“He who defends everything, defends nothing.” – Frederick the Great
“Defending everything” and interventionism are one and the same. Are we seeing increased global blowback to U.S. interventionism?
Consider: on September 1st Russia broke ground on a new gas pipeline link to China. The pipeline is to be the largest oil network in the world, and is widely seen as a move to end dependency on the west.
Also, Russia and China took the lead in forming the BRICS Development Bank.
According to Russia Times, Brazil President Rousseff said flatly: “We want justice and equal rights,” while Russian President Putin sees the bank as a hedge against U.S.-driven global financial instability. Furthermore, the Moscow Times reports that Russian Prime Minister Medvedev has warned he would consider closing Russian airspace to bankrupt western airlines, as a reaction to U.S. imposed economic sanctions against Russia over Ukraine.
The signs are ominous. As for financial instability, yes, the U.S. exports its inflation around the world. This distorts global markets (think the $3.5 trillion the Federal Reserve has printed since 2008).
The U.S. has a national debt of nearly $18 trillion, and has run trillion or near-trillion dollar deficits for the past six years. This means the U.S. spends roughly $1 trillion more annually than it collects in taxes. Plus, the U.S. could owe some $100 trillion in unfunded liabilities.
Where will the U.S. find the tax revenue to pay for this? What happens when interest rates rise? When will the U.S. be unable to pay for the interest on the debt alone?
Russia understands the situation. According to Rianovosti, a Russian official recently warned that Russia could strike back by dumping U.S. debt: “We hold a decent amount of treasury bonds… and if the United States dares to freeze accounts of Russian businesses and citizens… We will encourage everybody to dump US Treasury bonds, get rid of dollars as an unreliable currency and leave the US market.”
What if Russia went along with such a plan, and other holders of U.S. debt followed suit?
What happens if U.S. debt holders decide the U.S. may never be able to pay them back?
The point is clear: we’re essentially broke. And yet, we’re expanding domestic welfare programs and the so-called War on Terror.
To make matters worse, the U.S. spying on its allies is doing further harm to the economy. Consider the National Security Agency (NSA) and the Foreign Account Tax Compliance Act (FATCA):
According to Bloomberg News, U.S. tech companies could lose up to $180 billion due to foreign disgust with the revelations of NSA spying. Germany has already declared that it will be terminating its contract with Verizon. This has been largely ignored, save for Senator Ron Wyden, who recently said: “Nobody has looked at it from an economic standpoint, purely economics, dollars and cents… If a foreign enemy had inflicted the damage on the American economy… that the overreaching by the NSA surveillance brigade had done, people would be up in arms all over the United States.”
As for FATCA, it is designed to make it harder for U.S. taxpayers to hide their assets in offshore accounts. FATCA mandates that every bank in the world share information with the IRS. Banks who do not comply could suffer a 30% withholding tax. The U.S. is basically threatening banks around the world to spy on Americans.
Is this type of interventionist bullying smart policy?
What does all of this mean? How close are we to having nothing left to defend, because we have bankrupted ourselves “defending” everything?
We need to stop intervening around the world and focus on the home front–on getting our economy and financial house in order.
After all, the best “defense” is a strong, free economy. It’s not yet too late.