Would you rather live in the ascendancy of a civilization, or in its decline?

Sun Could Set Suddenly on Superpower as Debt Bites

...what if history is not cyclical and slow-moving but arhythmic, at times almost stationary, but also capable of accelerating suddenly, like a sports car?

Can non-random events cause random effects?

What if collapse does not arrive over a number of centuries but comes suddenly, like a thief in the night?

Great powers and empires are complex systems, which means their construction more resembles a termite hill than an Egyptian pyramid. They operate somewhere between order and disorder...

Such systems can appear to operate quite stably for some time; they seem to be in equilibrium but are, in fact, constantly adapting.

Does complexity increase the likelihood of complication?

But there comes a moment when complex systems "go critical". A very small trigger can set off a phase transition from a benign equilibrium to a crisis.

Complex systems share certain characteristics. A small input to such a system can produce huge, often unanticipated changes, what scientists call the amplifier effect.

The flapping of a single butterfly's wing today produces a tiny change…
…so, in a month's time
a tornado that would have devastated the Indonesian coast doesn't happen
or maybe one that wasn't going to happen does

Ian Stewart
The Mathematics of Chaos

Empires exhibit many of the characteristics of other complex adaptive systems, including the tendency to move from stability to instability quite suddenly. But this fact is rarely recognised because of our addiction to cyclical theories of history. The Bourbon monarchy in France passed from triumph to terror with astonishing rapidity. The sun set on the British Empire almost as suddenly. The Suez crisis in 1956 proved that Britain could not act in defiance of the US in the Middle East, setting the seal on the end of empire.

What are the implications for the US today?

The most obvious point is that imperial falls are associated with fiscal crises: sharp imbalances between revenues and expenditures, and the mounting cost of servicing a mountain of public debt.

Did Spanish money become worth less
after the Emperor borrowed against 100 years of future tax revenue
to pay for war against England?

Think of Spain in the 17th century: already by 1543 nearly two-thirds of ordinary revenue was going on interest on the juros, the loans by which the Habsburg monarchy financed itself.

Did France execute relatively the same strategy
with similar consequences not long after?

Or think of France in the 18th century: between 1751 and 1788, the eve of Revolution, interest and amortisation payments rose from just over a quarter of tax revenue to 62 per cent.

Nations are not ruined by one act of violence
but quite often, gradually, and almost imperceptibly
by the depreciation of their currency through excessive quantity

Nicolas Copernicus
Discovered Earth was not the center of the Universe

Alarm bells should therefore be ringing very loudly indeed in Washington, as the US contemplates a deficit for 2010 of more than $1.64 trillion, about 10 per cent of GDP, for the second year running...

...what is even more terrifying is to consider what ongoing deficit finance could mean for the burden of interest payments as a share of federal revenues.

...the fiscal position of the US is at present worse than that of Greece.

For now, the world still expects the US to muddle through...

...even if rates stay low, recurrent deficits and debt accumulation mean that interest payments consume a rising proportion of tax revenue. And military expenditure is the item most likely to be squeezed to compensate because, unlike mandatory entitlements (social security, Medicaid and Medicare), defence spending is discretionary.

If the US government dramatically increases Treasury debt issuance
while the rest of the world’s purchasing needs fall if global economic growth declines
should US long term interest rates eventually rise to attract investment?

It is, in other words, a pre-programmed reality of US fiscal policy today that the resources available to the Department of Defense will be reduced in the years to come. Indeed, by my reckoning, it is quite likely that the US could be spending more on interest payments than on defence within the next decade.

And remember: half the federal debt in public hands is in the hands of foreign creditors. Of that, a fifth (22 per cent) is held by the monetary authorities of the People's Republic of China, down from 27 per cent in July last year. It may not have escaped your notice that China now has the second-largest economy in the world and is almost certain to be the US's principal strategic rival in the 21st century, particularly in the Asia-Pacific. Quietly, discreetly, the Chinese are reducing their exposure to US Treasuries. Perhaps they have noticed what the rest of the world's investors pretend not to see: that the US is on a completely unsustainable fiscal course, with no apparent political means of self-correcting. That has profound implications not only for the US but also for all countries that have come to rely on it, directly or indirectly, for their security.

If Iran and India cut a deal to deliver more Iranian oil to India
and reduce exports to China
should China resort to military action to prevent it?

Australia's post-war foreign policy has been, in essence, to be a committed ally of the US.

But what if the sudden waning of American power that I fear brings to an abrupt end the era of US hegemony in the Asia-Pacific region? Are we ready for such a dramatic change in the global balance of power?

Judging by what I have heard here since I arrived last Friday, the answer is no. Australians are simply not thinking about such things.

I don't have a clue of what weapons
will be used in World War III
but World War IV will be fought with sticks and stones

Albert Einstein

...dramas lie ahead as the nasty fiscal arithmetic of imperial decline drives yet another great power over the edge of chaos.

Niall Ferguson is professor of history at Harvard University.

The ultimate result of shielding men from the effects of folly,
is to fill the world with fools.

Herbert Spencer
Coined the phrase “Survival of the fittest”