Who pays for the US war machine?

7 Feb

This important post from the onthebrynk site of Bryan Gocke, a pal since college days in the late seventies, sheds valuable light on that question.

Is the US running out of Luncheon Vouchers ?

I recently came across a Talking Post interview with John Pilger (1) about the war in Ukraine – which he views above all as

a war of propaganda. … almost nothing one reads in the western press about the invasion of Ukraine is to be trusted ….. scepticism is crucial now as nothing can be trusted.

Well and truly wearied by what appears to be the most extensive western propaganda campaign in living memory (never mind despair at the impact of the war on all those involved) my thoughts have been turning to China and how a similar process that has been underway for a number of years will inevitably get the same turbo charged treatment in the near future.

Staying, for the moment, with John Pilger, his 2016 documentary ‘The Coming War on China’ (2) seemed a good place start. It’s long – nearly two hours long, with half taken up covering the testing, use and impact of atomic bombs and the related history of US military intervention in the Pacific since then. Whilst this obviously includes the conflicts in Korea, Vietnam and Cambodia (and touches on middle eastern countries such as Iran and Iraq) the US’s current focus is clearly on China – increasingly depicted as a threat to democracy, human rights and the international economic rules-based order (3) …… in essence to just about anything that is good and wholesome in the region.

Pilger attempts to explain the increasing militarisation of the Pacific as essentially a mis-understanding on the part of the US, which has unhelpfully emptied its relevant government departments of all China experts (much as it has done with its Russia experts). Despite the US claims of ‘provocations’, the messages that Pilger highlights from Chinese officials, journalists and academics, is that China does not want to run the Pacific – it just wants to stop the US dominating the region. So there you have it – if only the US realised …….

Nevertheless, despite in my view being a little short on analysis in this instance, Pilger is nothing if not diligent when it comes to investigative journalism. He suggests that profits from armament manufacture in the US are driving the need for an enemy, ‘and the perfect enemy is China’. Moreover, he points out that a number of US officials have been talking for a while about achieving ‘full sector dominance’ in the region – and to this end the US has been surrounding China with military bases and missiles (just like it has done to Russia). So perhaps the US (or at least those with the power) realise only to clearly that its aim is to dominate the region – which makes China’s understanding of the situation entirely credible – and it is likely at some point (just like Russia) to have to make a decision when and how to resist militarily.

Pilger states that these US military bases are part of a world-wide network of around 1,000 scattered across every continent and that this does not include secret ‘lillypad’ bases that are embedded in 147 countries. When you include the 4,000 bases inside the US this amounts to an enormous and terrifying infrastructure – the sort you probably need if you are aiming for world-wide full sector dominance.

The documentary’s main message is that if we are not careful all this is going to get out of control and we’re going to end up with a major military conflict – including the trading of nuclear weapons and all that goes with that. Given that the warm up act has subsequently transpired to be a proxy war with Russia, these concerns are not to be treated lightly and I think we need to be ready to resist being softened up to demonise China in order to support this coming war.

These huge issues and threats aside (for the moment), I was somewhat taken aback by the sheer size of the US world-wide military infrastructure. I knew it was big – but this big?  … how does it pay for all this?

The simple answer is that it doesn’t pay – everyone else (ally, non aligned and opponent / competitor) does by lending the US the money – and here, with a lot of help from Professor Michael Hudson (4) is how:

The US spends $1 trillion annually to maintain its overseas bases and undertake military operations, an amount that is not far short of its annual budget deficit ($1.4 trillion in 2022). Given all the neo liberal dogma about national budgets having to balance (as though they were the same as a household budget) how can this be sustainable / allowed to continue without dire economic consequences for the US economy?

Since the 1970s the US has moved from being a creditor country (lending to others to exert influence) to a debtor country (owing to / borrowing from others to make the books balance). Despite this it has managed to increase its military expenditure to an amount which exceeds that of the next 10 highest spending countries combined (5). It has, and is still (just about), managing this through the world-wide ubiquity and central role of the US dollar. It is the global currency of business and inter-governmental payments. Through this the US enjoys massive economic advantages and the ability to influence / control the economies of other countries (as no doubt Britain once did with its Sterling area and empire).

US dollars spent abroad on building and maintaining foreign bases and associated infrastructure are exchanged by foreign companies for the local currency (in order to pay local suppliers, labour costs etc) at the country’s Central Bank. This leads to large deposits of US dollars. As foreign countries are largely debarred from investing in the US economy (NB the fuss that the US creates about China’s controls on foreign investment!) other countries’ Central Banks have little option but to use the dollars to buy US Treasury Bonds. The latter are essentially an IOU issued by the US – or more exactly a loan to the US, on which it pays interest. Thus, the expansion and maintenance of overseas bases has continued with minimal cost to the US and little impact on its budget deficits.

The global US dollar hegemony covers more than just military spending in foreign countries. A high percentage of global transactions are undertaken in US dollars, resulting in the same build up of dollars in foreign central banks and their conversion into US Treasury Bonds. China, in particular, is caught up in this due to the high level of exports of consumer goods into the US and Russia’s export of gas and oil (a significant proportion of its economy) was, until very recently, entirely traded in dollars.

The $7.5 trillion of US debt held by foreign countries is sustainable as long as (i) there is no expectation that the US will ever pay off the principal debt and (ii) the dollar continues to be the world’s principal currency.

Michael Hudson calls this a 50yr free lunch – and the sums are so large he suggests that this is more than military ‘self-funding’, as recycled dollars have continually bailed out the US domestic economy. There are technical reasons why foreign central banks have little choice in this (relative exchange rates and economic competitiveness) but ultimately the US asserts its control over the process by insisting that foreign countries buy US Treasury Bonds with their surplus dollars rather than gold – or run the risk of economic and in some cases military retaliation.

This state of affairs is obviously a problem for those countries attempting to resist the untrammelled access to their economies by a rapacious western imperialism. This seeks to extract excess profits through the use of cheap labour and collect rentier (6) income through privatisation and dismantling of public sector services. In response a process of de-dollarisation has been gathering pace over recent years as countries such as Russia, China, India etc have sought to begin to free themselves from the economic and military control exerted across the world by the US and her NATO allies. Russia and China in particular have gradually and significantly reduced their holdings of US Treasury Bonds and have been buying gold instead. China, which crucially has retained state control over its banking and finance sectors, and Russia are currently choosing to weather the economic head winds that come with gradually opting out of the international ‘rules based’ trading system based on the US Dollar. They are exploring options to set up alternative inter country payment systems. Russian Foreign Minister Lavrov commented in 2020 (7):

 We are pursuing our own foreign policy, which has taken shape over the past two decades ….. there’s more to the world than the West. In the 1990s, after the collapse of the Soviet Union, we wanted to become part of something, but we now realize that there isn’t much we can become part of. At least, the West is not building anything of its own. … If we take Western development models, we have no place to fit in. We need to build something ourselves.

Now this should be no surprise to us as Vlad the Bad went out of his way in the years before he finally accepted that you might as well talk to a brick wall as try to negotiate with the US, to make international speeches about the need for there to be more than one way of doing business in the world. He was arguing for a move from a uni-polar to a multi-polar world. However, by 2020 the Russians seemed to have finally accepted the intransigence of The West when Lavrov commented (8):

The most distinctive feature of our time is this: everyone understands that a redistribution of power is taking place and this is exactly what our western colleagues are fighting so adamantly, clinging to their centuries of dominance.

The clear danger for the US is the potential for a significant number of countries to make (the admittedly risky) provision to step away from using the dollar as the main international currency and develop their own arrangements between themselves. This would create significant, if not catastrophic, economic consequences for the US and severely limit its ability to influence / control the economies and politics of other countries. It would be faced with the impossibility of trying to pay down its debts, would not be able to continue funding its military in the way it has become accustomed to and would face the deconstruction of its western imperialist world order.

So, faced with reducing international and economic clout, the US, dragging us NATO allies with it, has fallen back increasingly on military coercion, threat and of course war. The proxy war against Russia in Ukraine is another step in the process that included Iraq, Libya and Syria (all of which resisted US economic incursion and exploitation). But this war is one of far more significance. It involves direct confrontation with a nuclear armed country that feels that its back is once again against the wall. The irony is that this war is accelerating the growing resistance to the uni-polar world order presided over by the US – and reducing any chance there might have been to negotiate moves to a more multi-polar structure.

The current US strategy would appear to be that once Russia is sufficiently weakened through the war in Ukraine, to pivot towards China and provoke a military response (in the South China Sea or over Taiwan) which will be framed as aggressive and a threat to the current (western) world order. Our governments and mainstream media will prepare us well for this and to be supportive of the subsequent western military engagement ‘in response’. Before the propaganda machine takes off with a vengeance we need to re-establish that scepticism that John Pilger advocates as essential.


(1) John Pilger – This is a war of propaganda. Youtube 09.07.22.
Interviewed by Yonden Lhatoo, South China Morning Post.
(2) John Pilger – The coming war on China?  Youtube December 2022.
(3) The current economic international rules-based order refers to the framework that governs international trade and the basis on which the economies of individual countries are run. It promotes ‘free trade’ as a global positive and in doing so insists that all countries should be open to foreign investment and finance capital and proscribes state subsidies for industry (viewed as comprising an unfair advantage). This effectively prevents ‘developing’ countries from developing their own industries behind a tariff wall and through the receipt of state subsidy. (NB it was through state subsidy and protective tariffs that the current global economic giants of the US, EU, UK built their capitalist economies in the late 19th Century.) This is entirely consistent with current US foreign policy of preventing the establishment of any rivals to its own global pre-eminence.
Hudson (below) suggests that the current rules-based order is entirely based on US exceptionalism and is designed to safeguard and promote its interests.
(4) Hudson, Michael (2022) – The destiny of civilisation: Finance Capitalism, Industrial Capitalism or Socialism.
I have found this book invaluable in understanding the dynamics of the current world economy and current political implications. An excellent review by my friend Phil can be found here …
(5) US military expenditure was $778 bn in 2020 – more than the next nine top spending countries combined.
Stockholm International Peace Research Institute Military Expenditure Data Base. Referenced in
(6) Rentier income is a term from classical economics that refers to unearned income. In this context it refers to income derived from land rents (largely mineral extraction rights), monopoly profits and interest paid on loans. Despite the undeniable need for credit in a capitalist economy, these rents are not in themselves productive, they are in fact an overhead cost on production and represent transfer payments from debtor to creditor – from ‘developing’ country to imperialist giants.
(7) Sergei Lavrov – Opening remarks on 28th Assembly of the Council on Foreign and Defence Policy, Moscow 10.12.20.
Quoted in Hudson, chap 13 (above).
(8) Sergei Lavrov – Speech to Valdai Club, 13.10.20, on the causes of turbulence in modern international politics.
Quoted in Hudson, chap 3 (above).

6 Replies to “Who pays for the US war machine?

  1. The problem with the US ‘strategy’ – if you can call insane and ignorant aggression ‘strategy’ – is that Russia is not and will not be ‘weakened’ – not to any significant extent anyway. Another problem is pointed out by Gilbert Doctorow in his article; https://gilbertdoctorow.com/2023/02/08/the-coming-existential-threat-do-we-act-in-common-or-is-it-going-to-be-every-man-for-himself/ where he indicates that Russia is going to change its nuclear red lines in the light of US promises to give the Ukraine weapons able to reach what is now Russian territory in Crimea, and even further.

    The US is a perfect example of a number of proverbs, such as ‘garbage in – garbage out’, ‘whom the gods wish to destroy they first make mad’, the concept of ‘hubris’ and . . . etc. I’ll have to consult my thesaurus as my mind is going, but you get the idea. Not that this helps anyone outside of the Washington / Pentagon / MIC charmed circle. The only ray of sunshine is that if we go, they will inevitable be consumed too. (That’s not really a ray of sunshine, in case anyone was wondering). But maybe there are some sane people in the circle too – lets fervently hope so.

    • ‘whom the gods wish to destroy they first make mad’

      Indeed. And, inevitably, there will always be an element of someone rubbing it in.

      On which note this, from the irrepressible Andrei Martyanov, caught the eye:


      “In related news CNN asked Evgenii Prigozhin (Wagner’s leader) the next question: Good afternoon, Can you please explain why recruitment in the Russian prison system has ended for Wagner? What is the reason behind this?

      Prigozhin’s response: After the release of Wagner PMC advertisement aimed at American audience we received more than 10 million applications from US citizens wishing to join the Wagner PMC to fight against NATO. At the moment, we are considering about one million American citizens for employment. Therefore, we temporarily suspended the recruitment of volunteers from Russian prisons, however, if there is a corresponding request from the US State Department, we will recruit from American ones.”

      He did actually respond like that. Of course, this part was ignored by CNN, LOL. But on a more serious note on this issue: Vladimir Rogov today informed (in Russian) that several thousand of citizens of other countries, such as UK, US, Canadians, French, Germans, Portuguese, in all from 47 countries, want to join Russian Armed Forces to fight. He stated that after resolving logistics issues and background checks by FSB they may join. He also underscored that for many of those people it is the matter of not only fighting globalism but defeating it for their own countries to survive and reform. How strange, in a good way, to see today the rebirth of Internationalist Brigades fighting for a good cause.”

      An exchange which CNN…..


      ….reported as:

      ” In response to CNN’s request for comment on Wagner’s decision to end recruitment from Russian prisons, Prigozhin issued a sarcasm-laced reply through the Wagner Group’s VKontakte page, and joked that millions of US citizens had applied to join the mercenary group.

      “Therefore, we temporarily suspended the recruitment of volunteers from Russian prisons,” he said. ”

      On a more serious note the Saker – which will be permanently closing down by the end of this month – provides a more sombre assessment of Global Security requirements:


      Including this observation on the impact of the ending of the petrodollar:

      “When Russia began the SMO in Ukraine, the US sanctions on Russia collapsed the ruble in an effort to make things very difficult for Russia to continue the war. Many analysts were surprised that the tactic did not work as expected. Instead, Russia had prepared for it and proceeded to survive without the Western imports. Suppose the end of the Petrodollar causes the US dollar to similarly collapse; would the US be able to survive as well? The US think tanks and foreign policy experts need to calculate and explain what would happen to prices and availability of goods at Walmart if the Petroyuan replaces the Petrodollar.”

      This observation on China – and Larry Johnson on today’s sonar blog (no link as I’ve already used up the three links in this post beyond which it will be flagged as spam) also has some interesting observations:

      “A shooting war around Taiwan would interrupt commercial shipping between the US and China, thus causing many shelves in big box stores to go empty. Analysts disagree on which country would be worse off: China for lack of exports to the US, or the US for lack of imports from China. This is a very serious question since the answer is the basis for the strategy of both countries. Foreign policy journals might well devote themselves to answering this question instead of demonizing the leader of China.”

      And this well aimed shot on soft power:

      “The WWIII scenario is not only being fought with dollars and gold, weapon systems, cybersecurity, and biological warfare, but also with social policy. Information is now appearing to suggest that human groupings do better in the long run if they practice restraint in sexual behaviors, and sociological work indicates that the “Wokeism” policy of the West is not especially attractive to the majority of humans living in the East and South. Thus the vaunted “soft power” of the West is being rapidly eroded in much of the world. The contest for the hearts and minds of billions of people across the globe has in the past been a slam-dunk for the West and Hollywood. Now, however, with Hollywood putting out films and shows promoting Wokeism, there are grounds for concern as to the effect this will have on US hegemony. Once again, think tanks and foreign policy journals are slow to investigate and report on this factor.”

      Interesting Times.

  2. All sorts of other related questions occur:

    Like how much bang per buck of ‘investment’ actually exists in a system rife with grift in which screwdrivers end up costing four figures and money is just thrown around like confetti at systems which are not fit for purpose – like the F-35 or the Bradley?

    Comparing the quality and effectiveness of US and RF military capabilities demonstrates just how dire the actual situation is. With the RF producing far superior fit for purpose kit and systems for a lot less.

    But that’s the problem when you have unlimited funds. You operate on the assumption that just because its costs lots of what is to you free money it must by definition be superior.

    Or the actual ability to produce anything – no matter how low quality – from an economy which has been hollowed out and de-industrialised?

    The threat to this self-perpetuating system from de-dollarisation represents only part of the problem.

    Here’s Gonzalo Lira on the very real implications for not just the funding of the US military but also the US economy per se from a model of legal asset
    seizure which is starting to make not just government’s across the world nervous but also individuals:


    In essence: Long standing practice in US internal law enforcement in which suspicion alone is sufficient to enable law enforcement to seize assets thought to be illegal is being rolled out on a much larger scale and playing field. Particularly given the amount of offshore assets parked in convenient front shell companies in the US from individuals across the globe. From China, Asia, The Near (‘Middle’) East and so on. Much of which gets converted into Treasury Bonds.

    Lira’s argument – that citizens holding the wrong passport, i.e Russians in this case, can suddenly find themselves victims of this legal scam – has merit. We have already seen the Canadian Government seize and freeze bank accounts of its own citizens – many of whom are at the lowest end of the income spectrum – for having the temerity to make small donations to the “wrong” cause. In that the case it was the truckers.

    Meanwhile, the British Government has extended the principle Lira identifies beyond holding the wrong passport to seizing the assets of those who hold the wrong views:


    In this case those of an independent British journalist who has been reporting from the Ukraine for some years.

    The point being, as Lira observes, there are now an awful lot of individuals holding their assets in the US – from the low hanging fruit of a few hundred thousand dollars to tens/hundreds of millions or more – thinking thoughts along the lines of ‘what if (when more like it) the US crazies in the basement decide they don’t like my country tomorrow? ‘*

    Barring the immediate seizure, confiscation, or freezing of withdrawal of all foreign owned assets from the US it seems entirely plausible that every entity with a working brain cell, individual, corporate and Government will be looking to extricate their assets from the US as rapidly as possible.

    Leaving one massive funding gap for that military machine with only one logical option short of Armageddon – which is to use that military machine and its bases to seize all assets and resources across the planet outside of the USA.

    *The thought did occur, given recent events across the other side of Hadrian’s Wall, that one possible way around this is to simply self identify as another nationality/ethnicity/culture or even species? After all, what’s sauce for the goose?

  3. “*The thought did occur, given recent events across the other side of Hadrian’s Wall, that one possible way around this is to simply self identify as another nationality/ethnicity/culture or even species?”

    Well, Dave et al, you’ll be welcome, but don’t be under any illusion that the ‘Wee Liar’ is any kind of socialist. She and her bunch of parrots are signed-up members of the Neo-woke theocracy, with strong links to UK/Euro establishment. But maybe if we got enough of you up here you could make a difference? You’ll have to learn to pronounce ‘loch’ though.

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