If you read Gabriel Kolko's excellent history of the Vietnam war, you'll see that's what happened then. Nixon was always willing to escalate to try to force the 'peace' he wanted. It was the finance system that eventually said NO. Back then, the US was on 'the gold standard'. In other words, it was only supposed to print money that it had gold in Fort Knox to back up. The idea was that anyone could take US dollars and ask for gold in exchange. By the early 70's, the US was running out of money for both its domestic priorities and its war in Vietnam. When forced to choose, any sensible politician chooses domestic priorities, as that's what gets them re-elected or kicked out of office.
Read this piece by Paul Craig Roberts, As the Dollar Falls Off the Cliff ... (via Counterpunch).
It is obvious to Chinese officials that neither China nor the entire world has enough spare money to purchase $4 trillion of US Treasuries over the next two years. According to the London Telegraph on May 27, Dallas Federal Reserve Bank president Richard Fisher was repeatedly grilled by senior officials of the Chinese government during his recent visit about whether the Federal Reserve was going to finance the US budget deficit by printing money. According to Fisher, “I must have been asked about that a hundred times in China. I was asked at every single meeting about our purchases of Treasuries. That seemed to be the principal preoccupation of those that were invested with their surpluses mostly in the United States.”
US Treasury Secretary Timothy Geithner has gone to China to calm the fears. However, even before he arrived, a Chinese central bank spokesman gave Geithner the message that the US should not assume China will continue to finance Washington’s extravagant budgets. The governor of China’s central bank is calling for the abandonment of the dollar as reserve currency, using the International Monetary Fund’s Special Drawing Rights in its place.
President Lyndon Johnson’s “guns and butter” policy during the 1960s forced president Richard Nixon to eliminate the gold backing that the dollar had as world reserve currency, putting foreign central banks on the same fiat money standard as the US economy. In its first four months, the Obama administration has outdone president Johnson. Instead of ending war, Obama has expanded America’s war of aggression in Afghanistan and spread it into Pakistan. War, bailouts, and stimulus plans have pushed the government’s annual operating budget 50 per cent into the red.
That's the almost surrealistic part of this. The US is broke. We are running huge deficits. Orders of magnitude higher than anything before. That's the cost of pumping trillions of US dollars into the reserves of the Wall Street banks to keep them from collapsing because of their fraud and bad business decisions. What amazes me is why on earth we don't shut these wars down and do it now?
In other news today, the House and the Senate reached agreement on the next $100 billion dollar installment of war funding. No big surprise, since Democrats and Republicans seem to be in full agreement that the wars must go on. If there was debate, it was on the details of the additional 'pork' that is added on to this bill. There was never any disagreement over funding the wars.
That's insane. One thing about being broke. You need every dollar you can lay your hands on. We just spent three times as much on these wars as we just spent trying to prop up our auto industry from the results of their own bad decisions. That was $30 billion. And, you'll see an article below where the union workers in that industry just lost all their pension and health for retirees benefits to fund the Wall Street bankers so they don't lose a dime on the deal.
Think about that. We have to steal $6 billion of the money that retired autoworkers put aside for their own pensions and health care in order to keep the fat cats on Wall Street happy. But we can find $100 billion to fund going to the other side of the world and killing people. Insanity.
At this point, I don't expect anyone in Washington to understand the moral issue that its not right to go around the world killing people. No matter how much you want their oil. But, surely these people can do what every American sitting at the kitchen table making a budget understand. That is, sometimes you just can't afford something. You can't have it right now. No matter how much your evil little heart wants to go to the other side of the world to kill someone who doesn't look like you ... sometimes you just can't afford it.