The Curse of Empires (page 1 of 2)

According to several articles which appeared in the international press, some of the most notable US commentators and scholars believe that, today, America is no mere superpower but a full blown empire in the Roman and British sense. Some observers even feel that no other country has been as dominant culturally, economically, technologically and militarily since the Roman Empire and that America's soft imperial policies, tenacity and intellect can spread prosperity around the world.

This is all great news because when one considers the alternatives such as a Chinese or Russian empire, which are, while no longer communist so still totalitarian in nature, a globally dominant US can probably enforce some kind of a Pax Americana and, therefore, offer the best hope for economic and social development. The bad news, however, is an economic one. All great empires experienced over time, accelerating inflation, rising interest rates and a sharp depreciation of their currency.

In the 'History of Interest Rates', Sydney Homer notes that interest rates have moved in 'repetitious patterns' over the centuries and that there was 'a progressive decline in interest rates as the nations or cultures developed and throve, and then a sharp rise in rates as each 'declined and fell'.'
Since US interest rates were in a long term declining trend between 1800 and the 1940s, when US long term government bond yields bottomed out below 2%, and have since then been rising irregularly, we can say that if the US is indeed an Empire, then it may already have passed its zenith.

In this respect a quick analysis of the monetary history of the Roman Empire is helpful, particularly since some pundits are now comparing the US to Rome. Until the rule of Nero, the Romans only used pure gold and silver coins. But, having run out money Nero proclaimed in A.D. 64, that hence the aureus would be 10% lighter in weight. So, whereas in the past, 41 aurei had been minted from one pound of gold, from now one the ratio became 45 aurei to the pound of gold.

He also minted a new silver coin, which was not only lighter in weight but also contained about 10% of copper, which meant that the new denarius was worth about 25% less than the old one. Nero had set an important precedent and from the time he was deposed until the sacking of Rome in the second half of the 5th century by Visigoths, Ostrogoths, and Vandals, a succession of emperors continued the practice of increasing the supply of money in the empire by debasing the denarius, which in the end only had a 0.02% silver content!

In Rome demand for money was insatiable because it was plagued by endless problems including continuous border wars, internal discontent and strife, a heavy dependence on imported goods, which led to a chronic trade deficit, slave rebellions, peasant uprisings in the provinces, power struggles between the rich eastern provinces and the poor ones in the west, plagues, and poor leadership. And each time a new problem crept up, the money printing press was turned on and led to a further debasement of the currency and higher and higher inflation rates, two factors whose importance in the fall of Rome cannot be overlooked.

Also, if we compare the Pax Americana with Rome, the fact is that the Roman Empire only enjoyed a very brief period of 'Pax Romana' at the zenith of the Empire under Augustus. But, thereafter, Rome was continuously engaged in some costly wars along its borders or had to take care of uprisings in the provinces and even on the Italian peninsula.