Must Read: While the Empire Crumbles its Capital City Surges

We wrote earlier this week about the Empire of Debt’s new financial capital, Washington, DC, and the theme seems to be catching on. Resident fellow at the American Enterprise Institute, David Frum, has now written a piece for CNN expanding on the topic…

“Over two centuries, American culture has been shaped by the physical separation of politics and finance. The British might centralize everything in London, the French in Paris, the other countries of Europe in their great capitals, but the United States divided these functions.

“The Constitution of the new republic provided for an autonomous federal district. It did not specify where that district should be. Mexico and Argentina both have federal districts that coincide with their greatest cities, and that option was at least theoretically available to the United States as well. Instead, the capital was sited on the swampy banks of the Potomac, far from the great commercial centers of the founding era: Boston, New York, Philadelphia and Charleston.”

“This decision had profound effects for the first 150 years of the new country’s life. If a business leader wanted to talk to a member of Congress or the Cabinet, he had to take a long train ride, often a very long train ride…”

It’s unlikely that physical distance alone, between DC and the US’ previous economic capitals, built the world’s profound faith in the nation’s typically safe-haven (and global reserve) currency. However, it almost certainly played a role. Much like the separation between church and state and the checks and balances that divide the three branches of government, there has been a historical willingness in America to design political systems that are robust in the face of society’s natural inclination toward moral shortcuts.

Unfortunately, the financial crises have “interpenetrated government and finance in a way never before seen in the history of the United States.” The dole outs from TARP and the other various bailout and stimulus projects have caused those District-headquartered buildings to shine brightly with wealth, and have resulted in a strengthening of the city overall. It’s a debt and deficit-funded boom and it’s largely at the expense of the rest of the nation which is left to flounder amid joblessness and weakening local economies.

You owe it to yourself to read more on this topic because it seems this trend is only in its earliest phases and is still growing. More details are available from CNN in its article on America’s new financial capital.

The Daily Reckoning