There Is Only One Empire: Finance

There’s an entire sub-industry in journalism devoted to the idea that China is poised to replace the U.S. as the “global empire” / hegemon. This notion of global empire being something like a baton that gets passed from nation-state to nation-state is seriously misleading, in my view, for this reason:

There is only one global empire: finance. China and the U.S. both exist within the Empire of Finance. Virtually every mercantile nation with access to global markets lives, works and thrives/dies within the Empire of Finance. Every nation that allows capital to flow into its economy is subservient to the Empire of Finance. Every nation with capital and debt markets exposed to (or dependent on) global financial flows is just another fiefdom in the Empire of Finance.

China has thrived within the Empire of Finance by creating more debt and at a faster rate of expansion than any other fiefdom. China has brought 20 years of future growth and income forward, and eventually that vein of “wealth” runs out as time advances into the stripmined future.

The same can be said of all nations that have borrowed heavily from future growth and income to fund consumption/GDP “growth” today.

The Empire of Finance has few requirements for hegemony in its realm, but they are big ones.

1. If you want your national currency to act as a global reserve currency (or the global reserve currency), you must run permanent large trade deficits to export your currency in size to the rest of the world. This is the essence of Triffin’s Paradox, which I have covered many times.

Understanding the “Exorbitant Privilege” of the U.S. Dollar (November 19, 2012)

Triffin’s Paradox Revisited: Crunch-Time for the U.S. Dollar and the Global Economy(April 5, 2016)

2. Your national currency must float freely in the global marketplace and be liquid enough to trade $1 to 2 trillion per day in global foreign exchange (FX) markets.

3. Your sovereign debt/bonds must float freely in the global credit/debt marketplace and be liquid enough to trade in size (tens of billions of dollars) daily.

4. Global capital must be free to flow in and out of your currency, debt, assets and economy without restriction. (Ease of capital flow is the core of liquidity, risk management, and profitability.)

Any nation-state that meets these four requirements is fully exposed to a global loss of faith in its economy, debt, balance of payments and currency.The Empire of Finance is a harsh master; any nation-state that wants to secure the privileges of hegemony must first be willing to accept the risk of full exposure to skittish global markets and capital flows.

Nothing wipes out “wealth” quite as quickly or effectively as a currency meltdown resulting from a sudden loss of faith / risk-averse capital exodus.Such a loss of faith or fear of loss quickly kills a nation’s ability to float more debt on the global marketplace.

There’s an irony in all this talk of empire: only nation-states that operate within the unforgiving global Empire of Finance can establish hegemony in that Empire, but only nations that become autonomous autarkies (i.e. self-sufficient and independent of global markets, resources, credit, capital, etc.) can thrive outside the global Empire of Finance.

There’s only one global empire, that of Finance. If you want global hegemony, you must accept the dominance of global finance and pay tribute. If you don’t want to submit to the empire, then you cannot be a global hegemon.

When the Empire of Finance collapses under the weight of its debt, perverse incentives, exploitation and inequality, the financial system of every nation-state within the Empire of Finance will collapse, too. Being the hegemon within the collapsing system won’t protect the hegemon from collapse. Every nation-state that has submitted to the Empire of Finance will collapse.

These charts are snapshots of an unsustainable global financial system.

Debt is outracing “growth” everywhere, including China:

To the moon, baby! There’s no upper limit on debt–until there is.

There’s no limit on the sale of claims on future energy, income and “wealth”–i.e. bonds:

The global economy, by one (flawed) measure (GDP):

As for hegemony and empire–be careful what you wish for. Life outside the financial bubble is much more contingent and risky than life inside the bubble–until it pops. 

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  • Kimfhall

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  • Zartan

    Correct, and it is checkmated on Wall Street, so why has nobody figured this out, Yet? I am quite sure that if I wanted, I could get Millions of Dollars from “other nations” to sponsor a US uprising on Wall Street. Your Founders looked to foreign powers to support their war on England. We have something far worse than England Today. Your founders would be in my Camp, America.

  • jadan

    What does anyone know about China’s finances? It is a mixture of state banks and private banks and the latter are subservient to the former. Cooking the books is the CCP’s modus operandi. It appears to meet requirements of the private global financial cabal established by the BIS, the IMF, the World Bank, but it is not a “market-based” system. Appearances are deceptive. It is a communist entity, ie, a collectivist system. It creates its own financial reality. China does not have to live within its “means”. Debt is mysteriously retired. Credit is in never-ending supply. The CCP creates the money, the markets and the laws of economics. There is no “invisible hand”. China has no wish to be a global hegemon. China’s strategy is to let the western devils be hoist on their own petards.

    • Zartan

      If Wall Street Pulls every US corp out of China it all comes down. The US made China for Slave Labor. The Leaders of China know and were well paid to accept this reality.

      • jadan

        The CCP has created markets for its low cost production and the US is one of these markets. “Slave labor” is a relative concept. The US is not the global hegemon it imagines itself to be. Financial parasites do not rule the world. Producers do. Low cost production is the opium to which American capital has become addicted. China is winning this opium war.

        • Zartan

          Russia is most likely on the CIA payroll as is the Chinese leadership. Putin is more like Americas Poodle: A boogieman for the US government to fleece the people with as they are fed lies.

          There are no producers, only Slaves, and those Slave Markets can be set up anywhere. China can be replaced with India, Indonesia, or other Slave Colonies. Nobody, except the US government elites, owns the Slave Market. Americans are slaves too!

          All global leaders, including Chinese, are paid ( foreign aid) by the US government to comply. If they fail to OBEY the NWO comes against them. China does not want to have US industry pulled and Isolation would kill them, literally. No … they will OBEY and take Millions of US dollars to enslave their citizens!

          Nobody benefits, except “wall street,” because the people live on Credit and when they die they have absolutely nothing. Hell, Americans do not even have healthcare!

          Producers … NOT …. Slaves, YES.

          • jadan

            You have a very inflated notion of US imperial power. It’s pure fantasy, comic book stuff. I think there may be a place for you on the Trump team. But you’ll have to loose your Russian syntax…..

          • Zartan

            Really? Then, explain how the US goes all over the world murdering people and nobody, “nobody” says a GD word. Trump could kill people in the middle of the Street, like He said, because HE does it every day with his drones and no group of nations can even muster up the testosterone to say a GD WORD! No complaints, No Filings for War Crimes! Nothing! Everyone is only all too happy to buy US debt at zero percent! Comic Book Stuff … No. The US government does have the power to end all life and earth, and in that capacity, it is on par with God.

            I hate the US, but I am a realist.

  • Zartan

    Do you people actually think there is anything called “free market capitalism?” Dear God … WAKE UP! China is nothing but the US and EU slave labor corps! If the US and EU “do not get their way” they pull the plug on China and all corporations US/EU go. Additionally, there will be war, first, and nobody will win. Nuclear weapons will keep all the slaves under Authority.
    China knows its place.

    • Sarahsstewart

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      On tuesday I got a great new Land Rover Range Rover from having earned $8752 this last four weeks.. Its the most-financialy rewarding I’ve had.. It sounds unbelievable but you wont forgive yourself if you don’t check it
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      • ZARTAN

        Sara, You idiot, get a new line, that “sanford and son” special is getting old.