender Reagan nor celebrate
the murderous Vietnam War, with 57,000 dead Americans and
between 2 and 3 million dead Vietnamese. Those names aren’t on
a wall, of course.

The book is chock-full of great monetary and financial charts,
though my favorite is a list of all the known empires and
their duration. Not that they believe that charts tell the
future. Indeed, our authors are contrarians. When most people,
they think, are convinced that stocks will never go up,
chances are they will. When most people think stocks can never
fall, chances are they will. If most people couldn’t be
brought to the view that houses will never decline in value, a
rip-roaring housing bubble would be impossible.

Since the days of the Great Khan, and the barbaric clarity of
his claim that the gods had given him the earth and everyone
and everything in it, empires have resorted to rosier
delusions, if no less fatal to victims—and sometimes
citizens—than the Khan model. From the Romans to the Fourth
Crusade (and their Venetian and French aggressors) to Genghis
Khan to the Spaniards and Napoleon and the British, Bonner and
Wiggin teach us the lessons of empire, with learning, wisdom, and irony.

"A great empire," they note," is to the world of geopolitics
what a great bubble is to the world of economics. It’s
attractive at the outset but a catastrophe eventually. We know of no exceptions."

Lew Rockwell is president of the Mises Institute and editor of
LewRockwell.com.