The New Empire of Debt: The Rise and Fall of an Epic Financial Bubble

by William Bonner, Addison Wiggin, Agora

An updated look at the United States' precarious position given the recent financial turmoil

In The New Empire of Debt, financial writers Bill Bonner and Addison Wiggin return to reveal how the financial crisis that has plagued the United States will soon bring an end to this once great empire.

Throughout the book, the authors offer an updated look at the United States' precarious position given the recent financial turmoil, and discuss how government control of the economy and financial system-combined with unfettered deficit spending and gluttonous consumption-has ravaged the business environment, devastated consumer confidence, and pushed the global economy to the brink. Along the way, Bonner and Wiggin cast a wide angle lens that looks back in history and ahead to the coming century: showing how dramatic changes in the economic power of the United States will inevitably impact every American.

Reveals the financial realities the United States currently faces and what the ultimate outcome may be Weaves together the worlds of politics, economics, and personal finance in a way that underscores the severity of the situation Addresses the events leading up to the implosion of the U.S. financial system Looks ahead to help you avoid the pitfalls presented by a weaker United States Other titles by Bonner: Empire of Debt, Financial Reckoning Day, and Mobs, Messiahs, and Markets
Other titles by Wiggin: I.O.U.S.A., Demise of the Dollar, and Financial Reckoning Day
The United States is heading down a difficult path. The New Empire of Debt clearly shows how this has happened and discusses what you can do to overcome the financial challenges that will arise as the situation deteriorates.

Genres: Economics, History, Politics, Finance, Nonfiction, Business

368 pages, Hardcover

First published January 1, 2009

Reviews

[Stan · Rating 5 out of 5]

The principles of freedom are true and timeless. They are universal laws. They are also priceless. That doesn't mean they cannot be broken, disregarded, or cast aside. Human history is replete with examples of peoples and societies that did just that. What cannot be changed is the inevitable decline of any society that chooses to disregard them. America was founded on the principles of freedom and they shine as brightly as ever; they are timeless after all.

Sadly, the United States abandoned freedom a long time ago. We still think we live in a free society, a free economy. We take great pride in our position in the world; we drape ourselves in the United States flag—thinking it is still the symbol of freedom; we think that if we voted in the last presidential election we have performed our duty as free citizens of the greatest society that has ever graced the face of the earth. We fervently believe that our way is so great the rest of the world wants to be just like us; that it is our duty to make the world safe for democracy; that if other peoples don't seem to want to be like us it is only because they don't understand and we must ram it down their throats. Once they see, they will be glad we did. Our hubris is absolutely magnificent in its size and magnitude. Except freedom does not work that way.

We have been steadily losing our freedoms for over a hundred years. The founding fathers would not recognize in our government the republic they created. Just as we cannot recognize that we no longer have what they gave us. Benjamin Franklin was right, they gave us a republic. Unfortunately, we were not able to hold on to it. The American dream lives on; freedom will go where it is appreciated and respected.

Bill Bonner does not have all of the answers and I think he willingly admits that. He does have some ability to recognize where principles of freedom have been rejected and where charlatans and world improvers—from both sides of the aisle and who believe they know what is better for us than we know for ourselves—have replaced freedom with principles and structures that draw more power to them. Of course they never say that; they make it sound like their plan is the best thing that could happen and will make life so much better and easier. They will take care of everything for us. Bonner also has an ability to describe how, over the last one hundred plus years, we have embraced the opposite of the principles that will ensure freedom. We may call it whatever we want. That doesn't change what it is. I'll let you read the book to find out. He does a much better job of explaining it than I can.

[Roope Kanninen · Rating 3 out of 5]

En ihan hirveästi välittänyt kirjoitustyylistä ja rakenne olisi voinut olla loogisempi, mutta itse asiapuoli oli kiinnostavaa ja opin paljon. Yksi kirjan pääsanomista oli, että dollari on laskussa oleva valuutta ja kulta on turvallinen sijoituskohde. Tämä kirjan versio on vuodelta 2009, joten katsoin mielenkiinnosta miltä neuvot näyttävät nykypäivänä. Tällä ajanjaksolla dollarin arvo on laskenut noin 20 % ja kullan arvo lähes kaksinkertaistunut, joten sen vähintään voi lukea kirjoittajien eduksi.

[Athan Tolis · Rating 3 out of 5]

Two confessions first:

1. I've owned the old book since 2006, I looked at it briefly and there was no way I was paying good money to get an extra 50 pages, so the review is actually based on The Empire of Debt. Regardless, I'm rather sure my review is relevant, for reasons that will hopefully be apparent in my review.

2. I totally loved reading it. I could not put it down. I even went back to re-read some passages, often going on to re-read entire pages or chapters.

Now, for the review proper.

The executive summary is that the authors made a truly amazing set of market calls when this was published in 2005: Sell stocks, sell housing, buy gold. Indeed, "buy gold" are the last two words of the book. At the same time, they based these market calls on a series of hunches and prejudices that it is very difficult for a sensible, educated man to agree with. And the thesis of the book, that the US is an empire in reverse, is preposterous.

But it is so unbelievably funny to read, you kind of wish they were right.

I come from a country that was twice saved by America. Once from the Nazis and soon after that from communism. My parents are to this day unbelievably grateful for this. They paid for me to go study in America, in the process returning a small part of the favor by sending hundreds of thousands of dollars to fund solid American jobs of the kind the authors like, albeit at an institution they probably despise. I can't square this with the authors' vitriol against American intervention in Europe. As a human being, Wilson may have been as bad as they make him sound, possibly FDR too. But the debt these presidents issued to fund these wars is probably a footnote compared to the benefits, pecuniary and otherwise. Would not know where to start with the math, but that's my hunch and I don't feel any more obliged to defend it than the authors do theirs.

Also, from my time spent in America the impression I gathered was of a people that is prepared to make material concessions if there is a principle at stake. Sometimes it can by misguided or beside the point (I don't much care for guns myself, and where I was brought up history says they tossed malformed babies off a cliff rather than worry about unborn foetuses) but it's just how it is. So I remain to be convinced George W Bush was an imperialist. Especially as we all know he's an imbecile with strong principles. That'll do it every time.

Equally, the authors treat all debt as one thing. While it can't be denied that there's a level of debt that's too high, it can no more be denied that a bit of debt does grease the wheels of an economy. The authors get unbelievably annoyed and aggrieved about an issue that may have been evident to them because of their market experience or because of their personal prejudices, but who is to know? Also, they do not mention anywhere that the big bucks were in the fees charged for all the lending, not so much in the house appreciation itself. It could be (we'll never find out) that if all the lending had been priced right the party could have carried on for a long time. And maybe not, of course. But people who have studied what happened with the Lloyd's insurance market some twenty years ago have come precisely to that conclusion. It wasn't hurricane Andrew that killed the Lloyds "names," it was the layers upon layers of fees. So it could one day transpire that the US economy can indeed support amounts of debt the authors find disastrous, if we bother to keep record of who lent what to whom, if we give prime loans to people who can afford them rather than trick them into subprime, if we suppress valuation fraud, if we don't take a slice of juice after every repackaging and so on. Maybe one day it will.

Anyway, little point in trying to refute every idea in the book, especially since I'm saying I loved reading it.

So, for example, there's a six page section where they tear into Thomas Friedman who writes for the NYT. God, do I wish I'd written that myself. And how unbelievably brave to publish this book in 2005. And what fantastic prose.

So where I'm left with this book is that first and foremost it entertained me, but it also exposed me to a series of arguments on which I could develop my own, less strident, views and counterviews. Pretty much what I'd expect from a good book.

But it's so one-sided and absolutist and, frankly, insular in the arguments it makes, that you can hardly say it's great book.

[Kim · Rating 5 out of 5]

I can only imagine what the first edition of this book was like, but the Second edition is updatingly informative.

The New Empire of Debt basically explains our addiction to debt – whether consciously or not- once the United States left the gold standard in 1971. The point is that what restricted the country from engaging in things it could not otherwise afford was gold. Once a nation ran out of gold, it was insolvent.

Enter the Vietnam War, and President Johnson wanting/needing to both fight a (turns out) fruitless war, but also finance the Great Society. However, the want and need to do both went further back than that. Leaving the gold standard was the pinnacle of being able to do both: try please the public and go on with empire-building objectives, just made the ability to do both far easier. Yet, doing both simultaneously, comes at a cost: no one, nor nation can do both without borrowing. What’s even scarier is that the public loses sight of the basic definition of borrowing: whatever is borrowed must at some point, be returned. Financially, what is borrowed must be repaid with interest.

Nevertheless, the governmental borrowing system has a caveat that no individual can even enjoy: the ability to borrow with the illusion that what is borrowed does not have to be repaid! If any individual did this, the creditor would immediately, if not soon(er than later), ultimately go after the individual’s assets to hopefully, but nevertheless, objectively satisfy the debt. Nevertheless, the United States ceaselessly needs to borrow, being the reserve currency and having a great reputation with impunity, to pay its growing bills and to finance empire-objectives. However, the question in the book is, how long can the United States continue to borrow –without actually paying back- when its creditors feel they have had enough. What then happens to the American economy when it finds that its economy is annihilated? Bonner and Addison rightfully point out that the United States’ creditors can request (call) its debt at any time, and the United States would not have the money, let alone the interest to totally satisfy the debt.

Bonner and Addison compare the United States debt to the fall of Rome, and there are many parallels to it. It all starts with the similar mindset of each nation: each starts out as a Republic, but ends up trying to be(come) an empire. In short, empires are very expensive and intrusive. What makes people of an empire-mindset so confident that it (the empire) can and will, influence let alone force any other nation to do and think as it does, let alone be subordinate to the empire? In Ancient Rome, there was a strong military to do this. However, the more Ancient Rome extended itself, doing so became more costly and the opposition to its influence and force grew; there comes a time when conquered and/or subordinate nations say, “Enough.” Between the rising costs and energies expended to maintain an empire runs thin, along with the empire’s government trying to keep a god-like standard of living for its people, for nothing, Rome found that it could not keep trying to do everything at the same time, at the same level of financial and energetic expenditure, and keep its people happy, indefinitely. Ancient Rome went bust!

Enter the United States, and now having the same parallels, but this time, it’s global … and now, the people deemed to be subordinate (not as smart and the United Stated) turns out holds most of the United States’ debt! In modern terms, when another nation owns more of your debt, they can dictate (sooner or later) what the former empire can do, or cannot do; the subordinate nation holds leverage against the former empire. This is the state of the United States to China, and Japan, two of the nation’s main creditors.

In the bigger picture, in Bonner and Wiggin’s views, the empire of the United States will end: if/when its people do not seriously consider the economic state that it is in, get a grip on the mindset and history that caused it, and feels that despite the inevitable, that it will somehow, be spared the decline based on illusions and lies to the people, the end is inevitable! Moreover, it will not be pretty; it will be devastating, and the pivot point will be the destruction of the dollar, rather than the United States being put in a bind to repay debt that it has long not been able to repay. It’s an eye-opening book, with a very, very sad outcome … all because the United States didn’t remain a Republic, but wanted to become an empire.

[Richard Santos · Rating 3 out of 5]

The New Empire of Debt: The Rise and Fall of an Epic Financial Bubble makes a strong case that the debt America has accumulated at both the federal and personal levels could lead to the downfall of the American Empire. The book explains how the U.S. constantly needs to borrow money to fund its growing expenses and global ambitions, leveraging its status as the world’s reserve currency. While this idea seems more obvious today, the book was ahead of its time when it highlighted how far the U.S. had strayed from a truly free economy.

One issue I have is with the book’s claim that America became an empire under Woodrow Wilson. If we follow the authors’ definition of empire, earlier events like Manifest Destiny, the Mexican-American War, and the annexation of Pacific islands already fit this label. America’s empire-building tendencies began long before Wilson, making this argument feel overly simplistic.

Another problem is the authors’ nostalgia for the Gilded Age, a time of extreme wealth inequality, poor working conditions, and little government action to address these issues. Romanticizing this era ignores the struggles many Americans faced during that time and makes the book’s perspective feel out of touch.

Lastly, the book often comes across as a libertarian rant, idealizing a Jeffersonian vision of everyone owning their own farm while offering little in the way of practical solutions. The repetitive arguments and lack of clear answers weaken its overall impact.

Despite these flaws, the book does a good job of emphasizing America’s debt problem and the risks it poses. While not without its issues, it’s worth reading for anyone looking to understand the challenges created by the nation’s reliance on debt.

[عبد الله القصير · Rating 4 out of 5]

الكتاب موجه للأمريكيين بالأساس، وفيه المؤلفان يعرضون المشاكل الاقتصادية التي تواجه الولايات المتحدة الأمريكية، وعلى رأسها الدين العام والخاص، والثقافة الإستهلاكية
المستفحلة بينهم، وضعف الادخار، والكسل! لذلك تجد أن الحلول التي يقدمها المؤلفان هي: الجد والادخار والذكاء بالاستثمار.. وشراء الذهب

الكتاب طويل لكن ممتع ، وكما هو موجه للشعب الأمريكي، إلا أن ما فيه يصلح للجميع.

[Giedrius Steponkus · Rating 5 out of 5]

Gera knyga. Buvau ją vartęs prieš 10-t, bet nesukėlė tokio rezonanso kaip šį kartą perklausius AubioBook.. US nuo prezidento Wilson laikų iš Respublikos virto imperija, turinčia visus aksčiau buvusių imperijų bruožus tačiau itin keista.. kritinio posūkio metai - 1913

[Josh Beaudoin · Rating 4 out of 5]

Very insightful book. Left me filling cynical and anxious about our country's obsession with debt.
Wouldn't read it more than once.

[DJ Meunier · Rating 4 out of 5]

Worth reading for anybody who wants to be financially competent. . .which should be everyone.

[Nazri Awang · Rating 3 out of 5]

One day the US will inevitably go bankrupt. Unsustainable budget deficit, with ballooning total national debt, and endless printing of money, in an effort to try reviving an economy destined to go bust. It predicts that the next economic bubble that will crash, is the US government debt. The past history of the Roman Empire tells us something, about how things are going to be slowly unfolding. This is gonna be even bigger than 2008 subprime-mortgage financial crisis. Hmm very interesting, indeed. But before that, let us see how Greece will be the first casualty of committing the same crime.

[Ahmad Cendana · Rating 4 out of 5]

Bill Bonner from DailyReckoning.com / Agora is one of the best business, finance and economics writer I've ever read. I would look forward to reading his articles in DailyReckoning whenever they appear. He isn't of the ivory tower type who'd bore you to death. Nor of the media darling type who talk/write as if they really know what is happening, and what will happen in the future.

I've always wanted to read Bill Bonner's books but haven't found them in the bookstores in Malaysia. But it's available in digital form at Scribd. Looks like I'll continue with the US9 monthly subscription at Scribd just to read this kind of book and by such an author.

[Daren Doucet · Rating 4 out of 5]

The New Empire of Debt. Gives fascinating numbers on household debt, the American debt, and its future commitments. Social security payments will grow, and there is a need to plan for a way to manage future spending. This book was wrote primarily for the U.S.A, but other countries need to read it in order to manage their affairs more responsibly as well. This book could get a 5 out of 5, but sometimes the sarcasm is a little too haughty. Very good book though, for those who like politics and economics.

[Lega · Rating 2 out of 5]

No me gustan los autores que permanentemente lanzan preguntas al lector. No me gustan los que repiten una y otra vez las mismas frases durante el libro. Como si el lector no hubiera entendido a la primera. Este libro peca de ambas cosas.

Las comparaciones que lanza el autor son pueriles y en ocasiones tienen un tufo rancio, machista « the picture was grotesque, unnatural... like a pretty wife who rotates her own tires; it is almost too good to be true »

No me ha gustado.

[JC · Rating 4 out of 5]

The US has been setup for the scenario we're currently in for quite some time. This book takes a much deeper look at the policies and history that brought us here for a much more political view than I'd previously read - most of what I've read has been very financial. Overall, an interesting read. I don't necessarily agree with the conclusion of where to invest, but interesting nonetheless.

[Christopher · Rating 3 out of 5]

Good one-liners, pretty good flow to it but just seemed about 75 pages too long?! It sure summed up the mess America got itself in through years of neglect.

[Sandeep · Rating 4 out of 5]

An excellent account of all the major civilizations' economic and political history, and its similarities to present day empires.
Its wise, fun and enriching all at the same time.

[Todd Woods · Rating 5 out of 5]

Excellent book about the disastrous path our country is on fiscally.

[Rich Cromwell · Rating 5 out of 5]

Pivotal in my thinking since late 2004, it has been updated two times. This is an outstanding book