We live in an economy of historical cycles. Historical events have a way of determining the state of our economy and markets, which more than often results in innovation and growth.
There’s a new book out that you should read.
It’s called War! What Is It Good For?: Conflict and the Progress of Civilization from Primates to Robots, by Ian Morris.
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I love archaeologists like Morris and anthropologists like Stephen Oppenheimer (author of The Real Eve: Modern Man’s Journey out of Africa) because they study the evolution of history and mankind. They get rid of all the layers of myth and legend and give us the real dirt.
I must admit that I haven’t finished reading his book yet, but I did catch Morris on an interview recently and after some research, and what I’ve read so far, I couldn’t agree more with his point of view on history.
He looks at the last 15,000 years of war and comes to the surprising and real conclusion that war ends up creating less violence over time…
For example, World War II was the largest war in human history. Since then, we’ve had 69 years of minor wars, peace and prosperity.
And Europe was involved in endless wars during the 1600s and 1700s. Waterloo, for instance, was an epic battle that was instrumental in creating peace in Europe that lasted nearly 50 years.
As Morris points out: “War creates bigger, more complex economies ruled by governments that stamp out internal violence… killing has made the world safer, and the safety it has produced has allowed people to make the world richer too!”
My own study of history confirms this…
Wars Stimulate Great Innovations for the Economy
Think about it…
After the American Revolutionary War (1775 to 1783), we saw the emergence of the steam engine, which started the whole industrial revolution along with the democracy revolution in America.
After the Napoleonic Wars of 1799 to 1815 and the War of 1812, we saw the arrival of steamboats.
After the Civil War (1861 to 1865), railroads began to snake across the continent.
After World War I (1914 to 1918), we saw the development of the assembly line, automobiles and widespread use of electricity.
After WWII (1939 to 1945), we saw the emergence of the jet engine, radar, antibiotics (in name at least) and the computer.
That’s because challenge and hardship fuel innovation and things can get much harder after wars, recessions or depressions. The acceptance of these innovations is evidenced by the growing demographic uptrends that soon follow.
The reality is: If we don’t have busts and challenges, we don’t grow!
None of this is to say I like wars. I don’t!
Remember the opening scene of the movie Saving Private Ryan? It was horrible! It was enough to convince me that I would never want to go to war.
But we can’t deny that war can bring about positive change. It reconfigures empires like the Persian, Greek, Roman and western empires, which all became greater, with more efficient markets, after periods of hardship… and the result was greater prosperity and safety over time.
James Dale Davidson and Lord William Rees-Mogg wrote a seminal book in 1993 called The Great Reckoning. What stood out for me was their concept on how surges of technology throughout history impact war and power.
Gunpowder was a huge innovation that changed power and created new empires in Western Europe and beyond.
Nuclear power and computer technologies are changing warfare today, in favor of countries like the U.S. that can use nuclear subs and drones to attack opponents.
Do you know that the U.S. has more aircraft carriers than any country in the world? We have 10 in service, two in reserve, and three under construction, per Wikipedia. Two countries are tied for second place, Italy and India — they each have only two!
Davidson and Rees-Mogg documented that every dominant power eventually extends its empire until the costs outweigh the benefits. Then they start to retreat, like Great Britain did after World War II and how the U.S. has after its Iraq and Afghanistan wars.
Yet the U.S. is still the undeniable superpower today. Even China, the only growing superpower, can’t challenge us yet!
After our failed wars in Iraq and Afghanistan, what will happen in the Middle East when we can’t afford to intervene again?
Davidson predicted that the U.S. would reach a point where it could no longer sustain its military power around the world… so we’ll likely see a major civil war in the Middle East, which will realign the region around its sectarian religions of Shia, Sunni and Kurd.
That won’t be pretty and it’ll cause oil prices to spike from time to time, even while liquid gold continues its downward trend with the 30-Year Commodity Cycle, the global crash, and deflation from late 2014 into early 2020. In fact, the continued crash in commodity and oil prices will only make the conflicts in the Middle East worse!
Despite the weakened resolve and capacity of the U.S., and the lack of a major challenger, I don’t believe we’ll see World War III in the next six years. Not least because the Geopolitical Cycle continues to point down from 2001 into early 2020 or so.
That said, the world is certainly not going to be a pretty or easy place during the next several years… not when all of our long-term key cycles point down at the same time (something they haven’t done simultaneously since the early 1930s).
No matter what happens, I continue to create and refine my long-term models as I get new information and uncover new research, so that you can be prepared for what lies ahead. Here at Dent Research, we learn from our successes and our mistakes!
That’s why, in the September issue of Boom & Bust, I’ll introduce a new 45-year cycle in innovation, which just so happens to also point down over the next six years (and beyond). Interestingly, this cycle’s movements also coincided with the stock crashes and crises between 1970 and 1975. If you’d like to read this upcoming issue, this will help.
Stay tuned. Things are about to get a lot more volatile… which can be more profitable… as the markets look ever more invincible.
We’ve compiled a free report that lists the five major forecasts for 2014. It will serve as a guide to help you further understand the markets, and prosper from them.
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