Great powers and empires operate somewhere between order and disorder. They can appear to operate quite stably for some time; they seem to be in equilibrium but are, in fact, constantly adapting. But a small trigger can set off a ''phase transition'' from a benign equilibrium to a crisis - a butterfly flaps its wings in the Amazon and brings about a hurricane in south-eastern England. Regardless of whether it is a dictatorship or a democracy, any large-scale political unit is a complex system. Most great empires have a nominal central authority - either a hereditary emperor or an elected president - but in practice the power of any individual ruler is a function of the network of economic, social and political relations over which he or she presides. As such, 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. French intervention on the side of the colonial rebels against British rule in North America in the 1770s seemed like a chance for revenge after Great Britain's victory in the Seven Years War a decade earlier, but it served to tip France into a critical state. In May 1789, the summoning of the Estates-General, France's long-dormant representative assembly, unleashed a political chain reaction that led to a swift collapse of royal legitimacy in France. Only four years later, in January 1793, Louis XVI was decapitated by guillotine.

The sun set on the British Empire almost as suddenly. So, what are the implications for the United States 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. Think of Ottoman Turkey in the 19th century: debt service rose from 17 per cent of revenue in 1868 to 32 per cent in 1871 to 50 per cent in 1877, two years after the great default that ushered in the disintegration of the Ottoman Empire in the Balkans. Consider Britain in the 20th century. By the mid 1920s, debt charges were absorbing 44.5 per cent of total government expenditure, exceeding defence expenditure every year until 1937, when rearmament finally got under way in earnest. But Britain's real problems came after 1945, when a substantial proportion of its immense debt burden - equivalent to about a third of gross domestic product - was in foreign hands. Alarm bells should therefore be ringing loudly in Washington, as the US contemplates a deficit for 2010 of more than $US1.47 trillion - about 10 per cent of gross domestic product, for the second year running.

Since 2001, in the space of just 10 years, the US federal debt in public hands has doubled as a share of GDP from 32 per cent to a projected 66 per cent next year. It is projected that debt could reach 344 per cent by 2050. These sums may sound fantastic. But more terrifying is to consider what continuing deficit finance could mean for the burden of interest payments as a share of federal revenues - up to 85 per cent in 2050. The fiscal position of the US is worse than that of Greece. But Greece is not a global power. In historical perspective, unless something radical is done soon, the US is heading into into Bourbon France territory. It is heading into Ottoman Turkey territory. It is heading into postwar Britain territory. For now, the world still expects the US to muddle through, eventually confronting its problems when, as Winston Churchill famously said, all the alternatives have been exhausted. With the sovereign debt crisis in Europe combining with growing fears of a deflationary double-dip recession, bond yields are at historic lows. There is therefore a strong incentive for those in the US Congress to put off fiscal reform. Remember, half the US 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. China now has the second-largest economy in the world and is almost certain to be America's principal strategic rival this century, particularly in the Asia-Pacific region.

Quietly, discreetly, the Chinese are reducing their exposure to US Treasury bonds. Perhaps they have noticed what the rest of the world's investors pretend not to see - that the US is on an unsustainable fiscal course, with no apparent political means of self-correcting. Loading 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. Niall Ferguson is a British historian and the author of The Ascent of Money. This is an edited version of his John Bonython Lecture for the Centre for Independent Studies delivered in Sydney last night.