Empires are not the result of conscious thought; they happen when a group is large enough and powerful enough to impose itself on others. But empires are expensive. They are typically financed by theft and forced tribute. The imperial power conquers… steals… and then requires that its subjects pay “taxes” so that it can protect them.
The US never got the hang of it. It conquers. But it loses money on each conquest. How does it sustain itself? With debt.
It doesn’t take tribute from the rest of the world; it borrows from it. As far as we know, no other empire has ever tried to finance itself by borrowing. But it is a special kind of debt. The US borrows in its own currency – which it can print as it chooses. If the burden of repayment is too high, in theory, the Fed can just print more dollars to satisfy its obligations.
Here is further insight from two foreign policy professors Flynt Leverett and Hillary Mann Leverett:
“Since World War II, America’s geopolitical supremacy has rested not only on military might, but also on the dollar’s standing as the world’s leading transactional and reserve currency. Economically, dollar primacy extracts “seignorage” – the difference between the cost of printing money and its value – from other countries, and minimizes US firms’ exchange rate risk.
Its real importance, though, is strategic: Dollar primacy lets America cover its chronic current account and fiscal deficits by issuing more of its own currency – precisely how Washington has funded its hard power projection for over half a century.”
Read the whole thing here...
http://bit.ly/1uzZiY8