Thread by @gladstein

1/ My essay “The End of Super Imperialism” is now live.

The global economy was once based on asset money. It's now based on debt money and inflation.

What happened?

Is the dollar system—where the US forces other nations to finance its wars—fair? ☕ 🧵

bitcoinmagazine.com/culture/bitcoi…

2/ In 1972, one year after Nixon defaulted on the dollar and formally took the world off the gold standard for good, the financial historian and analyst Michael Hudson published Super Imperialism, a radical critique of the dollar-dominated world economy.

amazon.com/Super-Imperial…

3/ The book is a study of how the world shifted from using asset money in the form of gold to balance international payments to using debt money in the form of US treasuries.

It's from a left-leaning perspective, but everyone from progressives to libertarians can learn from it.

4/ Hudson walks through monetary history and shows that, even as the $ was devalued over and over again in the decades after WWI, the US was able to convince other nations to save in dollars instead of gold by guaranteeing that dollars could be redeemed for gold at a fixed rate.

5/ But eventually in 1971 American officials rug-pulled the world, refusing to redeem more than $50 billion in short-term dollar liabilities that had been spent into the hands of foreign governments under the promise that they were "as good as gold"

6/ This deceit allowed the US government to finance an ever-expanding military-industrial complex and inefficient welfare state without ever having to make the traditional trade-offs a country or empire would historically have to make if its deficit grew too large.

7/ Instead, since the US managed to bake its debt into the global monetary base, it never had to pay it off.

America became a debtor nation during the Cold War, but learned how to make that a strength instead of a weakness.

8/ A key narrative in Super Imperialism is the story of how the US govt systematically demonetized gold out of the international economic system.

In Hudson’s view, leaving the gold standard was all about America’s desire to finance war abroad, particularly in Southeast Asia.

9/ He says Vietnam was “single-handedly” responsible for pushing the US balance-of-payments negative and drastically drawing down America’s once staggering gold reserves, in a way that parallels how Germany and Britain left the gold standard to finance the devastation of WWI.

10/ But Hudson’s thesis argues that unlike classic European imperialism — driven by private sector profit motives — American “super imperialism” was driven by nation-state power motives.

It was steered by Washington, not Wall Street.

11/ We might call dollar hegemony “central bank imperialism”: a centrally-planned world economy where the planners get other nations to finance their wars abroad and their entitlements and social programs at home.

12/ The key mechanism of super imperialism was that if any nation refused to accept dollars, or dumped its treasuries, the dollar would weaken, hurting its own industries as the US would undercut its exports. America used this trap to force allies + rivals to pay for its growth.

13/ Hudson even argues Bretton Woods institutions like the World Bank and IMF were used to harness the resources of developing world countries for America and force its leaders to buy US farm goods and weapons, preventing them from achieving economic independence.

14/ There are, of course, several criticisms of Hudson’s narrative.

It can be argued that dollar hegemony helped defeat the Soviet Union; usher in the age of technology, science, and information; push growth globally with surplus dollars; and isolate rogue regimes.

15/ Perhaps most compellingly, history seems to suggest the world “wanted” dollar hegemony, if one considers the rise of the eurodollar system, where even America’s enemies tried to accumulate dollars outside of the control of the Federal Reserve.

16/ But the bottom line is that by shifting the world economy from relying on gold to relying on American debt, the US was able to spend in a way no other country could, where it never had to pay back its promises, and where other countries financed its warfare and welfare state.

17/ Governments always dreamt of transforming their debt into the most valuable asset on earth.

This essay explains how the US made this dream a reality, what the implications for the wider world have been, how this era might be ending, and why a Bitcoin Standard might be next.

18/ The essay is long (10,000 words) so is presented to the reader in 10 sections:

I. The Rise and Fall of America as a Creditor Nation

II. The Failure of Bretton Woods

III. The Death of the Gold Standard and the Rise of the Treasury Bill Standard

19/

IV. Super Imperialism in Action: How the US Made the World Pay for the Vietnam War

V. OPEC to the Rescue

VI. Exploitation of the Developing World

VII. Financial Implications of the Treasury Bill Standard

20/

VIII. Counter-theories and Criticisms

IX. The End of an Era?

X. Bitcoin vs Super Imperialism

21/ I have been enormously privileged in my life to be born into the dollar system.

To be honest, I did not know the full story of dollar dominance until quite recently.

The full story is hard to digest.

I still believe strongly in the American idea, but we must do better.

22/ I hope this essay can help people understand that it's naive to think that our financial system is ideal, neutral, or fair.

It has been a story of exploitation, corruption, and war.

It has real costs. Perhaps you haven't paid them, but someone has.

We need a new framework.

23/ In researching this essay, I was struck by how incisive Michael Hudson's work was — even though I disagree with him on a wide range of topics.

This has helped strengthen my conviction that we need to reach outside of our comfort zone to more fully understand the world.

24/ In the end, for Americans, I'd suggest that we start to have new conversations based on the understanding that to be patriotic means supporting the American ideals as inscribed in the constitution and bill of rights: not supporting the current, wildly unjust dollar system.

25/ You can find the full essay is here.

We will have a Twitter spaces organized by @BitcoinMagazine this coming Tuesday 11/16 at 9am PT to discuss and debate.

My deep gratitude for the BM team for working with me to get this content out into the world:

bitcoinmagazine.com/culture/bitcoi…