The cancer that sinks empires: Debt

There has never been an empire in history that did not collapse. The most important reason for their collapse was the overconfidence created by victory and prosperity. The collapse of empires often begins not the moment they are defeated on the battlefield, but when they become indebted. Victories create the illusion that “no one can stop us anymore.” This very psychology becomes the first step toward collapse. Japanese Admiral Togo, who defeated the Russians in the western Pacific at the beginning of the 20th century, said: “The gods do not give the crown of victory to those who are satisfied with their situation after a single victory and rest. The crown of victory is given to those who train intensively in peacetime, for they have won the victory long before the war began. As a wise old man said, tighten the straps of your helmets after victory.” Initially, the empire that grows as a result of consecutive victories brings prosperity with it. The complacency and intoxication of power brought by prosperity draw leaders into the most strategic mistakes. The critical mind that sustains the state's reason is replaced by praise, and realism is replaced by idealistic expansionism. As the empire grows beyond its capacity, vast geographies that become impossible to defend, rising costs, and internal strife emerge. Merit weakens, discipline loosens, and decision-making mechanisms become blinded. As power grows, the threat also grows; as the empire expands, a counter-coalition forms. Friends diminish, interest groups dissolve, but enemies multiply rapidly. In the final stage, wrong wars, unnecessary risks, and poor management weaken the empire. Wars generate massive costs, and the state begins to borrow. Thus, the debt-interest-inflation spiral spirals out of control. This situation creates devaluation, and devaluation creates more debt. Eventually, the financial system disintegrates, the currency collapses, and the empire finds itself unable to finance itself. The collapse of the empire is now inevitable. Thus, the collapse occurs not by a blow from the outside, but by the weight of the mistakes accumulated within.

THE COLLAPSE OF EMPIRES AND MONEY

As empires expand, they impose an economic order. The goods and services they produce are circulated in their colonies, spheres of influence, and areas of interest with high profits. Their currency becomes the main reserve currency of continental and even global trade. The decline in the value of said currency occurs in parallel with the fall of the empires. Although monetary hegemony can never replace military, technological, demographic, and institutional power, it delays the collapse of the empire. Because it does not collapse all at once. It spreads over time. The weakening of the strong currencies of Rome and subsequent empires through debt over the flowing years began with the devaluation of silver and gold. While the decrease in the value of the reserve or hegemonic currency postpones the collapse of empires, it cannot stop overexpansion, economic decay, and debt crises. The denarius in Rome, the Real in Spain, the pound sterling in England, and the dollar in the USA were the global currency standards of their respective eras; however, the empires collapsed due to overexpansion, fiscal exhaustion, the erosion of production power, and internal political-military crises. The devaluation of currency tied to silver and gold in these empires occurred through three main methods. As in Rome, the precious metal content within the coin was reduced by lowering the content. As in the case of Spain, the oversupply of precious metal led to its own devaluation. In the cases of England and the USA, the gold standard was severed, and the currency was removed from the guarantee of gold backing, transitioning to a paper money system. The common result is the loss of the real value of currencies, rising inflation, the inability to cover imperial costs, and the collapse of the hegemony structure.

DEBT AND THE FALL OF ROME

As Rome's borders grew, the costs of the army increased, production remained dependent on slave labor, and when state expenses became unmanageable, it systematically reduced the silver content in the silver coin, the denarius, and the collapse accelerated. Looking at the wars that weakened the Roman Empire, although the Punic Wars waged against maritime Carthage between 264 BC and 146 BC were won, this period caused permanent damage to Rome's financial structure due to massive debt. Furthermore, the strengthening of the land aristocracy disrupted internal balances. The Gallic Wars, which took place between 58 and 50 BC, increased Julius Caesar's personal power gain, triggered civil wars, and the insufficiency of spoils increased debt; he took war loans called “foenus bellicum” from the wealthy. However, despite this, the silver ratio in coins during the Caesar era was 95%. The civil war between Caesar and Pompeius weakened the republic, and mandatory loans were collected to cover soldiers' salaries. During the Third Century Crisis, which occurred between 235 and 285 AD, Goth, Persian, Vandal, and Germanic incursions kept Rome in a state of constant mobilization. Emperors were forced to take high-interest loans from senators and provincial elites, and due to payment difficulties, they paid some debts with goods and grain. In the empire, which was fighting on three fronts simultaneously, the currency denarius collapsed, inflation rose, and the economic system disintegrated. Rome tried to buy time by lowering the silver ratio. In these years, the silver ratio in coins had fallen below 2%. This monetary deterioration caused inflation to explode, soldiers began to demand their salaries in goods and land, and the empire lost its economic power and was divided into two in 395 AD. It ended in 476.

THE FALL OF SPAIN AND DEBT

The Habsburg/Spanish Empire experienced short-term wealth in the 16th century with the massive flow of silver and gold from the newly discovered and colonized Americas. Between 1500 and 1650, approximately 80 percent of the silver flowing into Europe was under Spanish control. By plundering the Inca and Aztec civilizations, over 100 tons of gold and 1800 tons of silver were brought from Bolivia and Argentina until the 17th century. In the 16th century, the Spanish Real became the world's reserve currency. This abundance enriched Spain in the short term, but led to a decrease in the value of silver and a rise in prices across Europe. This triggered widespread inflation known as the “Spanish Price Revolution.” The flow of silver went not to the real sector, but to palace luxury and endless wars. Because Spain did not develop a production economy, it became buried in a rentier order and became dependent on imports. The oversupply of silver collapsed the purchasing power of the Real. On the other hand, endless wars weakened the Spanish Empire. First, while the war between the Spanish Habsburg and French Valois dynasties, known in history as the Italian Wars, was being waged between 1494 and 1559, costs were increasing for the naval struggle in the Mediterranean against the Ottoman Empire, the struggle against the British for piracy in the Atlantic, and the establishment of colonies in the new world. On the other hand, after Luther's declaration in 1517, tensions began with the German principalities and the Netherlands due to the rise of Protestantism. War financing in Spain was almost entirely based on external debt. Hundreds of billions of Reals worth of “asiento” debt accumulated in these wars. “Asiento” loans taken from Genoese, German, and Dutch bankers were Spain's primary financial instrument. The Italian Wars exhausted Spain financially, militarily, and politically. Spain burdened the Netherlands excessively to pay its debts. This fatigue and excessive tax/oppression policy triggered the rebellion in the Netherlands. For this reason, when the Italian Wars ended, the Eighty Years' War, which would last until the Peace of Westphalia in 1648, began. Debt continued throughout the Eighty Years' War, also known as the Dutch Revolt. The construction of the Spanish Armada, which was defeated by the English Navy in the English Channel in 1588, had also been provided through debt. Thus, the bankruptcies in 1596, 1607, and 1627 were a result of the costs of these wars and debt. The independence of the Netherlands collapsed the empire's tax revenues. The Armada disaster hit Spain's financial capacity as much as its military power; the navy had been built with debt, and the defeat led to bankruptcy due to unpayable loans. Intervention in the Thirty Years' War, which began in 1618 between European Protestant states and the Catholic Spanish-Austrian Habsburg front, brought a new debt burden, and Spain's influence in Europe narrowed. The Portuguese Restoration War forced Spain to fight on two fronts and created a huge loss in colonial revenues. After 1648, it recognized the independence of Saxony and the Dutch Republic, and the process of transferring continental hegemony to France and maritime hegemony to the Netherlands began. Ultimately, the wars of succession between the Bourbon front (France and Spain) and Austria, England, the Netherlands, and their allies, which began after 1700, ended with the Treaty of Utrecht in 1713 as a result of Spain's defeat. By then, the Habsburgs and Spain had lost their great power status.

THE DUTCH EXAMPLE

The 17th-century Netherlands was the heart of world trade, insurance, and finance. The guilder was the global reserve currency, and Amsterdam was the Wall Street of the world. However, the three Anglo-Dutch Wars destroyed trade fleets; while freight revenues fell, insurance and naval costs rose. City-states turned to large-scale borrowing to protect the navy. Rising interest rates in the Amsterdam market pressured the financial structure. Then, France's 1672 attack (the “Disaster Year”) crushed the Netherlands with the burden of a land war. Successive wars disrupted financial coordination among city-states and made the debt stock unsustainable. Although the guilder remained strong, a large portion of state revenues was allocated to interest payments, the Netherlands' military–strategic capacity narrowed, and it dissolved in the face of England's industrial power. The financial center remained standing, but the military and financial burden disrupted economic balances, and ultimately the debt-interest cycle caused the Netherlands to lose its leadership.

THE FALL OF FRANCE

The fall of France is a typical example of overexpansion and uncontrolled war financing. With the Italian Wars between 1494 and 1559, followed by the Thirty Years' War between 1618 and 1648, the state was condemned to an ever-growing war budget. The incessant wars of the Sun King, Louis XIV, who remained on the throne between 1643 and 1715, collapsed the financial order established by Colbert; the state treasury tried to survive through constant borrowing and tax increases. In the 18th century, the support given to the American War of Independence paralyzed the budget. In the 1780s, half of state revenues were going to interest payments. The financial system collapsed, and the printing of paper money (assignat) led to hyperinflation. The 1789 Revolution and the Napoleonic Wars completely exhausted the finances. Manpower, production capacity, and state debt became unsustainable. During this process, England consolidated its financial and production superiority thanks to the industrial revolution. France could not be the leading power of Europe after 1815.

THE OTTOMAN EXAMPLE

The Ottoman administration made its biggest and most strategic mistakes during periods of overconfidence. After entering Europe by defeating the Hungarian armies in 2 hours at Mohács in 1526, it was not the victory itself, but the geopolitical, economic, military, and institutional consequences it birthed that slowly dragged the Ottoman Empire into a “swamp of overexpansion.” Mohács pushed the Ottomans out of the Balkan geography and into the depths of Central Europe, forcing them to go beyond natural logistical borders. Central Europe was an extremely costly and unsustainable area of expansion for the Ottomans due to its climate, wintering conditions, and the distance of provisioning and supply lines. Maintaining this region required a massive flow of money, people, and logistics over thousands of kilometers of lines every year. This situation created the Ottoman version of the overexpansion “overstretch” syndrome described by Mahan, and the state's financial and administrative capacity began to wear down over the years. From the 16th century onwards, debasement (the loss of value of the currency) triggered by European silver flows collapsed the Ottoman monetary system. The three-front struggle of Austria–Iran–Venice in the 17th century after Mohács increased the financial burden, the timar system collapsed, and the Celali Rebellions shattered the production base. After the Second Siege of Vienna, which ended in defeat in 1683, the Ottomans, who faced Austria (Habsburg Monarchy), the Polish–Lithuanian Commonwealth, the Republic of Venice, and Russia in the Holy League Wars that lasted 16 years, faced a situation similar to Rome's 3rd-century crisis. The budget was exhausted. The Treaty of Karlowitz, signed in 1699, narrowed the tax base. The wars lost against Russia one after another in the 18th century also created a financial structure that constantly ran a deficit. By the 19th century, the state became unable to compete with Europe in domestic production, and customs policy collapsed with the capitulations. The Crimean War (1854) started the first major external borrowing. More than 15 external loans were taken between 1854 and 1876. Ultimately, the state went bankrupt in 1876, and in 1881, the Ottoman Public Debt Administration seized Ottoman financial sovereignty.

THE FALL OF ENGLAND AND DEBT

In the 16th and 17th centuries, England seized roughly 400 tons of silver by stealing it from Spain's colonies in Central and South America through piracy in the Atlantic Ocean and the Caribbean Sea. England formed the core capital of early capitalism with the gold and silver it stole from Spain; this resource was a critical lever that triggered the first capital accumulation of the British maritime empire and the industrial revolution. However, at the end of the 17th century, the dynasty needed to borrow. Thus, in 1694, the Bank of England, which included Sephardic Jewish bankers, was established to finance the Nine Years' War against France, and large war loans were provided to the state. In other words, England had established the modern public debt system for wars. 1.2 million pounds were borrowed through bonds. The Seven Years' War (1756–1763), accepted as the first global war in world history in the 18th century, was the first war in which England and Prussia fought against the France–Austria–Russia front, where the modern British Empire was born, and France entered a process of collapse. Even though England won this war, its debts doubled, and it increased tax pressure on its colonies. This situation triggered the American rebellion in 1773. The American War of Independence, which continued between 1775 and 1783, was ultimately a major financial blow to England, and the North American colonies were lost. On the other hand, India, which was colonized from 1757 onwards, provided England with approximately 10 trillion pounds of value-added in today's terms until the beginning of the 20th century and became the locomotive of imperial power, especially the industrial revolution. (India, which had 25% of world production in 1700, had reduced its share to 2% by the beginning of the 20th century.) The Napoleonic Wars at the beginning of the 19th century increased England's national debt eightfold. Jewish banker Rothschild and the world's most powerful banking dynasty, the Baring bankers, played a critical role in borrowing, and after the victory at Waterloo in 1815, it took almost 100 years to pay off the debts. However, despite the massive debt, after the 1805 Trafalgar Naval Victory against France, the empire definitively turned the global balance of power in its favor and established the “Pax Britannica” order. The Royal Navy took control of the world's sea lanes and determined free trade and security on the oceans alone. London turned the production superiority of the industrial revolution into the center of a global trade network, directing the flow of raw materials from the colonies to Britain. The pound sterling, with its stable structure tied to the gold standard, became the main anchor of international payments and finance. Thus, naval power, trade superiority, and the sterling-centered financial system combined to establish the global order of the 19th century around England. However, the Boer Wars in South Africa at the end of the 19th century showed the limits of England's global power capability and revealed that the empire had begun to crack from within. As England entered the 20th century, it faced the greatest challenge in its history with the emergence of Germany as a major trade and naval power. First the First World War and then the Second World War were inevitable for the curbing and dismantling of Germany, which was growing on the continent and applying great pressure on the island nation of England. In the First World War, England borrowed 4 billion dollars from Wall Street bankers, primarily JP Morgan, in the USA and increased domestic borrowing with war bonds. This process broke the hegemonic power of the pound sterling. Thus, although England managed the pound sterling that ruled world maritime trade, it exhausted its gold reserves with the cost of two world wars, and when it could not fix the pound to gold, the gold backing of the pound collapsed, and England abandoned the gold standard in 1931. Thus, the currency was effectively devalued without gold support. After the Second World War, the British pound experienced the sharpest collapse in its history due to the massive debt burden of the war, collapsing export capacity, melting gold and foreign exchange reserves, Lend-Lease debt dependent on the USA, and the rapid disintegration of the empire. The forced opening of the pound to convertibility in 1947 led to a reserve loss of 3 billion dollars in just six weeks, and the system collapsed. In 1949, the pound was devalued by 30%, reducing it from 4.03 dollars to 2.80 dollars. This collapse was not only monetary but a geopolitical fracture. England had left the financial leadership of the post-war order to the USA, the sterling area had weakened, and it had irreversibly lost its role as an international reserve currency against the dollar.

THE RISE OF THE AMERICAN DOLLAR

In 1890, the USA surpassed England in industrial production to become the world's largest manufacturing power, and this economic superiority laid the foundation for the dollar's global rise, slowly but surely. From the 1900s onwards, the economy of steel, oil, railways, and mass production (Fordism) transformed the USA into a state that exported global capital. Becoming Europe's war financier throughout the First World War, the USA collected most of the gold in its own reserves, and in the 1920s, New York rose as the second global financial center alongside London. By the 1940s, two-thirds of the world's gold stock was now in the USA. This economic and financial weight was institutionalized by transforming into the dollar-centered international monetary system established at the Bretton Woods conference at the end of the Second World War. Thus, the dollar definitively replaced the British pound not only as a strong economy but also as the architect of the global order.

THE BRETTON WOODS SYSTEM

Towards the end of the Second World War, in July 1944, the USA brought together representatives of 44 countries in Bretton Woods, New Hampshire, to design the post-war global economic order. The USA's economic superiority was decisive at the conference, and a stable exchange rate system was adopted where the dollar was pegged to gold and all other currencies were pegged to the dollar. The Bretton Woods system guaranteed 35 dollars for 1 ounce of gold. In this framework, two institutions of global financial architecture were established. The IMF to support short-term balance of payments crises, and the World Bank for long-term development and reconstruction financing. Thus, Bretton Woods shaped the economic architecture of the 20th century by institutionalizing both the dollar-centered international monetary system and the liberal economic order led by the USA.

THE COLLAPSE OF THE BRETTON WOODS SYSTEM

At the end of the 1950s, the USA printed more dollars than its gold reserves to finance the Vietnam War, the Cold War, the Marshall Plan, massive social spending, and world trade. Excessive dollar issuance was weakening the USA's gold backing. By the 1960s, Europe and Japan had recovered rapidly, the USA's production superiority had eroded, and the dollar surplus had accumulated in global markets, increasing distrust in US gold reserves. The USA could not keep up with both issuing global reserve currency, that is, providing sufficient liquidity to the world economy, and maintaining confidence in its own currency. Thus, it became impossible for the dollar to maintain the 35 dollars/ounce gold parity. When many countries, especially France, began to convert their dollars into gold, the system collapsed, and this weakening process resulted in President Nixon closing the gold window in 1971, effectively ending Bretton Woods. This decision meant the severance of the real precious metal backing behind the dollar. Nixon thus opened the era of unlimited monetary expansion in the modern sense. The power of the dollar became based more on US military presence and the petrodollar system than on gold. After this change, the dollar began to derive its power, apart from the influence created by the USA's economic and military power, from the liquidity it provided within the global financial system and the widespread use of the dollar as a reserve currency.

THE PETRODOLLAR SYSTEM

After 1971, the USA gained the ability to print unlimited money without a real gold stock. After the dollar's gold link was severed, the “Petrodollar” system came to the fore in oil trade. This system, with the strategic agreement established between the USA and Saudi Arabia after the 1973 oil crisis, turned into a financially based architecture that guaranteed global dollar demand and made the expansion and sustainability of American military power possible. In the agreements made with oil-rich countries in the Persian Gulf, oil sales began to be priced and invoiced in dollars. A system indexed to oil instead of gold was established in a way. The pricing of oil only in dollars and the energy-dependent structure of world trade ensured the cementing of the dollar's reserve currency status. Thus, the USA became an imperial apparatus that could attract unlimited external financing, run massive budget deficits, and yet borrow at low interest rates. This financial superiority made it possible for the Pentagon to operate aircraft carrier groups on a global scale, establish a network of over 800 bases, modernize its nuclear power, and maintain the unipolar world order after the Cold War. The Carter Doctrine, announced by President Jimmy Carter on January 23, 1980, in this context, defined the threatening of Persian Gulf oil routes as an attack on the vital interests of the USA and declared that any intervention in this region would be met with American military power. Therefore, the petrodollar order is not just a monetary system, but the very source of energy and liquidity for US military hegemony. Since the uninterrupted flow of energy means the sustainability of the dollar's global circulation, the USA placed the protection of energy lines in a wide area from the Persian Gulf to the Indian Ocean, from the Red Sea to the Eastern Mediterranean, at the center of its national security. This doctrine created the basic ground for the organization of the Central Command (CENTCOM) and the permanent US military presence in the Persian Gulf. During the Reagan era, this line turned into an aggressive containment strategy aimed at eliminating Soviet influence and any threat to energy arteries. Interventions in tanker wars during the Iran-Iraq war, the formation of American convoys in the Gulf, and the protection of regional allies were military tools to guarantee the continuity of the petrodollar system. After the Cold War, the Bush doctrine launched the first large-scale hot war to protect the petrodollar order by considering the fact that one-fifth of world oil reserves passed under the control of a single actor with Saddam's invasion of Kuwait as an unacceptable threat. The Desert Shield and Desert Storm operations dramatically revealed how interconnected energy security and the dollar order are. Meanwhile, after the Israel–US relations, which were moved to the top level after 1973, Israel was transformed into a kind of armed and uncontrolled mafia regime tool of the USA in the region. The preventive war doctrine developed after September 11, 2001, now legitimized the strategy of direct attack and regime change against regimes perceived as threats by energy lines and the dollar-centered system. Initiatives such as Iraq's move to switch oil sales to the euro in 2000 were a red alert for Washington. All of the interventions in Iraq in 2003, Libya in 2011, and Syria after 2013 were carried out both to maintain the petrodollar order and to contribute to Israeli geopolitics. The fundamental truth that all these processes show is this: The petrodollar system is the global liquidity engine that finances the USA's military power. It is a hegemony mechanism that was doctrinally protected by Carter, made aggressive by Reagan, and fortified with hot war and regime engineering tools by the Bush doctrines. For this reason, there is an inseparable causal link between the USA's global military presence and the petrodollar order; the moment energy flow stops, the dollar loses its foundation, and the moment the dollar weakens, American military superiority also loses its foundation. Although this structure seemed to maintain the dollar's status as the “sole dominant” currency, it harbored fragility in its foundations. However, over time, this support weakened. The USA's budget and foreign trade deficits grew, monetary policies became unsustainable, and this situation reduced confidence in the dollar. This loss of confidence signaled the gradual decline of the dollar's dominance within the global system.

THE DOLLAR BEGINS TO LOSE ITS THRONE

In recent years, efforts to use alternative currencies in global trade, especially by BRICS countries and other emerging economic blocs, have increased. For example, decisions are being made within BRICS to trade in national currencies, and a tendency to move away from dollar invoicing is observed. In a statement made by Russia's Minister of Foreign Affairs, the share of national currency use in trade between BRICS members has exceeded 65%, and the dollar's share has fallen to about one-third. There are also analyses that the dollar's dominance in the global reserve currency system and invoicing regime could fall from the 90% level to around 40–45% in the future. In this context, it can be said that the dollar has experienced a significant decline in both value stability and use in trade compared to the period when it was backed by gold. As a result, the severance of the dollar's gold link after 1971, finding a new legitimacy with the petrodollar system, but then the emergence of rising blocs and alternative payment systems in the global economy is causing a decrease in demand for and use of the dollar. This situation shows that the dollar's status as the sole dominant global currency has begun to gradually decline.

CONCLUSION

History teaches us this. Debt is indispensable to every empire. But it is like cancer. The day Rome lost its Denarius, that is, its silver, the collapse had begun. The day Spain's Real devalued under the abundance of silver, its hegemony had entered an inevitable descent. The day the Netherlands and France were held in an interest spiral, they withdrew from the stage. The Ottomans, on the other hand, were left breathless in the shackles of debasement and external debt. Today, we see the same economic entropy working for the American Empire. With a public debt exceeding 36 trillion dollars, a total debt stock approaching 100 trillion dollars, and a Washington system that produces trillions of dollars in budget deficits every year, it has become a financial giant that can no longer carry its own weight. Moreover, this time, it is not just debt that is accelerating the collapse; the global consent that sustains the dollar's historical privilege is also dissolving. The rapid increase in trade with national currencies within BRICS, Asia establishing its own payment systems, energy exchange increasingly moving away from the dollar, the silent change in the composition of reserve currency, and the global south seeking financial independence for the first time are the geopolitical fault lines eroding the foundation of the USA's last half-century of hegemony. As the petrodollar order shakes, the invisible liquidity engine funding the American military apparatus is also sputtering. It can be said that Washington now produces debt instead of hegemony. The dollar is now losing confidence. Just like in the moments of collapse of Rome, Spain, the Netherlands, France, and the Ottomans, the USA's greatest enemy is not rivals from the outside, but the debt-interest-inflation wreckage accumulated within. The inevitable truth is that if the currency collapses, the empire also collapses. Today, as the dollar's throne shakes, the world of tomorrow hears the footsteps of an Asia-centered multipolar system more loudly.