7 Stages Before the Collapse of an Empire!

 

The United States has been a world empire for much of the last century (20^th century). But every empire has eventually collapsed. The question remains: If an empire collapses, how do you avoid the fallout? And even more importantly, how could you benefit? 

1. Hard Money   

Empires typically begin on the right foot by establishing a hard-money system based on reserve assets like gold and silver. Creating a currency that’s backed by hard money, such as the gold standard, is a step toward building an empire. The U.S. economy went on the gold standard in the 1870s, but it was short lived. The gold standard is one in which there is an equivalent amount of gold reserves stored in the Treasury to match the money supply. It wasn’t long before the U.S. began printing more banknotes than there was gold to back it up. 

After more than a century with sound money, the country began inching away from that model. In 1913, it was a 40% ratio reserve, devaluing the currency by over 50%. Things went from bad to worse. The U.S. went completely off the gold standard in 1971 under President Nixon. 

 

Source: https://simple.wikipedia.org

2. Military Spending 

During World War II, the U.S. economy was fuelled by the sale of military and defence equipment like tanks and machine guns. Gold was used to pay for products imported from the United States, thereby bolstering the gold reserves of the country, giving the U.S. an advantage over the rest of the world.  

While it might appear that war strengthens the economy, that’s a misnomer. It’s only the case if you’re not the country doing the fighting but instead cashing in by selling guns. The Bretton Woods agreement of 1944 changed the dynamic between the dollar and the leading precious metal. World leaders agreed to eradicate the gold standard and crown the dollar as the global reserve currency. Other currencies were then backed by the U.S. dollar, the latter of which was only partially backed by gold, a recipe for disaster.  

3. War Effect  

By the time WWII was over, the U.S. economy had become intertwined with conflict. 

The Korean War, Cold War and Vietnam War followed and the cost of war shot up substantially, whether due to strengthening the nation’s defence or fighting wars overseas (and maintaining 750 military bases). The only way for the U.S. to keep this going was to pay (close to USD1 trillion) for it through currency inflation, or deficit spending, and the cracks begin to show. It wasn’t long before the Bretton Woods system was crumbling as the U.S. struggled to live up to its end of the trade bargain to provide gold for what had become an inflated dollar.  

4. Inflation and the Demise of Purchasing Power  

The dollar was detached from gold and the store of value it represented. It has been downhill ever since, with the dollar shaving off more than three-quarters of its purchasing power since then.  

5. Crisis of Confidence 

Consumers are losing confidence in the staying power of the dollar. Worse, the U.S. debt clock has reached over $30 trillion (and rising), which, in turn, has made other countries uncomfortable about the dollars they hold. Meanwhile, China is doing its best to displace the dollar as the go-to currency for oil trade. However, what could be more likely on the horizon is a gold-backed oil trading. As soon as people start losing faith in their currency, like the dollar, the dominos begin to fall.  

6. Store of Value Assets Endure  

In this second last of the seven stages before the collapse of an empire, fiat currency will fail if it’s not controlled printing! Economies may have no choice but to reclaim a fixed standard so that the currency has some basis for its value. The obvious choice is the gold standard, but it could also be something else, like a digital store of value like bitcoin. The only way for investors to avoid getting left holding the bag is to own hard money – gold, silver or bitcoin. 

7. Governance

In the last phase, governance becomes an issue. The Roman empire was on a downward spiral till Marcus Aurelius tried to stem the tide. Bu after him, the fall was dramatic. So it was for the British empire. Values and proper governance were lacking and India and other nations were “robbed” of their resources. India alone lost USD45 trillion. The U.S. now in a flip-flop era with Trump. What is black is now white and what is right is now wrong. The spiral downward will only accelerate – it is not MAGA but MAPA (make America poor again!) that will reign. 

Reference:

7 Stages BEFORE the Collapse of an Empire, Gerelyn, https://www.thecoinzone.com, 17 December 2024