The US Government Shutdown: A Stumbling Empire in Decline


It’s the end of another empire. The US government, once the most trusted creditor in the world, is nearing a ‘government shutdown’. Zero hour is supposedly tomorrow US time, so tonight our time. The media is having a field day with this one.

But what’s going on? Well, the heartless Republicans want to de-fund the brainless Democrat’s Obamacare, and are holding the rest of the government budget process hostage on that demand.

Of course, if there’s a government ‘shutdown’, the government isn’t really going to shut down. America’s military bases around the world will carry on their day to day business of bombing Afghanis, Pakistanis and anyone else they can find who doesn’t have enough sympathisers in Europe, America’s key ally. The American government will still pay its interest bill on the trillions of dollars it owes the Chinese, Saudis, Russians and whoever owns all the bonds parked around the Caribbean for tax purposes. We’re guessing the politicians will still be paid too.

In fact, the vast majority of the American government’s bills will still be paid in a shut down. That’s because the government’s version of a ‘shut down’ really means living within your means. Running a balanced budget might be something you do every day, but to politicians and economists it’s a devastating concept. One that could reduce American economic growth by a whopping 1.4% in the fourth quarter. Golly gumdrops, 1.4%! The Americans, being American, annualise their GDP growth figures. So 1.4% in the fourth quarter is really just 0.35% to the rest of the world.

But why gloat about America’s demise? Our boss is American. The founder of our publishing company and the Daily Reckoning is American. Australia’s defence force, is in effect, American too.

The government shutdown story is largely symbolic. That might seem boring, but it’s a kind of signal that investment trends will change. To find out how, let’s take a look at ancient Rome. Rome’s financial structure was based on exploitation. Loot, slavery, taxes and all sorts of other ways of extracting wealth funded an impressive army and civic system. But eventually that system’s cost outpaced its financial backing and the empire crumbled.

Today, America’s empire is beginning to stumble for the same reasons. Its military is even more dominant than Rome’s was. It borrows money from overseas instead of looting it. And it uses cheap labour to pay for its consumption goods. But now expenses are outpacing its financial capacity. Debt limit battles, economic crises and a backdown on Syria are all symptoms of a declining empire.

But declining empires, whether they’re Australian housing or the world’s superpower, aren’t necessarily bad. They create the incentive for people to be independent instead of reliant on the state. The process of creative destruction is on the move on that front already in the world of technology.

As we discovered in an interview for The Money for Life Letter last week, in a few years’ time you’ll be generating your own electricity within your own home. No more incompetent power utility companies, ugly and dangerous power lines or surging network costs. Complete independence.


Nick Hubble+
for The Daily Reckoning Australia

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From the Archives…

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Nick Hubble
Nick Hubble is a feature editor of The Daily Reckoning and editor of The Money for Life Letter. Having gained degrees in Finance, Economics and Law from the prestigious Bond University, Nick completed an internship at probably the most famous investment bank in the world, where he discovered what the financial world was really like. He then brought his youthful enthusiasm and energy to Port Phillip Publishing, where, instead of telling everyone about The Daily Reckoning, he started writing for it. To follow Nick's financial world view more closely you can you can subscribe to The Daily Reckoning for free here. If you’re already a Daily Reckoning subscriber, then we recommend you also join him on Google+. It's where he shares investment research, commentary and ideas that he can't always fit into his regular Daily Reckoning emails.

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3 Comments on "The US Government Shutdown: A Stumbling Empire in Decline"

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3 years 25 days ago
Yes, the author makes some fair points and observations on the americans and their (unwanted) empire now in its clear and equally welcome decline. That said, I’d be surprised if it was as precipitous as the Soviets as the last example of another bunch of unwanted bullies to fold. I’m now in my late 40’s and although I didn’t realise it as a boy growing up in the ’70’s here in Australia, the British are a case study of what is happening to the americans now. Via war, they (UK) post ww2, were broke but wanted to keep the empire… Read more »
slewie the pi-rat
slewie the pi-rat
3 years 25 days ago

shut ‘er down!
now, we are getting ‘assurances’ that it won’t be for long.

of course, there is a new ‘populist dynamic’: we’re all very concerned that we won’t be properly spied upon.
so, hurry back, my fellow Americans!

Nathan Chattaway
Nathan Chattaway
3 years 24 days ago
Nick said: “…in a few years’ time you’ll be generating your own electricity within your own home. No more incompetent power utility companies, ugly and dangerous power lines or surging network costs. Complete independence.” I think rather than the above, we’ll see something far more radical but also far from new. The family will return to an overall producer economy instead of the current arrangement which is of course a consumer economy. Those of us who survive will be harvesting our own potable water, growing and preparing our own food, minimising and safely disposing of all our own wastes, building… Read more »
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