As Ray Dalio says, “History doesn’t repeat itself, but it does rhyme”.
Others have said that we are seeing the 1930s repeat. In many ways, yes. However, let me give a slightly different viewpoint on this.
Ray Dalio has published my ideas in his book “The Changing World Order – Why Nations Succeed and Fail”. Of course Ray published a big book (576 pages) with a ton of data, but the concepts remain the same. I highly recommend reading his book to fill in all the historical detail and elaboration of these ideas.
Ray Dalio gave me this t-shirt, it’s good wisdom. Don’t aim to be perfect, just aim to be better.
Most of us were raised with the narrative: “Germany, Hitler, Nazi’s = Bad; USA = Saved the World (for democracy?)”
Something to consider is that there is no such a thing as a “good government”. The world is made up of different flavors of “bad government”. The best governments are those who mind their own business and remain peaceful (like Switzerland).
The past five years has taught a lot of us that we must question the narrative, we haven’t been told the truth. I’ve studied (mostly European) World War II for almost sixty years now (yes since I was in Elementary School). Since I was taught to question everything, since I was a young child, this gives me an open minded viewpoint to use for interpretation of events.
Put on your tinfoil hat as we will brush up against “conspiracy theories” (or just skip this article if you aren’t prepared to have your world view questioned and upset).
What is happening?
The fundamental event is the world’s leading power is losing it’s position of dominating the world. In the 1930s, this was the United Kingdom. Now it is the United States. In the 1930s, the economic threat came from Germany, now the economic threat is coming from China. Although, I believe I could argue that the USA has sabotaged itself, we may very well be our own worst enemy.
Key factors:
Money is at the root of virtually all problems. The aftermath of World War One left the world in financial chaos which led to a worldwide depression in the 1930s. The British Pound was the world’s reserve currency. Today the US dollar is the world’s reserve currency.
When other nations lose faith in the reserve currency they shift assets from the reserve currency to other assets. We are currently observing this shift as the US dollar assets held by central banks around the world are being replaced by gold (and more diversity of other currencies).
In the 1930s, the UK could not compete against the financial pressures from Germany, some have argued that this is why the UK provoked and declared war on Germany.
The world was most peaceful during the classic gold standard (before World War I). When the entire world agrees on one stable value (gold), this encourages international trade and prosperity is the result.
The Bretton Woods agreement at the end of World War II shifted the world’s reserve currency to the US dollar. Initially the US dollar was exchangeable by nations for gold (even though the common citizen could not exchange their dollars for gold). When the United States couldn’t pay it’s debts, Richard Nixon in 1971 took away the backing of the US dollar by gold (essentially we reneged on our promises). Between 1958 and 1971 the USA lost (paid out) over half of it’s gold reserve. Until now, the sheer might of the United States economy (and military) has bullied the world into trusting the dollar. Now with the U.S. government debt skyrocketing, that trust is eroding.
Fiat money, like the US dollar, backed purely by promises of a government is prone to manipulation. This fiddling, with monetary policy, has caused the booms and crashes of the past forty years (especially since 2007).
We are likely to see the Central Bank interest rate again drop as they “print money” to keep the U.S. government in power. If nothing changes, this will eventually collapse. Trump is making some very disruptive changes to try and prevent this. Unfortunately it’s unlikely that he will actually succeed.
Side effects:
Watch for government to seize more power / control over it’s citizens.
Watch for increasing censorship.
Watch for more polarization and more intense political conflicts as various factions vie for power, promising that they are the solution to the problems.
Watch out for more national forces (National Guard, FBI, Homeland Security, etc) to get increased funding, along with more deployment to maintain order in cities.
Watch for assassinations and the making of martyrs.
Watch for strong rhetoric from national leaders and demonstrations of military power as they flex their muscles and bluff to maintain power.
Most of all, watch for more and more restrictions of personal freedom.
Proxy wars:
The narrative pitches that it was German aggression that started World War II. Keep in mind that one man’s aggression is another man’s assertion of his rights. Viewpoint is everything! Another key point is that Germany did not declare war, they desired peace, it was the British (and their French allies) who actually declared war.
But in reality, WWII started long before 1939. Japan had attacked China in 1931, that could potentially be considered as the first military conflict of WWII. The Spanish Civil War acted as the proxy war in Europe, much like the Russian-Ukraine conflict does now, as well as the conflicts in the Middle East.
Generals always “fight the last war”. That’s why a lot of people can’t think past the idea of shooting and bombing each other (and look for better ways of doing it). The next war (actually the current war) is cyberwarfare.
What to do:
My audience doesn’t include influential national leaders so there isn’t much point in explaining the big picture fixes, other than to comment that Trump is at least slowing down the danger. Socialism / Democrats accelerate the problem.
As an individual, look at what the wealthy people (and Central Banks) are doing and shift more of your wealth into gold. Yes, I know I’ve been saying this for the past three years and gold is still climbing to new record high prices.
If war breaks out, or the US dollar collapses faster, gold will be a good store of wealth.
I’m also still in favor of investing in the stock market. Businesses will adjust with conditions, they will always be working to make a profit and those profits are shared by the owners (stockholders). Energy will be in greater and greater demand so I favor the small nuclear energy company stocks. If you don’t mind supporting the defense industry, well, they may continue to do well in the near future. Entertainment companies may be a good choice too, people will continue to want a distraction from gloomy news. Simulated Intelligence (AI) companies will also continue to do well as data is considered to be of extreme value. Surveillance of a restless and discontented population will also be in demand. Simulated Intelligence will be heavily used to monitor and make sense of all the data that spying on everyone will generate.
What should you not invest in? Beware of international businesses as more and more international disruption could hurt their profitability.
Real estate is also something I would be very cautious of investing in. Overall, real estate is overpriced and we may very well have another “bubble” burst. Watch interest rates!
Governments and the Central Banks will have pressure to keep interest rates low so that growing debts aren’t defaulted on (yet). “Cash” investments (savings accounts and CDs) will be a terrible investment.
Become a “prepper” or increase your preps. The worst case, outright military war, could certainly create outages and shortages. Cyberwarfare will also create outages and disrupt supply chains.
Don’t worry about the “Zombie Apocalypse” (or nuclear war), both are unlikely and unless you are staggeringly wealthy you can’t really prepare for them anyway. Humans will remain humans, some will be assholes (carjackings, murders, burglary, etc), but others will be wonderful people and may even bond together more in face of the common enemies.
If you live in or near a big city, consider moving to a small town if that works for your lifestyle and career.
Start your own business or stick with a secure job. Beware of being high paid. If you are the most expensive person on the payroll, you become a prime target for cuts when companies decide they must reduce costs.
Learn to be a positive person. Project joy and others will want to be around you and will want to help you.
Question everything! Do not trust the legacy media.