The cost of being a "super power" - by Rick Morren

Being a super power does not come cheap.

On November 16, last year the US national debt topped the12 trillion mark. Today only 5 months later it is approaching 13 trillion dollars. In reality the U.S. Treasury is sitting on a ticking debt time bomb: Over $2 trillion in short-term debt needs to be refinanced in the next 12 months.  And there's only one way they can do that... by printing even more money.  Eventually this is not sustainable and will lead to financial disaster.

The International Monetary Fund predicted that by 2014 America's dept-to-GDP ratio ( a measure of a nation's overall debt burden against its capacity to generate sufficient funds to repay its creditors) will reach108 percent. Since foreign countries own about 50% of the publicly held US federal debt, it makes the situation even worse. As a consequence, two of the US's biggest creditor nations, China ($798.9 billion) and Japan (751.5 billion), now have a considerable grip on the long term economic planning of the US and basically leave the US with very little room to manuever independently in any kind of major economic dispute.

Another important problem is the trade deficit. The US census reported that in 2009, the total U.S. trade deficit was $380.7 billion which is $1.5 trillion in exports minus $1.9 trillion in imports. The major culprit of this trade deficit is America's dependence on foreign oil. In 2009, the U.S. imported over $253 billion in petroleum-related products while only exporting $49 billion. Petroleum-related products include crude oil, natural gas, fuel oil and other petroleum-based distillates such as kerosene. This oil-related deficit of $204 billion was over half of the total 2009 trade deficit of $380.7 billion. Regardless of these factors it is quite obvious that an ongoing trade deficit is detrimental to the health of the US economy over the long term, mainly also because it is financed by debt. In other words, the U.S. can buy more than it makes because the countries that it buys from are lending it the money. It is like a party where you’ve run out of money, but the super market is willing to keep sending you the supplies and put it on your tab. Of course, this can only go on as long as there are no other customers for the super market goods, and the super market can afford to loan you the money. But if one day the lending countries decide to ask the U.S. to repay the debt there will be a problem. On that day, the party is over.

Last but not least one has to look at the drain caused on the US economy as a result of military spending. Just imagine the US alone is responsible for 41.5 per cent of the world total military spending, distantly followed by China (5.8% of world share), France (4.5%), UK (4.5%), and Russia (4%). The balance of the military spending is done by the rest of the nations in world. According to a report by the US Department of Defense (which also means it does not account for secret installations) the US operates 860 military bases in foreign countries and 3842 in the US, adding this all  up we get a total of 4702 military bases. As to the cost to keep these "military enterprise operating" ? Based on a report by the Center for Arms Control and Non Proliferation the military expenditures by the US in 2009 were approximately US 700 billion. This figure is probably a conservative estimate, given that many US government departments have some form of military budget item included in their budgets. By adding those figures to the equation, the yearly military budget for the US could well be above one trillion US dollars . Obviously, over the long run this is unsustainable,  given the already astronomical high US budget deficit.

Taking all these factors into considerations the US is now facing the very same problems as the British Empire did before it collapsed. It has an unsurmountable debt and an overstretched military. It therefore seems essential that the US develops a credible plan to restore the federal budget balance within a relatively short time. If not,  it could be curtain time for the US as a major world power, regardless of the optimistic "fables" we continue hearing from Wall Street and other financial circles.  No one in  their right mind wants financial disaster to happen to the US, but time is running out.