In the meantime, I’d like to show you a note Akhil Patel recently wrote for his subscribers over at Cycles, Trends and Forecasts. It’s about the historical “war cycle” we discussed on Friday’s market broadcast, a topic both fascinating and deeply worrying for investors…
War games and the long wave
Akhil Patel, Cycles, Trends and Forecasts (17 May 2020)
The newly created US Space Force launches the X-37B from Cape Canaveral, Florida. It is solar powered and remotely piloted.
The purpose of its mission remains “secret”, but it’s not likely to be a peaceful one. Only the day before, from the Oval Office, Mr Trump claimed with his characteristic eloquence that the Space Force was working on a “super-duper missile” that can travel “17 times faster than what we have right now”.
Early May 2020
American warships return to the Barents Sea for the first time since before the end of the Cold War. The flotilla includes three destroyers and showcases Western military strength, including missile defence systems and weapons that can attack targets on land. A British frigate is a member of this party as well.
It’s a show of force close to the centre of Russian naval power; its Northern Fleet is headquartered there.
According to The Economist, this latest development “is part of a steady northward creep by NATO naval forces”. Russia seeks to control the Northern Sea Route through the Arctic Circle, which is suddenly being opened up to commercial shipping on account of the changing climate. Western nations, led by the US, regard these as international waters and exert their right to freedom of navigation.
In response to what it regards as an incursion, the Russian navy decides to carry out “live fire” military exercises.
27 April 2020
At a press conference Trump floats the idea that China will be pressed to pay reparations to the US for its initial attempt to hush up the spread of the disease. The sum total will exceed by some distance the 150 billion-euro sum demanded by German tabloid Bild a couple of weeks before (a position not endorsed by the German government).
Later, American officials are reported to be exploring the mode for taking these reparations, including renewing tariffs on Chinese imports or, even more fantastically, defaulting on some of the US debt owed to China.
25 April 2020
The US administration reports a growing wave of cyber-attacks on government bodies and medical institutions, including those responsible for overseeing the US response to the pandemic and those conducting biomedical research to find a vaccine. Only two countries have the capability to mount those attacks, according to an official: China and Russia.
3 April 2020
A Chinese coastguard ship rams and sinks a Vietnamese fishing vessel near one of the Paracel Islands, located in the disputed South China Sea (which China claims as its own, in the face of international law). The Philippines joins Vietnamese protests at the action, suggesting the coastguard is part of China’s “maritime militia”.
According to Al Jazeera, the US called on China to remain focused on supporting efforts to combat the pandemic and “stop exploiting the distraction or vulnerability of other states to expand its unlawful claims in the South China Sea.”
Despite increased tensions in the backyard, countries in the South China Sea are reportedly reducing their military expenditures as resources are diverted away to shoring up their economies. This is a situation the Chinese government is trying to exploit.
The top headlines are often not the real news
Whenever the airwaves are dominated by a particular story or set of stories, I am always on the lookout for the “real” news.
I am not saying that the latest developments in the unfolding global pandemic are not important. But the stuff you don’t get to hear about is often hidden by the relentless daily barrage of information on new infections, deaths, whether people are following social distancing measures and how the hunt for a new vaccine is going.
And, lately, you can add to this increasing speculation of what the “new normal” is going to look like. And what that implies for anything from stockmarket returns to locational values.
These are all significant questions. But I wonder if the “real” news – the things which are going to have the biggest bearing on our near-term future – consist of things we are not really able to track amid all the noise.
The most obvious arena for such news is in relation to international relations and war.
In the January issue, I wrote about war cycles. We are coming to a point in history where a number of war cycles are coming together, particularly the Long (or Kondratiev) Wave. The point of maximum tension would be after 2025, especially the years 2029 to 2032.
I pointed out that while there may be many factors that drive people to war, the fundamental causes are always economic, and always involve a fight over the economic rent.
And if such cycles are to repeat there would need to be a definitive ramping up of tensions in the run-up to that – in other words, in the first part of the decade. Which is what we are getting.
All of the news items I selected above point to both increasing tension, competition or conflict. And all are related to the economic rent, whether it be about controlling shipping routes (and therefore the terms on which trade takes place), projecting power into space (and controlling the space economy), intellectual property or owning natural resources.
So while it’s important to think about how the global pandemic will shape our domestic economies in the coming years, it’s also very likely that the these more hidden stories will have more of an impact.
Particularly given that this will likely play out at a time (after 2025) when the economic fallout from a land-led recession hits the global economy harder and for longer than the current recession. Which means that such tensions are more likely to bring about real conflict.
It’s always important to be on the lookout for such things and be prepared…
Yours sincerely,
Akhil Patel
Editor, Cycles, Trends and Forecasts
PS Please follow me on Twitter and LinkedIn – @akhilgpatel www.linkedin.com/in/akhilgpatel
Category: Market updates