Will America go bankrupt ? The idea seems fantastical. A short time ago the media and various experts were pronouncing a new world order of unlimited American economic expansion; geo-political hegemony; and surging stock markets -- the 'indispensable nation' in Albright's words. Debt and future obligations were deemed manageable and easily accommodated by rising economic growth and potential rents and profits. No one seriously discussed American declinism. Than a government manufactured housing finance disaster ensued and suddenly the underlying weakness of the American model – statism, corruption, debt, government distortion, easy money, over and poor regulation – was revealed. The American elite knows that inflation and debt kill empires. The real question is – why don't they do something to solve their problems ? 

The Americans are not stupid. Neither is their elite. Even a radical Marxist like the Black Jesus, or MIMH [most important man in history], probably has a rudimentary concept of why states collapse. Inflation and debt are the most consistent killers of empires in history. This is true if one takes a cursory glance at the end of some of history's most glorious empires all of whom were supposed to 'last forever' and dominate their geo-political environments for eternity. 

 Rome: From 200 AD until 400 AD the Roman denarius or silver based coin declined in value by 95 %. Inflation destroyed the economy and the belief in being a 'Roman'. State taxation more than doubled. Citizens became indifferent to the idea of Rome. Along with social catastrophes [civil wars, the plague, a reduced population, no innovation etc.], the Roman state collapsed long before 476 AD.

Imperial Spain: Once the Spanish discovered and exploited the silver mines at Potosi in the 16^th century, the amount of silver in circulation in Spain and Europe increased by 10 times during the 17^th century. The result was of course a strong upward increase in inflation and prices which lasted 3 generations. The Spanish did not understand that minting money would cause severe dislocations including; a reduction in economic productivity; a decline in investments; and lower tax revenues. The Spanish state, engaged in wars literally across the world, was heavily in debt, and like Rome, the combination of huge debts, interest payments and hyper-inflation doomed it to oblivion.

Louis the XIV and XVI: In the late 17^th century the French under the Sun King began to imitate Imperial Spain and Rome. Colossi were built using public debt including the rather useless but pretty Versailles. Wars were fought to expand French claims to empire – mostly financed by external debt. By the time the armies of Marlborough defeated Louis, the French state was near collapse. This led to severe economic problems during the 17^th century including the Mississippi land scam and ponzi scheme; higher taxes; punitive regulations; and state control over most of the economy. A revolution was inevitable. By the time Louis the XVI took office, and the 1789 revolution commenced, the French livre was useless, income taxes approached 80 % and the population had had enough.

Britain: The British until recently had always enjoyed a minimalist state. Prior to 1945 the British state was never larger than 25% of GDP and its debt was always 50% or less of national income. Imperial over-reach and two World Wars changed this. Contrary to Marxist fantasy, the British imperial project had negative terms of trade starting in the late 19^th century. Outflows and investments to Canada, Argentina, India and Africa were far in excess of returns and inflows. In other words the British imperial project was draining capital and profits long before World War One. With the advent of two wars for survival, British debt exploded – and its currency value plummeted. Within 25 years the British pound had lost 40% of its value and British debt was 150% of national income. By 1945 the British had no gold reserves left, and 70% of their overseas assets were guaranteeing their debt to America. With a national debt approaching two times the size of the war shattered economy, the British, to quote Churchill 'were bankrupt'.

USA: Since 1900 the US dollar has declined in value by 95%. US debt has now increased by a factor of 700 % during the same period. Total US debt and entitlements stretching to 2025 now stand at $130-150 Trillion or 8-10 times the size of the current US economy. No state or empire in history has ever had a national balance sheet of such debt-ladened proportions, buttressed by a declining currency.

The Americans don't need to go bankrupt but it will take some peculiar political will to right-size the sinking ship of Americana. Looking at the scampering pygmies on display today- Obama, Pelosi, Reid, Geithner, and the left overs from Bush's Big Governmental era including Bernanke a central banker who believes that printing money means prosperity – it is hard not to be more than just a tad negative about American prospects.

What should be done ? To save their empire the Americans have no choice but to take the following 10 steps:

1. Raise interest rates to be above near future inflation and population growth meaning today they should be at 3 % minimum.

2. Reduce the amount of money supply and stop printing money.

3. Support a strong US dollar policy through the above.

4. Cut Federal taxes to stimulate economic growth.

5. Cut 50% of Federal spending to pay for the tax cuts.

6. Stop the Obama $800 billion stimulus of government and instead make it a legal budget obligation to start paying off the debt each and every year.

7. Stop all subsidies to the housing market including closing all CRA, HUD and FHA programs which give low income people, speculators and others sub prime loans [now valued at over $1 Trillion].

8. Allow for the bankruptcy and reorganisation of Freddie Mac and Fannie Mae, the two state owned institutions which were instrumental in causing the current economic meltdown.

9. Forget about socializing health care and Globaloney Warming carbon taxation and economic control.

10. Privatize Medicaid and Medicare – both of which are bankrupt and get that $85 Trillion future debt off the government's books as a future obligation.

If the Americans did the above their empire would survive. But they won't. Rates will be kept low because the Americans can't afford higher interest payments on government or personal debt. The US dollar will be destroyed to appease exporters. Stimulus packages will be enacted to expand government and buy off union votes – the exact same reason why health care will be socialized. Globaloney warming will be used as an excuse to increase both taxes and spending. In fact the US elite, certainly not a stupid bunch, will do the very opposite of what needs to be done. All for power and control.

And this is usually how the beginning of the end happens. Short term political opportunists, corruptocrats, and statists who elevate power, money and influence over the national interest. It is nothing new in history. And the outcome is entirely predictable.