China Rises While United States Declines

Our old friend Marc Faber is “highly confident” that things will turn out badly.

“The future will be a total disaster, with a collapse of our capitalistic system as we know it today, wars, massive government debt defaults and the impoverishment of large segments of Western society,” he writes.

“We have a money-printer at the Fed,” he continues, “which guarantees runaway inflation, wholesale debasement of the dollar, and a major lowering of living standards for most Americans and many Europeans as well.

“Meanwhile, Paul Volcker says that China’s rise merely ‘highlights the relative decline of the US.'”

So there you have it: China on the way up, America on the way down.

That’s the drama that we’re watching every day, here at Markets and Money. In our view, the peak of US wealth and power probably came during the period between the fall of the Berlin Wall and the fall of Lehman Bros. But there are probably a lot more shoes to drop before people are fully aware of what is going on.

The way we see it, almost the entire 20th century was a mistake…a dead end.

Europeans were clearly on top of the world when the century began. Then, after WWI the Europeans in America took the lead role. But WWI shook their faith in their evolving political order. Not long after, the German hyperinflation and the Great Depression shook their faith in their economic and financial order. This left a huge vacuum, which was soon filled by ruthless adventurers and ideological schemers. Much of the rest of the century…from ’39 to ’89…was spent in hot wars and cold wars against these Bolsheviks, Fascists, Stalinists and Maoists.

In the end, the more reasonable and consensual societies of the West won the battle. But they, too, were transformed by 50 years of war and nearly a century of bad ideas.

“Whoever fights monsters should see to it that in the process he does not become a monster. When you look into the abyss, the abyss also looks into you,” Nietzsche warned.

Looking into the abyss created by Mussolini, Hitler, Tojo, Pol Pot, and the rest, Western societies decided both to fight them…and to join them. Tax rates soared. Regulations multiplied. University professors taught socialism, Freudianism, modernism, cubism, feminism, racism…and every other ‘ism’ they could think of. Parents spent good money to spend their children to universities that turned them into mush-heads.

And – perhaps most ominous – in the United States of America, the military grew into a greedy, grasping goliath…the very thing Eisenhower had warned against.

Then, there were counter-trends in the ’80s…led by Margaret Thatcher in England and Ronald Reagan in the United States. But these were mostly frauds. Top marginal tax rates were rolled back. And there were some cuts in regulatory procedures. But government spending tended to go up anyway. Worse, Ronald Reagan mistook the Soviet Union for a genuine threat and increased military spending even further to combat it.

And now, the United States staggers under the weight of its eternal wars…its imperial illusions…and its everlasting efforts to provide bread and circuses. If it kept its books like a private enterprise, it would be broke. If it were a public corporation, it would be de-listed.

Still, it spends and spends…and there is no stopping the spending. Trillions are spent on wars in Iraq and Afghanistan, for no apparent reason. But who complains? Too much money is at stake. There are too many lobbyists for too many industries and too many special interests involved. Military spending – even in a time when America faces no substantial challengers – cannot be rolled back. Neither can social spending.

Marc Faber is right. There too, there are too many people with too many dogs in this fight. Both military and social spending will continue to expand until the empire is ruined.

Until tomorrow,

Bill Bonner
for Markets and Money

Bill Bonner

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.
Bill Bonner

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9 Comments on "China Rises While United States Declines"

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The biggest mistake was to enable the moneylenders to run the temple – turning the USA into a FIRE economy where only money and the bottom line mattered. People lost all sense of morals, customs and decency. Jobs were sent overseas; there was a massive military build-up followed, inevitably, by wars of aggression; and the paid and bought Congress sanctioned the lot without questions. Now the entire economic system has been taken over and the utter graft and blatant looting of treasury is carried out openly for all to see – indicating that there is now no return.

nick mitsoulis

I hope our government is taking down notes america is know a failed empire the west must know move to Australia we must take the lead or it will truly perish ROME is truly going to fail this time unless it can hijack china and lets not forget china is run by engineers not lawyers unlike america engineers always win lawyers get caught with there pants down.

tar and feathers
I have two sons and have sworn to the Govt that will not take them to fight a war we cannot win because we have weakened our contingency to defend our sovereign economy, we have no manufacturing to retool to arms…..I am trying to fathom how the USA is struggling to muster 20,000 of its already vast World wide military to add to the Afghanistan contingent, have a look what it costs to run the toy soldiers in the Pentagon. You manufacture to provide a strong economic base, contingent on defence of your economy and citizenry…. Since Aus Govts (circa… Read more »

Thanks for the cheery predictions. It’s gonna be difficult to know which way to turn in the future.

I think everything has become too damn complex when dealing with taxes or finance. As far as I can see the whole financial/housing system is mainly designed to relieve the average person of his hard earned money and transfer it to people and organisations who add no value. The whole system could do with a tear down. The only unfortunate aspect is that the tear down will cause a lot of innocent people a lot of grief.

“Since Aus Govts (circa Hawke) decided to have a service economy, even now we are ransacking TAFE – waisted spending opportunities, we are doomed without manufacturing. At least our Aus Labor Pollies will have their $75,000 postage allowance, for a little while.” @ tar and feathers on 1 October 2009: Comment: The whole succession of incompetent governments since Menzies has brought Australia, even as it remains a colony of Great Britain, to its knees where almost the entire commercial industry of this nation comprises naught but “agencies” and representations for foreign goods. The University in main are producing, have produced… Read more »

Well thats what swine flu is for to get rid of all those surplus humans but it has to be done slowly after the economy is destroyed and so those with half a brain dont wake up to whats really planned for them

Ned S

The prediction is probably cheery enough if one is a chinaman earning $4k pa as opposed to a Yank earning $40k pa Justin! :)

tar and feathers
DR 27 May 09: “Call it investment insight from Ernest Hemingway. “The world breaks everyone and afterward many are strong in the broken places,” Hemingway wrote in A Farewell to Arms. “But those that will not break it kills. It kills the very good and the very gentle and the very brave impartially. If you are none of these you can be sure it will kill you too but there will be no special hurry.”….this and the above and the DR “The Next Broad Move is Down” 28 Oct 09….Harry S Dent predicts an optimism to the crash at years… Read more »
Jeremy Britton DipFA SA(Fin) AAHA HH Dip(PH)
Jeremy Britton DipFA SA(Fin) AAHA HH Dip(PH)

Trillions of US dollars are spent on wars in the countries that most American kids would not be able to point to on a map. Imagine if all of that money were spent on education! The US thinks that political assassinations or small change donations will save the “third world”; meanwhile, back in the Land of the Free, over 30 million US people are (officially not starving, but) classified as “food insecure”.

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