Align yourself with the trajectory of the world

John Adams famous wrote to his wife Abigail in the year 1780: “I must study politics and war, that my sons may have the liberty to study mathematics and philosophy. . . in order to give their children a right to study painting, poetry, and music. . .”

So that their children can major in gender studies and waste their lives on Tik Tok.

OK so I added that last part myself. But I believe the quote most accurately sums up the natural decline of empire.

When enough time passes, a dominant superpower begins to lose the cultural traits that made it great to begin with. Instead of being energetic, ambitious, and hungry, the population becomes complacent.

Meanwhile, hard-working rivals become wealthier by the day… rising, ascending, and eventually eclipsing the declining superpower.

History has been witness to this natural cycle over and over again, from the ancient Greek conflicts between Athens and Sparta, to the decline of France and rise of Great Britain in the 1700s.

The United States is the modern superpower that is now in obvious decline; we write about this all the time at Sovereign Man, so this should hardly be a controversial statement. As former US Treasury Secretary Larry Summers once said, “There is surely something odd about the world’s greatest power being the world’s greatest debtor.”

And he’s right. The economic and financial data are clear: the US has enormous debts, huge deficits, awful inflation, and insolvent pension funds (like Social Security). The social divisions are palpable. Trust levels in institutions, government, and corporations are at historic lows.

It’s true that the US has been divided before. And the US has also seen its share of financial crises.

But simply put, America has never been battered simultaneously by so many debilitating trends. This is truly new territory for the world’s dominant power.

Now, it’s important to not get emotional about US decline. We’re talking about facts and doing our best to make a rational analysis.

And one of my conclusions is that we may be experiencing the end of an era.

For the past several decades, the US was the undisputed global superpower. And there was a great deal of peace and prosperity in the world.

After all, so many countries– China, India, Russia, etc. were getting rich selling their products and resources to the United States. Who would possibly want to screw up that balance?

We’ve seen this same cycle over and over again throughout history: peace and prosperity go hand and hand.

But things are different now. Other countries are stronger than they used to be. The US is much weaker. The power dynamics have been disrupted… and the cycle of peace and prosperity is being displaced by chaos and conflict.

This is our topic for today’s podcast.

We start in ancient Rome and discuss how the unparalleled dominance of the Roman Empire in the early 1st Century brought an unprecedented period of stability, peace, and prosperity to the western world.

Frankly it’s quite similar to what we enjoyed for the past 30 years.

But the Pax Romana, as this period is known, did not last. Neither is the Pax Americana.

We see chaos and conflict all over the world now… much of it due to the decline of the US, much of it due to bonehead incompetence from the supposed ‘experts’ who run the show.

And this new era of chaos and conflict has some pretty serious implications.

Don’t worry– it’s not the end of the world. In fact, there are some really interesting opportunities for anyone with the independence of mind to look at these facts and trends rationally.

And we discuss some of these in today’s podcast, including things like real assets, and investing in neutrality.

I explain, for example, what today would be the equivalent of having a Swiss passport in 1935. Or which specific asset classes are extremely relevant in a world where resource nationalism is a real possibility. And how cryptocurrency fits in to a cycle of chaos and conflict.

These big picture trends are all very clear– it’s the obvious trajectory of the world right now. And it makes a lot of sense to align yourself with that trajectory of the world.

You can listen in to the podcast here.

[00:00:01.090]

Today, we’re going to go back in time to the year 29 BC to the Forum, Romania of ancient Rome. Now, this is about a five acre stretch in the Roman city center. It still exists today. And 2000 years ago, this was the primary center of commerce and trade. Everything that happened in ancient Rome happened in the Roman Forum.

 

[00:00:22.620]

This is where they gave public speeches, parades, criminals were put on trial. There would be punishments, fights, arguments. Everything would happen here in the Roman Forum. And seven centuries before, one of the last kings of Rome had built a temple in the middle of the Roman Forum. And that temple was to one of the gods.

 

[00:00:45.590]

Remember, Rome was a polytheistic culture, and there was a god in ancient Rome named Janice. Janice was a two faced god. He represented duality yin and yang, light and dark, good and evil, war and peace. And again, this ancient king, this is now seven centuries before 29 BC, built a temple of genus there in the Forum of ancient Rome. And the temple itself was quite historic, and it was quite symbolic.

 

[00:01:14.470]

And the entrance to the temple were gates, specialized gates, and the gates were there again, as Janice represented this duality, including war and peace. The gates to the temple represented war and peace. And there was always a symbolic gesture throughout the history of Rome that whenever Rome was at peace, some leader or general would go to the Temple of Janus and close the gates. Closing the gates of Janus signified that Rome was at peace. Now, the last time that Rome had actually been at peace and the gates of the Temple of Janus were closed, it’s been 200 years before this.

 

[00:01:49.080]

Rome was at war for centuries, constantly. I mean, they had war with barbarian tribes. They war with Carthage, one of their greatest enemies, and had even been at war with itself for decades, really up to 29 BC. There was a civil war between Julius Caesar and Pompey the Great. It was a major civil war.

 

[00:02:10.640]

Julius Caesar won that war, and then in 44 BC, was himself assassinated by various senators. That led to a second civil war and the second Triumvirate, including Antony and Cleopatra and Pompey the Great Sun. And it all ended, more or less with a battle of actium in 31 BC. September 2, 31 BC. Anthony and Cleopatra committed suicide the following year.

 

[00:02:34.660]

And this was basically what Rome looked like in 29 BC. Two decades of civil war really taking its toll. Towns across Italy, towns near Rome, had been sacked. Commerce and trade halted. Crime went through the roof.

 

[00:02:48.200]

There was no military, there was no security. Police forces don’t even exist. Bandits and murderers ran wild. It was kind of like San Francisco today. People were hiding their money, hiding their income.

 

[00:03:02.270]

When armies would move through towns during the Civil War period, they would just plunder the countryside. They would raise farms. They would steal people’s wealth. People were literally burying their money, and hope was quite forlorn. People didn’t feel optimistic about the future.

 

[00:03:18.300]

They weren’t having children. Birth rates were declining. Immigration rates were declining. In short, Rome was war weary. It was tired of conflict.

 

[00:03:26.490]

It was coming apart at the seams, and people were desperate. They were sick of it. They were sick of the conflict. They were sick of the war. They were sick of the crime.

 

[00:03:34.750]

They were sick of everything. They were just angry. They wanted to stop. And they’re at the point where they just didn’t care. They just didn’t care.

 

[00:03:41.800]

They didn’t care about the Republic. They didn’t care about their freedoms. They didn’t care about the voting. They didn’t care about any of that stuff. They just said, please, can I get somebody to deliver me from this conflict, from this constant chaos?

 

[00:03:53.170]

I don’t care what it takes. We’ll do whatever. Just stop with this and give us peace and stability. Well, that’s exactly what they got. And they got it in the form of a guy named Gaius Octavius.

 

[00:04:05.060]

guyus Octavius was actually the grand nephew and adopted son of Julius Caesar. Now, you got to remember, in ancient Rome, adult adoption was actually a fairly common thing. Adopting was the way that people would signify, this is who my heir is. Gisele Tavis was the grand nephew. But at a certain point, Caesar, who did not have an error of his own, decided, I’m going to adopt Gaia’s Octavia.

 

[00:04:24.410]

And that was the signal to everybody that this guy is my heir apparent. And after Julie Caesar’s assassination in 44 BC. Gaius Octavius had waged and won the next civil war. He defeated all comers, all enemies, and at the end of it, he was victorious, and it came at great cost, and he knew it. Rome was in turmoil.

 

[00:04:45.020]

It was 29 BC. He knew he needed to do something quickly. He needed to bring stability. And that’s why in 29 BC, Gaias Octavius stood at the temple of Janus and the Roman form, and he closed the gates. Now, Gaias Octavius is obviously known to history now as Augustus or Caesar Augustus, but that was actually his real name, was Gaius Octavius.

 

[00:05:07.560]

We know him as Augustus, and most people refer to him as Augustus. And Augustus was really the first emperor of Rome. This is when Rome transitioned from being republic to being an empire. And Augustus was absolutely a dictator. He had all the power.

 

[00:05:23.700]

Nobody opposed him. He was quite cunning. He kept the Senate close, but they gave him all the power he wanted, and nobody questioned him, because, again, everybody was so tired of conflict, and they said, we don’t even care you’re a dictator. Just do what we need you to do, and you can have all the power you want. And after he closed the gates, augustus got to work with forming Rome, and he did a lot of things that really strengthened Rome.

 

[00:05:45.980]

He improved the rule of law. He got rid of all the illegal expropriations and the asset seizures, what we would call today civil asset forfeiture. They had that in ancient Rome where they just went and stole property, private property from people. And he stopped that. He said, no, we’re not going to do that anymore.

 

[00:06:01.810]

And people slowly became more confident. They realized, okay, I can actually have assets and it’s not going to get stolen by the government. And so this money came out of hiding. People actually dug up their money, they dug up their wealth. And private investment once again began to flourish because people felt like, I could actually do things now in this economy, and it’s not going to get stolen by the government.

 

[00:06:22.780]

He strengthened private property rights. He stabilized the currency. He invested big time in security to the point that he actually created the first police force there was in Rome. Crime rates plummeted, piracy. He had a big navy and he kept it.

 

[00:06:36.420]

And piracy on the seas disappeared. He actually used the navy instead of for war, to actually patrol the seas and make it safe for trade and commerce. Bandits went into hiding and crime rates really plummeted. He reformed the tax system. He eliminated this system of very unfair tax farming, which ended up rearing its head again later on in the empire.

 

[00:06:55.650]

He simplified the tax code. He didn’t make taxes exceptionally low. They weren’t high, but they weren’t super, super low. But they are reasonable. More importantly, they were simple.

 

[00:07:04.460]

They were easy to understand. It wasn’t hugely bureaucratic, and people felt like they got a lot of benefit for what they were paying. They got a lot for their money. And part of that was because Augustus went out of his way to stamp out corruption and eliminate all the graft and the theft that had been prevalent for really centuries before he took that savings. He invested heavily in infrastructure, roads, aqueducts, post, literally a postal service.

 

[00:07:30.920]

In fact, the reason we call it post goes back to the ancient Rome where they had along the roads that the Romans built. Every so often they would have a post there. That post was literally a post whereby mail could be dropped off and picked up and so forth. There’s literally a post in the ground. You could hire fresh horses.

 

[00:07:47.530]

Sometimes there is food and water or an in there. That’s actually today why we still call it the post, goes back to the ancient days of the Roman Empire when they actually had little posts along the side of the roads. And all these things, these infrastructure investments, they boosted employment. They had heavy, for example, irrigation investments in irrigation investments they did, especially in Egypt, which was the bread basket for the Roman Empire. The irrigation investments in Egypt just brought this bonanza of wealth and tax revenue.

 

[00:08:13.390]

And there was so much money, so much tax revenue that came into Rome as a result of the infrastructure investments they made, the irrigation investment they’re making it literally. It was such a flood of revenue that came into Rome. This tidal wave of money coming from Egypt actually caused interest rates in the Roman Empire to drop from 12% to 4% is how much money came in. And as a result of all of this, borrowing was cheap. Real estate prices boomed.

 

[00:08:37.260]

Frankly, there’s a lot of things that we see in some respects similar to over the last couple of years. Now, all this was taking place. It wasn’t just in Rome. Rome was in this period of peace and prosperity. But it wasn’t just in Rome.

 

[00:08:48.680]

Rome had a huge economy, a huge population. There are 7 million people on the Italian peninsula alone, 40 million people across the entire empire. And they had a lot of spending power. They had wealth, and they weren’t afraid to spend it. Imports abounded from all over the world.

 

[00:09:03.450]

There is an ancient philosopher who lived around this time named Elius Aristides who said, whoever wishes to see all the goods of the world must either journey throughout the world or stay in Rome. Because when you were in Rome, you saw everything there was to possibly see from all over the world. They had meats from Sicily, stones, gemstones from Africa, soap, pottery from Gaul, pearls from Britain, amber and FIR from Germany, figs and cheese from Persia, incense and ginger from Arabia, rare fruits from Lebanon, silks from China. All over the world. And all this brought a great deal of wealth to foreigners and foreign traders and manufacturers and foreign farmers.

 

[00:09:44.450]

Everybody was getting rich trading with Rome, selling to Rome. Everybody was getting rich. And so this peace really brought prosperity to everybody all over the world. Now, it’s an interesting thing when you think about peace and prosperity, we often see these two words together peace and prosperity. They go hand in hand.

 

[00:10:00.300]

This is not a cause and effect relationship. It’s not that one creates the other. Peace creates prosperity, or prosperity creates peace. It’s actually more like a chicken and egg issue. Which comes first?

 

[00:10:09.870]

It’s kind of hard to say, but they really, both of them go hand in hand. That peace and prosperity. For example, we see that peace meant that peace is security. And so trade routes over the land and over the sea were safe. They didn’t have pirates.

 

[00:10:23.070]

They didn’t have the same problem with bandits and highway robbers and so forth across the roads. And so this made trade a lot better. And that created a great deal of prosperity. But you have to have one without the other. It had to be peace and security in order to have the prosperity.

 

[00:10:39.200]

But you had to have the prosperity in order to maintain the peace and security. So you have to have both at the same time. Again, it’s much more of a chicken and egg, as opposed to a cause and effect. And there are all these great stories back then, in the early days and the days of Augustus in particular, where merchants would come from all over the world. The story of merchants coming from Alexandria in Egypt, who literally came to worship Augustus because he provided the security that they needed to be able to trade.

 

[00:11:04.650]

Their entire livelihood was based on the fact that they could trade. And the only reason they could trade was because August has provided them the ability to do so. Now, throughout all this time, life was pretty great, as you can imagine. Peace and prosperity, the stability. It was really extraordinary.

 

[00:11:21.660]

And Romans lived a really great life. One of my, I think probably favorite, if you take a slice of life from Romans, like, what did Romans do? They got up in the morning, they went to work, and they do things like normal people do. But the way they actually entertain themselves is quite interesting. We hear all the stories about bread and circuses and the gladiator events and so forth, but actually, one of the things, especially in the days of Augustus, one of the things that was actually the most one of the kind of the centers of social life was actually the baths, the Roman baths.

 

[00:11:49.890]

And many of these actually still exist today. The Romans were incredible engineers, and they figured out how to actually bring in hot water, underground water from natural hot springs and so forth, and pipe them into the city. And there were hundreds of them, hundreds of them, just in the city of Rome. These baths were actually at a subsidized entry cost. The cost was one quadrant, which works out to be an ancient unit of currency.

 

[00:12:15.440]

That works out to be about $0.28 in today’s money. That’s based on a gold price of about $1,700. So we talk about twenty eight cents to be able to buy a day pass into a Roman death. Now, that might seem outrageously cheap, but it’s actually not. If you think about it, that daily rate works out to be about $100 a year, a little bit more than $100 a year.

 

[00:12:38.000]

And that’s actually not that far off from what it takes to get an annual membership at the parks and recreation department in my hometown outside of Dallas, Texas. So it’s actually somewhat similar to these subsidizer. If you think about the Roman baths as sort of parks and recreation in the city, where you go to a local rec center in the gym and the swimming pool and all that, that’s what the Roman baths were, but they were a lot more interesting. Roman baths were open from sunrise six, seven a. M.

 

[00:13:03.760]

To about 01:00 p.m.. For women, and then from 02:00 p.m.. Until evening time, maybe eight, nine PM. For men. And they have certain gym facilities, so you’re going there.

 

[00:13:13.050]

And as an ancient Roman, they didn’t have, I don’t know, whatever spinning classes and that sort of thing. But instead you could throw javelins and discus and boxing and wrestling and all the old school kind of Greek Olympian sports. These are the sorts of things that you can do in the gym facilities. And then you would go into the Tepidarium. This is the warm air sauna and then the Calidarium, which was the hot sauna.

 

[00:13:37.190]

Then they had the Frigidarium, which was a cold plunge bath. And then they had the Thermae, which were the hot baths and all these things you go around from place to place and the hot sauna, the hot baths and the steam rooms and the cold baths and go back and forth these places. And they had game rooms. They were you go and play dice. And they had this version of an early proto chest called Ludus Latin Collorum which was like a kind of military strategy game that was very popular in the Roman Empire.

 

[00:14:05.310]

They had game rooms set up where you had guys that were playing these board games with each other. And they had libraries and reading rooms. And they had areas for socializing where people would sit around and eat fresh fruit and gossip and talk to each other about just learn whatever the rumor of the day was. And other rooms they could hear musicians perform and philosophers and scientists delivering lectures. And they had gourmet restaurants.

 

[00:14:30.560]

All this inside of the Roman bath, you got it for basically you’re like parks and recreation. $100 a year price. What do you think about it? That’s a pretty ideal lifestyle. Now, Rome was the superpower at the time, right?

 

[00:14:45.580]

This is a place they had no more enemies. Their last major enemy was Carthage. They had long since been laid to waste. Roman legions and the Roman Navy still inspired tremendous all around the world. They had the best technology.

 

[00:14:56.790]

Rome had the best engineers, they had the best roads, the best aqueducts, they had great metallurgy, they had hydraulic mining technology. It was just out of this world stuff. When people come to Rome and go, oh, my God, I can’t believe people do these things. This is incredible. So Rome was exporting its technology.

 

[00:15:14.350]

Everybody’s coming to Rome to learn and they were also exporting culture. Roman culture was dominant throughout the world. This was the age of Ovid and Horace and Virgil and Livy. Even Emperor Augustus himself was so enthralled that he would eagerly anticipate Virgil’s latest release like it was an Avengers film or something like this. When you look at all of that and you say, god, life was so good.

 

[00:15:39.860]

Life was great. Life was great in Rome. Life was great outside of Rome. People were getting fabulously rich selling to the Romans. The Romans are getting fat and happy enjoying this wonderful life, this peace and prosperity.

 

[00:15:50.690]

Businesses are making money. Property prices were going up. Everybody was doing great. And this is known to history as the PAX Romana, the Roman peace, where everybody was doing so well. Who would possibly want to mess that up?

 

[00:16:05.250]

Who would want to throw a monkey wrench in that? Everybody’s doing so well. Nobody would want to mess that up. And that’s really why peace and prosperity do go hand in hand. Because you get to a certain point where you need some level of prosperity to be able to maintain the peace.

 

[00:16:18.920]

But you need to have peace in order to have prosperity. They go hand in hand. It’s very cyclical. It’s a little bit of peace, a little bit of prosperity. It’s the self propagating, self aggregating, self fulfilling prophecy that as it continues, it gets bigger and bigger.

 

[00:16:32.970]

It’s a lot of momentum in this towards more and more peace and prosperity. It just continues to build and build and build. And when you have it, it’s great. It’s great. And nobody wants to mess it up.

 

[00:16:45.590]

This is what I think we’ve been experiencing for the past several decades. Starting in about early 1990s, we had a very similar thing. The US. Vanquished its last enemy. Instead of Carthage, it was the Soviet Union.

 

[00:16:58.270]

Right. Just like Rome, the US has had and continues to have really this massive consumer economy that just like Rome, was importing everything from all over the world. The US was home to a very stable, respected reserve currency, accepted worldwide. The dollar was king. Everybody accepted it.

 

[00:17:17.530]

Very powerful military dominant technology gave birth to the internet, Hollywood culture that was being exported around the world. Everybody wanted to be America, america number one. Everybody respected that. We’re talking about 1990s and again, everybody is making money. Who would want to mess that up?

 

[00:17:37.320]

The Chinese are making money, the Vietnamese are making money. The Brazilians are making money. Mexico is making money. Everybody’s making money selling to the United States. Who possibly wants to mess that up?

 

[00:17:47.890]

And this is the way the world was for decades. And we saw the rise of all these emerging markets, the bricks nations in India and Indonesia and so many places that we’re doing so extremely well. This is some people call this the PAX Americana, like the PAX Ramana. I call it the PAX argentari. Argentari is the Latin word for fights.

 

[00:18:08.370]

It’s a financial piece, the money piece. Basically, it’s the piece that was brought by money, by wealth, because people were doing so extremely well. Who would possibly want to mess that up? But the thing is, it never lasts forever. There was kind of an obscure economist in the 20th century, mid 20th century.

 

[00:18:28.880]

His name was Robert Trifon. And Robert Triffin had an economist theory, it’s called Triffin’s Dilemma that basically says that dominant superpowers simply cannot last. They cannot last because it’s like an autoimmune disorder. It just eventually attacks itself. Dominant superpowers by nature, because they’re the dominant superpower, they cannot produce everything in their own economy.

 

[00:18:50.610]

It’s just too expensive. Being the dominant superpower means that you have this very expensive economy. You have expensive labor force and so you’re not going to be able to produce socks and underwear because it’s just too expensive. And so you got to start importing things from cheaper countries overseas and eventually that takes hold and you start importing more and more and more and more. As you start importing more, you grow this trade deficit, this current account deficit and essentially, you’re shipping wealth overseas in exchange for other people’s production.

 

[00:19:19.400]

Your adversaries grow rich while you grow weaker because you’re importing so much. And this is just a very cyclical thing. Rich nations tend to and we have seen this over and over again throughout history rich nations grow lazy. They get fat and happy. They lose their edge.

 

[00:19:35.310]

They lose the priorities of the things that made them great and powerful to begin with. They lose the eye of the tiger. Complacency sets in. Deficits become commonplace. Debts rise.

 

[00:19:46.410]

The currency they start to debase the currency and they do so with a tremendous sense of arrogance where they say, we’re number one and everybody else is just going to suck it up. Everybody else has got to deal with it. We can do whatever we want because we’re number one. So we can debase our currency and we can go into debt and we can run these sky high deficits and we can do whatever we want. It’s that sense of arrogance because they lose the thing that makes them great.

 

[00:20:09.410]

John Adams wrote to his wife Abigail on May 12, 1780. This was John Adams, the second president United States. This was years before he became president, but he was one of the Founding Fathers and had helped frame the constitution. In 1780 was the year he actually helped draft the Massachusetts Constitutions and the Commonwealth of Massachusetts. And he wrote to his wife in May 1780.

 

[00:20:31.790]

He said, quote, I must study politics and war that my sons have the liberty to study mathematics and philosophy in order to give their children a right to study painting, poetry, and music so that their children can major in gender studies and waste their lives on TikTok. Now, of course, I added that last part myself but the whole idea here is that this is John Adams saying, like, I’ve got to do this tough work so that my sons can do this other stuff that’s still tough but different so that eventually, further on down the road, we have these younger generations, and they can do whatever they want. They can study art, and they can major in gender studies and they can do all these things that don’t really have the same value as studying politics and war or science and technology, etc. E. And this is essentially the way that empires go.

 

[00:21:18.560]

You start off strong, and everybody is focused and there’s a common sense of understanding, and that commonality, that unity and eventually its discord. And all these things give way. And this is when empires go into decline and all of it can disappear rather quickly. In the case of Rome, augustus died in 14 Ad. Two emperors later, after Augustus was Tiberius, after Tiberius was very infamous, Caligula.

 

[00:21:44.600]

Caligula ended his reign in 41 Ad. So from 14 Ad, at the time that Augustus died to 41 Ad, we’re talking basically three decades later, the treasure was bankrupt. All trust and confidence in the government’s, gone. This is by the end of the reign of Caligula, of course, Caligula just famously turned to I mean, they’re not just rumors, actually true stories about turning palaces into brothels and all this crazy stuff that was going on. And people looked at the government and said, oh, my God, what a joke.

 

[00:22:12.810]

What a joke. All trust and confidence in the government was gone. The power, the fame, the grandeur, the gravitas was all gone. And the treasury was totally bankrupt. And it happened in three decades.

 

[00:22:24.030]

It happened in about 30 years. Right? So that sense of decline, it works in the opposite way. When we talked about peace and prosperity as being this sort of self propagating, cyclical force that just continues to rise and rise and rise, and the more peace and more prosperity you have, the more peace you have, so the more prosperity you have. And it rises and rises and rises.

 

[00:22:47.150]

But when the decline sets in, it has the opposite effect. You have this self propagating force of conflict and destruction and you have more conflict and you have more destruction. And this is really a common theme in history. Conflict really does. When you have decline that starts to set in, conflict often does take place when you have a declining power that collides with a rising power.

 

[00:23:07.610]

This is known in geopolitics as the Thucydides Trap, and this is named after the ancient Greek historian who wrote the history of the Peloponnesian Wars between the rising and declining powers in Greece, Athens and Sparta. And this sort of conflict, conflict is always extremely expensive. Conflict creates economic devastation. We’re not just talking about war, but war in particular creates vast economic devastation. And that vast economic devastation often begets more conflict.

 

[00:23:34.250]

Here’s a great example, world War One. Leading up to World War I have the UK in decline. The UK enjoyed a century as the peak superpower in the 1800s, but by the early 1009 hundreds, it was obvious the UK was in decline. Meanwhile, we have Germany as a rising dominant power. Austria Hungary is a declining power.

 

[00:23:54.140]

The US is a rising power. The Ottoman Empire is a declining power. So we have all these powers rising, other powers declining, and they’re all colliding with each other. And basically there just needs to be some assets to be kicked. And that’s what World War One was all about.

 

[00:24:07.830]

All these guys forming alliances and so forth. And at the end of day, they had to fight it out. But World War I, because they vastly, all the experts vastly underestimated what that war was going to be in World War I created a historic devastation the world had never seen before. That’s why they call it the Great War. They didn’t call it World War I, obviously called it the Great War.

 

[00:24:29.200]

And the Great War dealt a historic amount of devastation, especially to the European continent. And that devastation, again, the conflict created devastation. And the devastation created, what a surprise, world War II. More conflict, right? Because he had the Weimar Republic, which made it possible for a guy like Adolf Hitler to rise and so forth.

 

[00:24:48.410]

And you get more conflict out of that. Conflict creates economic devastation. Economic devastation creates more conflict. This is all very cyclical. It’s like the economic cycles where we have a period of boom and then bust.

 

[00:25:00.590]

We have geopolitical cycles where we have peace and prosperity and then conflict and destruction. And then peace and prosperity and conflict and destruction. If we think about our world today, again, we go back to the US. It peaked in the early 1990s. Debt was being paid down.

 

[00:25:14.900]

I mean, the deficits were actually falling. They’re running a budget surplus. Oh, my God, a budget surplus. Can you imagine a budget surplus in the United States of America? That’s what it was in the 1990s.

 

[00:25:24.260]

And we had peace and prosperity. The worst thing that we had to worry about was Bill Clinton saying it depends on what the meaning of the word is, which, if you’re too young to remember that, that was actually a real thing that the President United States said. Depends on what the meaning of the word is, which in of itself is hilarious. It took 30 years, just like Rome, right from the time that Augustus died to the time that Caligula ended. His reign was about 30 years.

 

[00:25:51.320]

And they went from being super powerful and prosperous and all these things to Treasury’s bankrupt. Nobody trusts the government. The whole thing is a joke. 30 years. Well, guess what?

 

[00:26:00.460]

Early 1990s, 2022, 30 years, and we see the same thing. The US is an obvious decline. I’ve talked about this before, another podcast. When I talk about the four forces of decline, I’ll touch on these briefly. But we have the forces of energy.

 

[00:26:14.290]

I did a whole podcast about the forces of energy, and I would really encourage you to listen to that and understand that trend about energy sources that are becoming more scarce, becoming more expensive. And this makes everybody worse off. You cannot have a healthy economy if you have expensive energy. It’s just not possible. There’s a very, very clear correlation between a robust and prosperous economy and cheap and expensive energy.

 

[00:26:38.700]

Where you have an expensive bit of energy, you have a prosperous economy. Where you have expensive energy, you have an economy that’s worse off. And so the forces of energy are. Extremely powerful in this. We also have the forces of society, and these are the things, the anger and the trust issues and the social divisions and the constant conflict and the Twitter feuds, and just the antifa and the fist fights on the airplanes and all these things that we see, just society so deeply frayed and scarred and everybody just in each other’s throats.

 

[00:27:10.910]

Those are forces of society that we’re also seeing. We have forces of economy, the debt and the inflation and Social Security looming insolvency and $2 trillion deficits, and politicians that hold up their index finger to their thumb and say it costs nothing when they’re talking about two and a half trillion dollars spending packages. These are the forces of economy. And the last of the four forces are the forces of history. These are the natural cycles of things.

 

[00:27:37.820]

The rise and fall of empire, in this case, the rise of other nations. And we see this in this context of the idea of the cycle of peace and prosperity, the cycle of conflict and chaos and destruction. And we see this cycle. And just like Rome, when you think about in the 1990s and the US was at the center, it has the economic superpower and the military superpower, nobody could come close to the United States, and its last major enemy had been vanquished. And the US was exporting culture all over the world.

 

[00:28:07.400]

It was all about Tom Cruise and Hollywood. And maybe in some respects, it’s still all about Tom Cruise. But if you look at the changes that we’ve seen, the US military, which I would still argue was the finest fighting force in the world, the military has been gutted from a financial perspective. It’s been gutted from a policy perspective. Now they stand down.

 

[00:28:30.150]

The military, it’s all about all these sort of this woke ideology that they have injected into the military. Now. It’s not about national security anymore. They’ve done this in the intelligence agencies and the CIA and so forth. It is completely ridiculous.

 

[00:28:46.640]

Not to mention the utter humiliation. The utter humiliation. The shameful withdrawal from Afghanistan with the helicopters and people dangling from the landing gears of the airplanes and having to pass babies over razor wire and so forth. I mean, just what an utter humiliation in front of the entire world. The kind of thing that makes the adversaries of America look and go, really?

 

[00:29:12.750]

I’m supposed to be intimidated by these people? It’s just not a good look. You look at how from a cultural perspective, look at how these big US institutions just suck up to China from a cultural perspective. Disney is saying, thank you for letting us film our movie next to your Uighur concentration camp while we completely turn a blind eye to the genocide that you’re waging on your own people. The National Basketball association closing ranks, firing an executive because he dared say something that was pro Hong Kong.

 

[00:29:40.850]

It wasn’t that long ago, John Cena, the Hollywood actor, was groveling in Mandarin on Chinese social media because he dared to call Taiwan a country. I mean, this is the sort of thing where you go, that was peak culture. Peak American culture was at least now 1015 years ago. Now it’s all about Hollywood studios. It’s like, it’s all about, we got to get the Chinese on board.

 

[00:30:03.220]

We got to get our movie in the Chinese box office, otherwise we’re not going to make it. And all these big companies, they all turn a blind eye to all the human rights atrocities, everything that goes on in China, they completely turn the blind eye to it, and they completely just suck up to the CCP. It’s such a joke. We’re way past peak American culture again. The military has been gutted.

 

[00:30:26.330]

From a financial perspective, this woke ideology, the humiliation, the loss of the defeats from that. And I would even say that if you look at American technology, which used to lead the way in the world, the US. Has really lost its edge in a lot of different ways. It’s really fallen behind. The US.

 

[00:30:42.810]

Is great at producing vaccines. Boy, if you want a vaccine, the US. Is that’s USA number one. But in other things, I mean, the US. Has fallen far behind, for example, and things really of the future, like supercomputing technology, etc.

 

[00:30:54.590]

For but the biggest thing that I would point out about US. Technology is that most us? Technology these days really seems to be more oriented towards consumer technology. It’s about helping people consume more. It’s not productive technology.

 

[00:31:09.090]

It’s consumptive consumer technology. Instead of making us our lives better, our lives easier, doing things faster, doing things cheaper, how do we keep people scrolling and swiping and swiping and scrolling? That’s what it is. Like our big technology companies, it’s like Apple, which makes iPhones, and Facebook, which destroys the self esteem of 14 year old girls, and TikTok, which sells all of the 14 year old girls data to the CCP. And actually, it doesn’t even sell it.

 

[00:31:36.430]

They just give it away for free because they’re all basically stateowned Chinese companies, and Spotify, which we just listen to music, whatever. This is a technology company.

 

[00:31:47.390]

This is not the kind of technology that they used to put out decades ago. And it’s worth pointing out that let’s just say adversarial nations tend to focus more on productive technology and not consumer technology. You have a currency that’s not as widely respected as it used to be, not as powerful as it used to be, and geez, you’re looking at eight 9% annualized inflation. Central banks, central bankers in the US. Don’t seem to have the foggiest idea what they’re doing now that it’s running this haphazard monetary policy after being completely asleep at the wheel saying, inflation?

 

[00:32:23.470]

What do you talk about? There’s no inflation. And they say, oh, it’s transitory. They said, okay, yeah, fine, we have inflation, we’ll do something about it eventually. And now all of a sudden it’s this emergency.

 

[00:32:32.360]

Inflation has been around for more than a year, but now suddenly they’re taking it seriously and saying, from my cold, dead hens, we’re going to do no matter what the cost, we’re going to keep raising rates until whatever hell freezes over. It’s this very panicky approach to everything. And they’ve demonstrated that they are incompetent, that they totally missed it. They failed to predict it. They failed to see it even when it was so obvious to everybody else.

 

[00:32:57.900]

This is not the kind of central bank policy and institution that inspires confidence in the rest of the world. And at the same time, the US. Sees many of his adversaries rising. And all these things happened again, like ancient Rome we’re really talking about over the last 30 years. We’re seeing geopolitical events that would have been unthinkable 25 years ago, and enemies, at least I want to say enemies, it sounds too generic.

 

[00:33:23.970]

But really adversaries that are so emboldened in doing things that would have been completely unthinkable. And that’s what happens when you don’t have a stable hegemon. That peace and prosperity. The peace disappears quickly, and you can’t have the stable hegemon. When you’re running the largest current account deficit, you’re running the biggest national debt in the history of the world.

 

[00:33:44.270]

It was Larry Summers, former treasury secretary. He’s in the news a lot, always running his mouth about inflation and where interest rates should be, blah, blah. But one of the better things that Larry Summers ever said was, how long can the world’s biggest debt or go on being the world’s greatest power? And he’s right. You can’t have $30 trillion in debt and expect to be the dominant superpower in the world and constantly go groveling to foreign nations, banks, please buy my treasury bonds.

 

[00:34:09.730]

It’s just not a good look. It’s not something that powerful nations have to do. And so we have all these unthinkable geopolitical events, and we also have all these extra factors at play. We have consequences that are still playing out from the disastrous public health policies that took place during the Pandemic. We have the inflation, we have the energy crisis.

 

[00:34:28.650]

And so all these things, the conflict, right? The conflict and destruction. The conflict is already upon us, and the conflict is destructive. Like we talked about in the examples, world War I creates economic destruction. The economic destruction from World War One created the conditions for World War II.

 

[00:34:44.960]

Conflict creates destruction, destruction begins more conflict. And this is kind of the state of the world right now. It’s important to point out, and I’m not saying like, oh, this all means shooting wars. Conflict and destruction, that part of the cycle. Again, it’s this self perpetuating, self actualizing cycle where they reinforce each other.

 

[00:35:03.930]

Conflict creates destruction, destruction creates conflict. That part of the cycle. Doesn’t necessarily I’m not talking about a shooting war. I’m not necessarily saying, although obviously we’re seeing that right now, but destruction basically means we’re talking about fewer resources. Conflict means having various forms of conflict over those resources, fewer resources.

 

[00:35:25.160]

When you have conflict, conflict creates destruction. Destruction means fewer resources. Fewer resources means a scarcity mentality. It creates a sense of mercantilism. We talked about that in a previous podcast.

 

[00:35:35.250]

The difference between mercantilism and capitalism. Mercantilism was an economic system before capitalism, before Adam Smith wrote The Wealth of nations in 1776, one of the most important things to happen that year. And before capitalism, there was this system called mercantilism. Mercantilism was all about government control. It’s a zero sum game.

 

[00:35:54.190]

I get rich at your expense, you get rich at my expense. Therefore I have to block you. I have to block you from growing, because if I don’t block you, you’re going to grow at my expense. So I have to block you. I have to obstruct you.

 

[00:36:06.660]

I have to stand in your way because it’s a zero sum game and I’m going to win. And I’m going to win because it’s at your expense. So we don’t do win win deals. Capitalism is all about winwin. Value creation is about winwin.

 

[00:36:20.700]

And mercantilism, in this conflictridden, scarcity mentality, resources are scarce. And so I’ve got to be protective, protectionist, mercantilist mentality, it’s all about win lose. I got to win because you’re going to lose. And the only way I can win is if you lose. So the only deal I want to do is a win lose deal where I get all the chips and you get nothing, where I get most of the benefit and you get very little benefit because there’s a finite amount of benefit.

 

[00:36:46.790]

And I’m going to take as much as I can for myself. And if I can’t do a win lose deal, then we’re going to do a lose lose deal. We’re all going to go down together. And that’s usually what ends up happening. And this is why conflict and destruction are self reinforcing, because it pushes people to do lose lose deals.

 

[00:37:02.960]

And we’ve seen this, I mean, every day in the paper, we just see lose lose deals. The conflict, the war itself is just a lose lose deal. Everybody loses. Russia loses, ukraine loses, germany loses, the US. Loses.

 

[00:37:14.550]

Everybody’s worse off. But they’re just going to keep doing it because they have this if I can’t win, then you’re going to lose, you can’t lose. So we all end up we’re just all going to lose. And that’s what ends up happening. We’re just all going to lose.

 

[00:37:25.350]

And that’s this sort of destructive destruction, conflict cycle mentality. It’s mercantilist. It’s a scarcity mentality, it’s a lose lose mentality. And it’s all extremely anti productive. But again, it’s not all about a shooting war.

 

[00:37:39.860]

It doesn’t mean a shooting war. There are so many different ways that conflict can play out. We’re talking about things like economic sanctions. G where have we seen those? Trade wars and tariffs g.

 

[00:37:49.890]

Where have we seen that? Controls, right? Different types of controls, capital controls, exchange controls, price controls, competitive evaluation. We already see a lot of competitive evaluation, and I would remind you that in our modern world, in modern history, modern economic history, things like exchange controls and even capital controls were actually quite commonplace. Exchange controls have existed in modern economic history for far longer than they haven’t existed.

 

[00:38:17.970]

Exchange controls are where people say, okay, well, here’s where our currency is going to be. Or we’re not going to allow currency to freely come in and out of the country. We’re going to create controls and restrictions around currency leaving the country or coming into the country and so forth. We’re going to control these things because we have to control our economy. We have to prevent adversaries from coming in and making investments or selling investments or profiting off of our economy.

 

[00:38:41.850]

So this is why people create controls. And controls existed literally for decades and decades and decades. We’ve had the last couple of decades where we haven’t really had exchange controls, but that’s actually a relatively recent phenomenon, so it wouldn’t be a surprise to see return to some sort of exchange controls or capital controls. And again, some of us were already seeing some form of these things like competitive devaluation, the trade wars, the tariffs, the economic sanctions, these sorts of things. We’re already seeing again, it’s all of it.

 

[00:39:07.780]

It’s all of it very anti productive. It’s win lose, or it’s lose lose. It’s definitely not win win. And this is why in this type of conflict, when we get into this part of the cycle where it’s about destruction and conflict and conflict and destruction, it’s really ultimately, again, we’re not talking about a shooting war, but all this type of conflict is really it’s like a war of attrition. It’s to say who can stand to lose the most resources for the longest period of time.

 

[00:39:33.820]

That’s what a war of attrition is. It’s just you just lose and you lose and you lose, and basically you’re just trying to outlast the other guy. So who can lose the longest? Whoever can lose the longest wins the war of attrition. And that’s an extremely anti productive prospect.

 

[00:39:51.170]

One of the things I think this leads to, and again, this is me trying to, in a way, connect the dots in advance and skate to where the puck is going to be. But this idea, the cycle of destruction and conflict and conflict and destruction, one of the things in the controls and the exchange controls and the capital controls leads to something that I think is we could call it resource nationalism. I know what I’m saying. Nationalism not nationalization. I’m not talking about expropriation or confiscation or governments coming and say we’re going to seize all these assets.

 

[00:40:22.830]

We’re not talking about nationalization. We’re talking about nationalism. Nationalism. So this is basically export controls, right? If you think about whenever you export anything, when a company and wherever country produces something, they manufacture something and they ship it overseas.

 

[00:40:41.050]

Essentially, they are exporting everything that went into producing that thing. If you’re producing widgets and digits and whatever else, you’re exporting everything that went into producing that. You’re exporting the raw materials, you’re exporting the labor, you’re exporting the energy, you’re exporting every single thing that went into producing that manufactured good, and you’re shipping that away. So in an environment, for example, where, let’s say, energy is scarce and it takes energy to manufacture something, it’s certainly plausible that a government is going to peer in it and say, do we really want all this energy that we had to use to produce this thing? Do we want all that energy being exported over to our adversary?

 

[00:41:18.540]

And it’s certainly a case to be made that governments really start paying attention to how scarce resources being used and allocated. More importantly, where do they end up? Are we shipping things to our adversaries? Are we comfortable exporting energy to our adversaries? Are we comfortable exporting anything at all to our adversaries?

 

[00:41:36.930]

And so they start looking at things and start identifying what they would consider critical national resources. And this can be a number of things. It could be certain minerals, very important, and critical minerals like lithium, for example. Absolutely certain things like energy. Even food.

 

[00:41:55.190]

Even food, I think, is a possibility. We’re not talking about caviar and things like that. We’re talking about wheat, some of the really basic staples. And as an example of this, I would point out, in the state of California, for example, california is the largest almond producing region in the world. State of California produces 90 even.

 

[00:42:15.560]

I’ve seen estimates of up to 99% of all the world’s almonds, right? Almonds is a type of nut, obviously. Now, almonds suck up a lot of water. They use a lot of water. And so the state of California, the almond farmers are estimated to consume, at least on the low side, 10% of the state of California’s water supply.

 

[00:42:35.570]

So if you think about almond, farmers in California are using 10% of the state’s water supply to grow almonds, and then they take those almonds and they export them outside of California. Some of that ends up in different parts of the United States. Others might end up in China. And so, at a certain point, even the state government in California say, do we really want to be exporting 10% of our state’s water supply to China or any other country in the world? Does that really make sense?

 

[00:43:01.530]

And so that sort of thing where they start looking at going, hey, we have scarce resources. We need to start paying more attention to this. And this is where they identify. This is a resource that’s in the national interest. A national resource.

 

[00:43:13.030]

And I think this also includes certain types of technology, even data, personal consumer data, the types of things that, for example, I mentioned before that TikTok is collecting. Everybody that uses TikTok. I mean, everybody uses any of these apps. If you’re on Instagram or any of the sort of stuff. These guys are just collecting data, data and more data on you.

 

[00:43:33.660]

And if you’re using TikTok, all that stuff is being shared immediately with the Chinese government. That’s not some wild conspiracy theory. This is the executives at TikTok at Bite Dance full blown admit this. They gave testimony in front of the United States House of Representatives and they full blown admitted this. So this is not any kind of conspiracy theory.

 

[00:43:52.810]

This is coming straight out of the executive’s mouth. So this is the sort of thing, at a certain point, you can imagine politicians saying, we need to be a little bit more careful about what we allow to be exported. This is a type of export control. This is resource nationalism, where we start identifying we don’t want certain things to leave our borders, or not necessarily leave our borders, but we’ll give it up to Canada, we’ll give it up to Britain, but we don’t want it to go to the Chinese. And this is really not that far fetched.

 

[00:44:22.490]

Remember, they did this with face masks. They did this with face masks in 2020. It was a national resource, right? People can’t buy it, we can’t export it, we can’t ship face masks overseas. So if they’re going to do it with face masks and they did it with face masks in 2020, why wouldn’t they do it with other things?

 

[00:44:37.440]

Especially if there’s a real shortage or a real crisis in some particular resource. So this is something, I think, that’s totally within the realm of possibilities now. This is again, it’s not a guarantee or any kind of certain prediction. We can’t make certain predictions, and that’s not the business that we’re in. What we’re trying to do is make certain determinations about the path that the world is on.

 

[00:44:57.820]

What is the trajectory that the world is on? And the trajectory right now seems fairly clearly that this is a mercantilist, scarcity minded, conflict and destruction sort of approach where there’s a whole lot of idiots in charge, and God help us, but there’s no way that Camel and AOC are going to lead us back to peace and prosperity. It’s just probably not going to happen. And I’m not saying that because this isn’t about doom and gloom or anything like that. This is not the end of the world.

 

[00:45:21.120]

I do think, however, it’s important to consider that while not the end of the world, it may very well be the end of an era. An era where we had this PAX Argentarium, the PAX Americana, where it was just life was so good and everybody was making money. It was this again, self reinforcing, self propagating, peace and prosperity because more peace began, more prosperity and everybody is making so much money and everybody’s getting so wealthy and the Chinese are doing well and the Indians are doing well and the Russians are doing well and Europe is doing well and everybody’s doing well and who wants to mess it up? And then things happen. The decline starts to set in the natural end of empire.

 

[00:45:58.400]

The decline of empire sets in and adversaries become more powerful and that balance of peace and prosperity starts to peak and offset and things happen and we see the four forces of decline set in. And then that leads to conflict. It leads to that thucydides trap. We have rising powers and declining powers colliding with each other over places like Taiwan or Ukraine or wherever else the case may be. That’s the world that we live in right now and I think it’s fair to at least argue the possibility of an end of an era, the end of a Pax Argentari on the end of a Pax Americana.

 

[00:46:32.370]

And what does that really mean and where is the world going? I think it’s important to try and understand the trajectory of the world and to align oneself with the trajectory of the world. Instead of saying no, I’m just going to continue on as if we’re still living in the past, as if we’re still living in the 1990s and that’s still the world that we’re living in. Again, this is all about skating to where the puck is going to be. It’s not an exact science.

 

[00:46:53.220]

We can’t really ever say for sure, but we’re not trying to pull out a crystal ball here and say here’s exactly what’s going to happen on this date at this time. That’s silly. We’re trying to connect some dots in advance and just understand big picture, the trajectory of the world and trying to align ourselves with the trajectory of the world. Now if we think about this from a financial perspective over the past several decades, central banks had all the power, right? Central banks, I mean we can think about if you’re old enough to remember Alan Greenspan in the 1990s, this is a guy, he was the big cheese back then.

 

[00:47:26.800]

He’s one of the most powerful guys in the world. He was the chairman of the Federal Reserve back when you still used words like chairman. And this is a guy that went out and he commanded financial markets. He would notoriously speak in this Fed speak. He would just be very cryptic things and nobody could understand what he was saying.

 

[00:47:43.420]

It was all this kind of code and everybody’s trying to read the tea leaves on what Alan Greenspan was going to do and what it was all about, whether he’s going to print money or he’s not going to print money. And based solely on what one person would say, markets would rise and fall. And we still see this realistically to this day. Jerome Powell, chairman of the firm. I think he’s chair or chairperson now.

 

[00:48:05.700]

They don’t use ghastly words like chairman anymore, but Jerome Powell running the Fed. He goes out and says something and markets rise and fall, but these days are coming to an end. We’re already seeing this trust and confidence in central banks is falling rapidly. They have this basically one trick is to get to manipulate the money supply. They get to manipulate and by manipulating the money supply, they’re manipulating interest rates.

 

[00:48:28.670]

That’s pretty much their one big trick. And people have seen again how asleep at the wheel they were. They look at the Fed with respect to inflation, say they were gaslighting people, they were denying it. Then they said it was transitory. Then they said, oh we’re going to do I swear to God we’re going to do something about it.

 

[00:48:45.960]

And then six months passed before they did anything and they had these little tiny rate increases. And now they go, oh my God, now her hair is on fire. There’s five alarm fire. And they’re doing everything they can and they look like rank amateurs instead of these steady professionals who know what they’re doing. They look like complete amateurs who are totally asleep at the wheel, failed to predict it, failed to see anything coming, failed to do anything about it.

 

[00:49:08.060]

And now they’re totally overreacting and blowing it all out of proportion. So this is not an organization that inspires confidence anymore. More importantly, I think people are realizing that the Fed’s bag of tricks doesn’t actually amount to very much. Yes, they can manipulate interest rates. Yes, they can increase and decrease the money supply.

 

[00:49:26.940]

Big deal. They can’t produce food. They can’t produce energy. They can’t hit the button on their big printing press and make more oil come out of the ground or make more wheat come out of the ground. They can’t make more lithium come out of the mines.

 

[00:49:39.990]

They can’t create any productive technology. They can’t do any of those things. And I think people are starting to realize that for the past several decades, during this whole PAX Argentarium, it was all about what is the Fed doing? And for the most part, the Fed was keeping monetary policy loose. For the past several decades, interest rates were generally falling and Fed balance sheets were rising.

 

[00:49:59.540]

And so monetary conditions were easy and it was getting cheaper to borrow. And that was fueling this giant asset bubble. And that giant asset bubble fueled the rise in financial assets, paper assets, stocks and bonds and these sorts of things. And if we’re talking about the end of an era where an era that was dominated by Federal Reserve and central bank monetary policy that drove the value of paper assets higher and higher and higher, it might make sense to consider, well, what else is there? What are the alternatives to this idea of investing in paper?

 

[00:50:36.730]

And frankly, the thing that might make a lot of sense right now is looking at real assets. Real assets is actually real stuff. Instead of just pieces of paper and so forth, it’s actually real things. I’m not talking about not investing in stocks and so forth. It’s not really what I’m saying.

 

[00:50:53.870]

I’m talking about specific real assets. Energy, mining, minerals, agriculture, productive technology, which by the way, productive technology and consumer technology. And companies that actually invest in these things, companies that produce these things, could be on a stock exchange, could be a private business. But the point is, this is a big difference then. And the difference I would highlight is in the past, I think the best example of the financial asset boom was index investing, where in the past when all that mattered was are they printing or are they not printing?

 

[00:51:24.980]

Are they keeping monetary conditions loose? Are they pumping liquidity into the system or not? And for most of the last several decades, they were pumping a lot of liquidity into the system. And essentially what that did is it drove up the value of paper assets, including big, broad index funds. Now, if you think about what an index fund is, a big broad index fund basically means that you own a little piece of everything regardless of price, regardless of quality.

 

[00:51:51.340]

So if there are companies in some big stock index that are trading at all time highs and they are dog shit companies that just have no hope of ever making money and they have horrible balance sheets and they’re dead up to their eyeballs and they’re hemorrhaging cash and they’re never ever going to make money and the CEO’s a drunk or whatever, guess what? You buy an index fund, you’re buying shares of that company too. You’re buying shares of every terrible company in the index. And there’s a lot of terrible companies just because some companies on the stock market, a lot of terrible companies, a lot of great companies, a lot of things in between. But when you buy an index fund, you’re buying everything in the market.

 

[00:52:27.800]

So even some horrible company that’s trading at an all time high, you are literally taking some of your money in that index fund and you’re buying shares of a horrible company and paying an all time record high price for it. And in a time where central banks dominated financial markets and it was all about are they printing or are they not printing? And as long as they’re printing money and as long as they’re expanding their balance sheets and keeping interest rates low, then you know what, paper assets are just going to boom. And that’s what happens. You didn’t have to do anything.

 

[00:52:55.530]

You just tossed money into an index fund. You bought shares through the index, a terrible company, and paid a record high price for it. But you could still do okay because central banks were printing money. That’s the difference between real assets and. Paper assets, real assets and financial assets, real assets.

 

[00:53:11.640]

We’re talking about investing in companies and businesses and even the real assets, the commodities themselves, etc. Are productive technology things that actually produce real things that actually matter in this world. Instead of just useless pieces of paper and not having any idea what we’re investing in, just throwing money at some random index or fund or piece of paper because the central bank is printing money, I think it’s probably worth considering that that era may in fact be over. And instead, I think what we’re left with is, in addition to investing in real assets, I want to leave you with an idea of investing in neutrality. And this is kind of an interesting concept.

 

[00:53:52.070]

If we’re talking about being in an era where it’s dominated by conflict and destruction, and more conflict creates more destruction, which creates more conflict and so forth. I think there’s a couple of different ways to invest in neutrality, and one is looking in, let’s say, less aligned regions. I did a podcast previously where I talked about the barbarian kingdom thesis, where at the end of the fall of the Western Roman Empire, there are all these different barbarian kingdoms. There’s no longer a dominant superpower in the world. And I think that’s completely viable and plausible outcome, where instead of having a dominant superpower or even a bipolar world, it’s a multipolar world where you have China’s a strong power, and India is a strong power, and Europe is still relevant.

 

[00:54:34.990]

North America, perhaps a union of North America is still very powerful, all these different sort of factions, some of which are aligned with others in certain ways and aligned with others in other ways. And if we’re talking about a world where there’s a lot of conflict, for example, between the US. And China, or Russia and the United States, et cetera, I think it might make sense to actually look at less aligned regions. And I think specifically, one of the regions that seems to be, at least for now, proving that it is not aligned and really had its fill with all this is Latin America. Latin America has a lot of Chinese influence.

 

[00:55:10.770]

Latin America has a lot of us. Influence. Mexico is a great example. They’ve decided they want no part of this really hardcore side picking, where you’ve got to banish all Russians from your borders and you’ve got to engage in the two minutes hate every single day against all things Russia. And they said, we’re not going to do this.

 

[00:55:29.780]

We’re going to continue to play nice with everybody. And in fact, Mexico even invited they said, hey, let’s have peace talks, and let’s invite Russians and Ukrainians here to Mexico and so forth. And Mexico is actually kind of gone out of its way to be neutral. And I think that’s interesting. And it’s the idea of looking at areas and parts of the world that are neutral is, I think an interesting concept, and not even necessarily in terms of financial investing, but we think it would even plan B sort of way of thinking about things.

 

[00:56:03.170]

I look at Mexico as the way, if you could imagine having a Swiss passport in 1935, if you were in Europe, that would have been a very valuable resource for you and your family to have a Swiss passport in the mid 1930s before all hell broke loose in Europe. Because even when it happened, switzerland was still a neutral country. It was a safe haven. It was okay with everybody and didn’t take sides. And because of that, it was relatively unscathed even when all hell broke loose on the European continent.

 

[00:56:32.430]

And I think to have something like that in Mexico is why having, for example, residency or citizenship, something like that in a place or at least a part of the world that is relatively neutral, I think that’s an interesting way to think about strategically even a plan B from a financial perspective as well. I think in terms of neutrality, I think also focusing on industries that aren’t really politically charged. This is one of the reasons why I like agriculture so much, because you could look at, I think, energy. There’s a lot of really great investments to be making in energy. We had a discussion before about nuclear.

 

[00:57:04.260]

Energy is quite politically charged, though. I mean, everything to some degree is politically charged. There are people that are going to be professionally outraged about every single thing that you do or say. But in particular, energy, you’ve got a whole lobby of people, I mean, lots and lots and lots of people that never want to see another oil rig ever again. They never want to see another ounce, another barrel of oil ever drilled.

 

[00:57:24.230]

They never want to see anything. They want to see any exploration. Same thing with mining, even though all these things, I mean, oil and gas and minerals, all these things are just so critical to the global economy. You don’t really see too many picket lines of people saying no more wheat, no more avocados. We want to round up all the avocado farmers and get rid of it.

 

[00:57:43.920]

Nobody ever says that, right? Nobody has a problem with avocados. Nobody has a problem with these sorts of things. This is actually why I like agriculture, because it’s not politically charged. It’s neutral.

 

[00:57:53.890]

It’s neutral. And I think neutral industries that don’t have these horrible forces, these ESG forces they’ve got oil has all the ESG forces against it. They’re forcing private equity funds and banks and so forth to not invest in oil and divest themselves from all their oil investments, try and chase these guys out of business and so forth. There are industries that don’t have that. Frankly.

 

[00:58:18.260]

Certain industries within the technology sector are also not politically charged, right? Cybersecurity. Nobody screaming that cyber securitycurity firms need to go away and that they’re too politically charged or they’re rigging elections or anything like that. These are the sort of things I think that makes sense to really consider. So we talked about basically kind of less aligned regions.

 

[00:58:42.330]

I don’t think there’s any such thing as a completely unaligned region, but less aligned regions, non politically charged industries. And I think as well, you can look the same thing with currency currencies are aligned. And I think if you’re holding a national currency in an environment that is very politically charged, geopolitically charged with a lot of conflict and so forth, what happens when they start sanctioning each other and the trade wars escalate and the competitive devaluation and the capital controls and exchange controls? What starts happening to the value of currency? They start playing, they get involved in currency disputes.

 

[00:59:14.480]

Again, we’re not even talking about conflict. Doesn’t necessarily need to be a shooting war. It could just as easily be, hey, we’re going to dump your treasuries, we’re going to flood the market with treasuries. Your bonds are going to become worthless overnight. Your currency is going to go into freefall.

 

[00:59:28.890]

All these things that adversarial nations could do. And so all these things are possible. And so to be able to hold things that are not actually aligned with any specific country or any specific block, and this is the thing that makes okay, sure, yeah, you could hold currency for other nations that are in line. But this is what I think why crypto is actually one of the many reasons why crypto is so extremely interesting is because it’s not aligned. Let them sanction each other.

 

[00:59:54.640]

Let them engage in capital controls. Let them engage in all sorts of silly economic shenanigans with one another. It’s all good for crypto, and it’s a way to be able to hold wealth outside of a system that you can’t be sanctioned. It’s not subject to capital controls and all these sorts of things, and you can have it fully in the blockchain with a brain wallet and all sorts of things. This crypto is extremely interesting in this kind of environment.

 

[01:00:21.850]

I think to a degree, gold and silver are as well. I would say it’s been just as an aside, It’s been interesting. I think a lot of people may be surprised that gold isn’t doing better in an environment where inflation is as high as it is and so forth. I think there are a number of reasons for that. But the one thing to keep in mind is that gold prices, where we start seeing major movements in gold prices over the long term, gold and has kept up very well with inflation.

 

[01:00:52.500]

And the last stagflationary period in the 1970s, gold was one of the best performing investments. Gold, farmland, again, real assets like we were talking about did extremely well, extremely well. Gold, though, tends to move a lot when central banks buy and sell central banks, foreign sovereign governments, because these guys buy and they buy it by the time tons and tons and tons of gold. And that’s what really moves the price, because it’s not that much supply. And so when we see relatively limited supply, especially in an environment where people still deal with public health protocols and you’re dealing with supply chain issues and so forth, there’s supply issues in the gold market and then lots of demand coming from central banks, that’s what moves the price.

 

[01:01:37.830]

And I think that’s something that and again. This isn’t necessarily a specific prediction. But I think in terms of the trajectory of the world. If people are looking at conflict and saying. I got too many dollars.

 

[01:01:49.530]

Or I’m trying to screw over the United States because we’re trying to do a win lose or a lose lose. And so I’m going to dump some treasuries and so forth. Gold ends up being a beneficiary of this because they got to turn those dollars into something. They got to turn those euros into something. So what do they do?

 

[01:02:03.760]

They buy gold. They buy gold because that’s traditionally what they can do. Gold is a big market. They can spend trillions and trillions of dollars in the gold market and buy a lot of metal. And it’s something that they know there’s always going to be some value for.

 

[01:02:16.620]

They’re always going to be able to use that or trade that or sell it or whatever the case may be. And so I think we may be at some point here down the road in an environment where central banks and foreign governments are going to buy lots and lots of gold. And that’s something that could absolutely move the price. So all this is to say, I just wanted to give you some thoughts. This is by no means is this investment advice.

 

[01:02:38.720]

This is one guy exercising my First Amendment right to express my personal views, presuming that the First Amendment right still exists at the time of this recording. I do absolutely fundamentally believe. In fact, I don’t even like saying the word believe. I believe. It’s like saying I believe in Santa Claus or the tooth fairy, something like that.

 

[01:02:57.630]

I don’t believe. It’s just obvious the world is changing before our very eyes. My thesis, my theory, is that this is the end of an era, an era that was marked by dominance of central banks, the PAX Argentia, the PAX Americana, where life was so good, everybody’s making money, all these foreign countries, all these exporters traders, everybody emerging markets, everybody was doing well selling the United States, et cetera. But the natural forces of decline kicked in. Triffin’s dilemma.

 

[01:03:30.890]

You cannot be the dominant superpower forever. Decline will eventually set in the rot, the complacency. You lose the eye of the tiger, you start to decline. And that decline creates conditions for conflict. And that conflict creates more loss.

 

[01:03:44.900]

And that loss creates more conflict and so forth. We start seeing this with respect to trade wars and trade disputes and sanctions, and even shooting wars, and currency competitive, currency devaluation and all these sorts of things that creates more and more conflict, that creates more losses and destruction, which creates more conflict. And the scarcity mentality and mercantilist approach and win lose and lose lose deals. That’s basically what we’re seeing right now. That is my thesis here.

 

[01:04:13.560]

And it, I think, combines with a lot of the things we’ve talked about in the past. The energy story, the barbarian kingdom thesis, all these things sort of together. This is just my attempt to try and piece together everything that I’ve studied for years and years about history with where I see the world is right now and where it looks like the trajectory of where the world is going. We can see the trajectory. And to me, I think it makes sense to align oneself with the trajectory of the world instead of trying to fight it, accept it and see where it’s going and try and really skate to where the puck is going to be, pick up on those big picture trends.

 

[01:04:50.630]

It’s not an exact science. It’s not about crystal balls and trying to predict the future. It’s really about big picture trajectory and aligning ourselves with that trajectory. And the trajectory that we see right now is an end of an era. It’s not the end of the world, it’s the end of an era.

 

[01:05:06.000]

And it’s not anything to be panicky about, it’s not anything to be overly concerned about. But it’s important to understand the gates of Janus are open. It is not the end of the world, but it does constitute a major shift. And as long as somebody has a little bit of courage and independence of mind to actually examine this openly with an open mind, it does create really a world of possibilities. I appreciate you listening and we’ll talk again soon.

 

About the author

Simon Black

About the author

James Hickman (aka Simon Black) is an international investor, entrepreneur, and founder of Sovereign Man. His free daily e-letter Notes from the Field is about using the experiences from his life and travels to help you achieve more freedom, make more money, keep more of it, and protect it all from bankrupt governments.

Get our latest strategies delivered
straight to your inbox for free.

Discover our most read content below...

Share via
Copy link