Empire of Debt: The Rise of an Epic Financial Crisis

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Editorial Reviews:

Amazon.com Review
Many Americans have resisted the notion that their country is an imperial power. The idea seems to contradict the values of the Republic and its Founding Fathers. But in Empire of Debt, prominent financial analysts Bill Bonner and Addison Wiggin argue passionately that not only is the United States an empire, but it is also one whose end is coming soon. Bonner and Wiggin are the brains behind www.dailyreckoning.com, an iconoclastic and irreverent market advisory service that has long raised concerns about American indebtedness and warned of a looming dollar crisis. In Empire of Debt, a sequel to their earlier doom-and-gloom book Financial Reckoning Day, they elaborate on their argument that the U.S. economy is about to implode.

Bonner and Wiggin enumerate a long list of chronic ailments that imperil the American financial system--a massive trade deficit, soaring personal and government debt, a housing bubble, runaway military expenditures. These problems "hardly disturb the sleep of the imperial race," the authors write. "[But] all empires must pass away." Bonner and Wiggin argue that American imperial delusions are similar to the fantasies that fueled the dot-com market mania. They recommend readers buy gold as insurance in the event of a financial crisis. Empire of Debt flounders when discussing how America indebted itself; the authors blame the Federal Reserve Board's low interest rates but gloss over the fact that rates were slashed because the U.S. teetered on the brink of deflation in 2002 and 2003 (a topic they give more attention to in Financial Reckoning Day). As hardcore free-marketeers, Bonner and Wiggin also seem to long for the pre-welfare days of the 1920s but forget how that period's policies led to the Great Depression. That said, Empire of Debt contains many revelations that will open eyes. --Alex Roslin

Product Description
In Empire of Debt, maverick financial writers Bill Bonner and Addison Wiggin provide you with the first in-depth look at how the American character has shifted to accommodate its new imperial role; how we have abandoned the private virtues of personal liberty, economic freedom, and fiscal restraint; and how the government has gained control of public life and the economy.

Customer Reviews: Read 113 more reviews...

3 out of 5 stars

Did I miss something? November 26, 2005
497 out of 566 found this review helpful

Bonner is a very entertaining and witty writer.

But in this book he's saying (over and again) not much more than:

1. Empires are created by vainglorious self-deluded fools.
2. Empires always overreach and go broke and collapse.
3. America is an Empire.
4. America buys more from overseas than it sells there, and that's bad.
5. Americans spend too much and don't save enough.
6. The housing market is a bubble due to pop.
7. Gold is a good store of value.

That's about it, along with some fragments of schoolbook history. Hope I "saved" you some money!

5 out of 5 stars

En Vino Veritas? November 10, 2005
248 out of 284 found this review helpful

I read this tag team of financial prognisticators' first book, Financial Reckoning Day, and LOVED it. Well, loved it in the way you can love a book that tells you history is all for naught and the financial world as we know it is coming to an end (at least they smiled when they said that, in a bemused kind of way).

But it's my understanding these guys wrote that book and some of this one while over in France (they're also the team behind the Daily Reckoning ezine, which I also read). There must be something in the wine over there that makes you see a little more deeply into things than most are prone to here in the States. Or maybe it's the distance from their homeland (they're both American) that gives them perspective.

Because I found Empire of Debt, which I just got and finished, nearly as eye-opening as the discussion they'd already started in the last book. In short, easy credit and wild spending will get us in the end. Already, it's nipping at our heels. Even while most of us, right on up to the powers that be -- who should be exercising a little more caution, but instead happen to be the worse over-spenders of them all -- refuse to pay attention to the message.

But it's there in the history books. And it's in this one, which you could call a kind of history lesson as much as you could call it a forecast for things to come. Great material and well done. Definitely worth a read for anyone (smart) who cares about the future of the world economy.

3 out of 5 stars

Articulate, but lopsided view of an increasingly globalised economy. January 19, 2006
94 out of 108 found this review helpful

This book is an interesting concoction - akin to the contrarian stance in the marketplace. When everyone else is buying shares, these guys are advocating gold. When economic growth sits at a healthy 4.2% per annum - these guys preach gloom.

The basis of their argument is the record US foreign debt, and they see this as the banana skin on which the USA will ultimately slip. The argument has some merits, but the outcome is not as inevitable as the authors argue.

The irony of debt is that it can actually integrate an economy more closely with that of the rest of the world. Just as the old adage goes that if you have a million dollar overdraft at the bank, you get really great service, so too - if a nation has a high debt exposure, then the rest of the planet is more inclined to talk business. Who, after all, could afford to see America fail? Could China? Could Europe? I doubt it.

So I'm not so sure that the gloom is warranted - and I find this tendency of today's political and economic commentators to choose one stance or another academically weak. The truth in economics is seldom anything but a series of "but on the other hand..." statements. Debt is bad...but on the other hand.

Next question posed by the authors: Is America an Empire? Does it behave as an empire? These authors believe it does, but again I'm not so sure the truth is that simple. Sure, Iraq really does appear to be about oil hegemony at the highest politcal level - but on the other hand the American economy is made up of so many non-political commercial organisations that it is unrealistic to say that the USA behaves as a single minded Roman-styled empire. Microsoft, or Dell or Amazon will do their own thing with or without the politicians.

So this alarmist book makes an interesting, entertaining quick read, but the thesis isn't deeply explored and the ideas are rather too glib. Your view of the book will depend upon your underlying political disposition, and that, ultimately is a failing of this text; it doesn't present any news that will either educate or even change our minds.

4 out of 5 stars

Advice From My Grandparents August 22, 2006
63 out of 69 found this review helpful

When my grandparents bought their home in the 1930s, they made paying off the mortgage a high priority and celebrated when the house was finally theirs. They worked hard, pinched every penny and took good care of what they had. They kept their house tidy and in good repair; they never used the fireplace because they did not want to get it dirty, and the furniture stayed good as new under its plastic covers. When they died, they were debt free and had money in the bank. It was these virtues--thrift and industry--that built the United States into the most powerful empire the world has ever known, according to Bill Bonner and Addison Wiggin in their new book, Empire of Debt: The Rise of an Epic Financial Crisis.

Bonner and Wiggin view ancient Rome as the classical model of empire. Running an empire was an expensive business; the folks in the homeland needed to be mollified with government handouts (bread and circuses), while a large military had to be maintained in the frontier. Rome used its military power to exact tribute from neighboring states; it was a protection racket, no different from the Mafia. Nevertheless, this scheme generally kept the central state solvent and the territories at peace. The United States is also an empire, Bonner and Wiggin maintain, but it does not follow the classical model. It placates its citizens with massive distributions of government largess while using its powerful military to exert influence and keep peace abroad. However, "[i]nstead of getting paid for providing protection, the United States is on the receiving end of loans from its tributary states and trading partners " (p. 77). This is how the United States became the Empire of Debt.

In Bonner and Wiggin's version of history, the beginning of the American Empire was Wilson's entry of the United States into World War I. Wilson was behaving imperially, according to the authors, because he was using military force in an attempt to influence political events beyond his country's borders. By the Vietnam War, the United States had clearly shifted to imperial mode; although it made no difference to the American homeland who ruled Vietnam, it is nevertheless the role of the empire to "routinely and habitually contest control of periphery areas" (p. 169). Indeed, during the twentieth century the United States got involved in conflict after conflict that was irrelevant to maintaining its security.

What made America a peculiar empire was that it had an agenda for changing the world. It would not play empire by the old rules; instead, it would use its imperial power to remake the world in its own image. Wherever the American empire could exert its influence, it demanded not tribute but rather that its vassal states practice democratic capitalism. At first, this arrangement was profitable to the United States, especially in the case of Western Europe and Japan after World War II. But providing protection is costly, and the homeland, rather than the vassal states, was paying for it. Here the authors also see a parallel between imperial America and that other peculiar empire of the twentieth century, the Soviet Union. They comment that what made the Communists so "obnoxious was not their own goofy creed but their determination to do precisely what [America] wanted to do, remake its adversary into something more like itself" (p. 209). Changing the world is an expensive undertaking, and the Soviet empire was bankrupt before the end of the twentieth century, but was the American empire really in any better financial shape?

Thus is the history of the Western world according to Bonner and Wiggin. But is this interpretation of events reasonable? Is it even plausible? Indeed, there is much to hate about this book. And yet, therein lies its beauty. For Bonner and Wiggin toe no party line; rather, they expose the chicanery and buffoonery of every political persuasion. No matter where you stand on the political spectrum, you are bound to find something in this book to offend you. And this is a good thing, because we all need to be knocked down a peg or two from time to time. Bonner and Wiggin play the role of the little boy in the tale of the emperor's new clothes who is willing to admit that he cannot see the royal robes--the emperor is naked, and the empire is broke.

On page after page, Bonner and Wiggin challenge the conventional wisdom. For example, they dispute the commonly held belief that "democracies are more peaceful than other forms of government" (p. 109). As evidence, the authors point to World War I, which, they insist, "was already a largely democratic war" (p. 112) even before Wilson involved the Unites States in it to make the world safe for democracy. Of the major combatants, only France was officially a republic, but England, Germany, Austria-Hungary and Russia were constitutional monarchies with at least limited popular political participation. Indeed, there is evidence that King George V of England, Kaiser Wilhelm II of Germany and Tsar Nicholas II of Russia, who were all first cousins, worked together to keep their countries out of conflict, but they were overwhelmed by popular sentiment, which "found the prospect of a short, sanitary war charmingly distracting" (p. 115). Furthermore, when the Tsar was deposed in 1917, the democratic Provisional Government kept Russia in the war; it was the autocratic Bolsheviks that withdrew Russia from the conflict. Bonner and Wiggin also challenge the belief that democracy is the best form of government, maintaining that in "a modern democracy, it is relatively easy to stir the masses to absurdity" (p. 164). This is not to say that the authors favor autocratic rule. Rather, they mean that we should think carefully, before imposing democratic institutions on unwilling populations, whether we are really doing them--or us--a favor.

Bonner and Wiggin also see a parallel between the British Empire at the beginning of the twentieth century and the American Empire at the beginning of the twenty-first. A hundred years ago, the British Empire had become moribund and was going increasingly into debt to the then economically vigorous United States, especially to fund its participation in the Great War. (Indeed, the authors suggest that Wilson sided with the British not because they were more democratic but because they owed us more, and Wilson wanted to make sure that debt could be repaid.) Now, the economy of the American Empire has stagnated as it becomes increasing indebted to the new global economic engine, China. There are many reasons why China is growing while America stalls, but one important reason has to do with the fact that "Asian workers are younger and cheaper" (p. 233). As a frequent traveler to China over the last sixteen years, I have witnessed firsthand China's unfolding economic miracle. Its people are young, well-educated and ambitious; they are determined to make themselves wealthy and their country the world's next superpower.

However, the American economy is not simply being bogged down by an aging population; it is also being destroyed by a collective delusion that debt does not matter. As Bonner and Wiggin point out, "America's empire of debt rests on many huge deceptions," such as that "the rest of the world will take American IOUs forever" and that "domestic savings and capital investment are no longer necessary" to maintain the economy (p. 290). Instead of saving, the typical American family takes out home equity loans, thinking that the rising values of their houses means that they are getting richer. Thus, Americans use creative financing and "the savings of poor people in foreign countries" (p. 285) to maintain a standard of living they cannot afford. Nevertheless, this debt will eventually have to be repaid. "For what is a national debt," the authors observe, "but an intergenerational obligation, a burden placed on infants by their parents and grandparents" (p. 200). The revelers may claim that tomorrow will never come, but those who have remained sober (and solvent) can see that there are major problems ahead for the United States.

It may be too late to turn the United States from economic decline; its people seem to lack the willpower and the foresight. However, that does not mean that individual Americans are doomed to financial despondency, as long as they are willing to face certain facts. Bonner and Wiggin emphasize that you always have to work to make money, either by selling your labor or by putting in many hours learning about good companies to invest in wisely. Furthermore, you do not get rich by playing the stock market; instead, the authors argue, "you get rich by buying companies at good prices, holding them for a long time, and not spending your money" (p. 309). This sounds exactly like the kind of advice that my grandparents would have given.

2 out of 5 stars

Platitudes but not truth January 3, 2006
43 out of 58 found this review helpful

After reading "Empire of Debt" I cannot recommend its purchase unless you are suitably wealthy as to own a book you will read just once. As a polemic (or satire), it is amusing at best. I find particularly funny the passage on American presidents, where every indication is given that mediocrity is a virtue, but almost no mention is made of Herbert Hoover, a poster boy of American presidential mediocrity and impotence, if ever there was one in the face of daunting economies.

I would rather recommend the purchase, or loan from your local library, of "Blood in the Streets" by those two Agora predecessors of Bonner and Wiggens, James Dale Davison and Sir William Rees-Mogg.

While this book, as its Amazon reviews point out, is dated, hyperbolic, and skewed, I heartily recommend the first half, esp. these excerpts which I will quote below found on pages 78 and 120-122 as a help to understanding current events. Granted, these statements were made in regard to the British Empire, ca. late 19th century, but fast forward them to America early 21st and ask yourself is history about to repeat itself? We all know what happened to British hegemony in the 20th century and that's with America taking over British rule. And as far as I am aware, the Chinese aren't English speakers nor are they overly fond of a republican style government.

On pages 78-79, which is quoted from F.A. MacKenzie in "American Invaders" further quoted from "American Peril," pp. 12-13, ca. late 19h century we have....

"In domestic life we have got to this: The average Briton rises in the morning from his New England sheets, he shaves with `Williams's' soap and a Yankee safety razor, pulls on his Boston boots over his socks from North Carolina, fastens his Connecticut braces, slips his Waltham or Waterbury watch in his pocket, and sits down to breakfast. There he congratulates his wife on the way her Illinois straight-front corset sets off her Massachusetts blouse and proceeds to tackle his breakfast, where he eats bread made from prairie flour, tinned oysters from Baltimore, and a little Kansas City bacon, while his wife plays with a slice of Chicago ox-tongue. The children are given `Quaker' oats. At the same time he reads his morning paper [printed] with American ink, and, possibly, edited by a smart journalist from New York City.

He rushes out to catch the electric train (New York) to Shepard's Bush, where he gets a Yankee elevator to take him on the American fitted railway to the City [London].

At his office, of course, everything is American. He sits on a Nebraska swivel chair, before a Michigan roll-top desk, writes his letters on a Syracuse typewriter, signing them with a New York fountain pen, and drying them with a blotting-sheet from New England. The letter copies are put away in files manufactured in Grand Rapids.

At lunch time he hastily swallows some cold roast-beef that comes from a Mid-West cow, flavors it with some Pittsburgh pickles, followed by a few Delaware tinned peaches, and soothes his mind with a couple of Virginia cigarettes.
To follow his course all day would be wearisome. But when evening comes he seeks some relaxation in the latest American musical comedy, drinks a cocktail or some California wine, and finishes up with a couple of `little liver pills' made in America."

And on pages 120-122 the following are found with explanatory paragraphs--that are too long to enter into this review-if one finds them to be interesting, get the book:

"Debt proliferation reflects the decay of the predominant power.

Financial strength of the dominant power is the last element of hegemony to go.

The surplus position of the formerly dominant power deteriorates, as weak external assets are matched against strong external liabilities.

International debt expansion continues until the sovereign debtors have milked the once-dominant power to the limit."

Davidson and Rees-Mogg also make the point that the projection of military power, besides being overly expensive, is fleeting because of the role of technology plays in leveling the field. One only has to look at the USA's current experience in Iraq to see this theory played out in real-life (and also the US's experience in Vietnam). While America may very well have the military ability to totally destroy its enemies (e.g. nuclear), it does not have either the domestic or global approval to wreak this level of havoc, i.e. the hegemonic power to exact its leaders' will is restrained and what is allowed results in little more than a pissing contest between combatants. So, the dollars America currently spends in military expenditures are no more useful than the francs France spent building and maintaining the Maginot line post WWI.

I would also like to point out that Iran (not to mention its recent Israel-baiting) is slated to start an oil bourse based on Euros in March '06 and Hector Chavez, besides making himself a nuisance to American hegemony in the world press, has struck deals with China for oil and natural gas sales and Evo Morales has recently been elected president of Bolivia and has aligned himself with both Castro and Chavez and is pushing for nationalization of its petroleum resources. Bolivia, by the way, is the second largest South American natural gas producer after Venezuela. So instead of bringing order to the Middle East (and maintaining the US dollar as the world's reserve petroleum currency), the Bush-Cheney regime has not only wasted billions of dollars and tens (if not hundreds) of thousands of lives, but has seriously undermined American hegemony in not only the Arabian peninsula, but also in her own backyard. What would the average American now think if the White House declared a mobilization to overtake Venezuela or Iran or if Chavez and/or Morales should meet an untimely death?

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