Megapolitics

But oversimplifying can cause big mistakes. ‘Enemies’ are not always real enemies. Wars are not always worth fighting. And stock market prices do not always go up.

The Roman Forum, Source: Getty Images

Friday, June 14, 2024

Bill Bonner, writing today from Paris, France 

 

Megapolitics attempts to extract major structural patterns that repeat throughout history. The factors leading to megapolitical change include topography, climate, microbes and technology. By taking into account how different factors influence human incentives, you can better identify the implications of change. This perspective allows you to perceive with greater clarity the rising and falling of governments, economies, cultures and violence. 

— Matthew Siu 

“Megapolitics” is our not-so-secret weapon. It gives us an edge, we believe, by helping us understand the deeper currents of politics and economics. 

You could, for example, watch the weather. Day by day, it changes. One day is hotter. The next day it rains. You could guess about what will happen as the days go on. But it is very useful to know that there are seasons... patterns that repeat themselves... never exactly the same, but always, reliably present. 

Megapolitics is really nothing more than an insight, but an important one: there are seasons in our markets and politics too. You may think, for example, that ‘the government would never allow that to happen’... or that it won’t happen because ‘no one wants that.’ 

But then... it happens anyway. 

People — smart people especially — fool themselves. Regularly and consistently they over-rate their ability to understand what is going on...and their competence to control the future and take the kinks out of history.  They undertake vast programs and projects to make the world a better place – the Crusades, WWI, the Russian Revolution, the Great Leap Forward – and end up making history kinkier than ever.   

The problem arises from the nature of life itself. It is, as Wallace Stevens put it, ‘an old chaos about the sun.’ There are an infinite number of things going on... and an infinite number of ways to look at them. We humans, however, do not have an infinite amount of time or an infinite brain capacity. So, we put things into categories (a process that Kant described as the ‘categorical imperative’) in order to simplify them.

Danger 

Proto-humans had to make quick decisions in order to survive. If they saw a big, hairy thing charging in their direction, for example, they didn’t have time to wonder about what genus or species the thing might be... or if it was not some optical illusion caused by the setting sun... or a practical joke played on us by one of our own tribe members. They had to run... as fast as possible... to survive. Our ancestors, the survivors, were those who ran... not those who wondered for too long.  

Today, we receive thousands of ‘messages’ — advertising, notices, data, opinions, and observations. We go through them on our computer screens... as quickly as possible... picking out those that are worth our attention. Most are disregarded immediately. Some are noticed... and studied carefully. A few actually change our ideas or behavior. 

Most people are busy; they sort things into very simple categories — good or bad; red or blue, friend or foe. Enemies are ‘bad’ people; that’s all you need to know. 

The world of finance too can be reduced to the simplest dichotomy. Prices are either going up or down; why complicate it? 

But oversimplifying can cause big mistakes. ‘Enemies’ are not always real enemies. Wars are not always worth fighting. And stock market prices do not always go up. 

For a hint about what is really going on, we need to understand the seasons. We can look out the window and see the sun peeking through the clouds... but it also helps to know that it is springtime. 

Natural Patterns

In the most simplistic, superficial sense, people make their choices and try to get what they want. But in the deeper, mega-political world, what they want has nothing to do with it. Megapolitics describes the profound currents of history... like the Gulf Stream... an immense underwater river. On the surface, it is not even visible. But underneath the waves, it carries warm water across the Atlantic and makes Northern Europe habitable. It is a natural pattern. It influences us; we have no influence over it.  

Megapolitics recognizes that ‘stuff happens’ whether you want it to or not. Who wants to die, for example? But everyone does.  

And who can imagine that the US empire will be brought to its knees? But that will happen too. 

Megapolitics encourages us to look beyond the slogans and platitudes we take for granted. The Titanic was considered unsinkable... until it sank. And now, many people think the Fed ‘wouldn’t allow’ a major recession, runaway inflation, or long-lasting bear market. But can the Fed really prevent these natural corrections? Probably not. 

At another level, we believe that ‘all men are created equal,’ for example... and that we should ‘do unto others as we would have them do unto us.’  

But when power shifts dramatically, equal rights vanish. Imagine an invasion by a race of aliens with vastly superior technology. They might treat humans like we treat cattle... or snakes. Even among humans, huge disparities in power lead to relationships that are in no way ‘equal.’ That was the underlying story of the 18th and 19th centuries, when Europeans had such a big advantage in firepower over the indigenous peoples of Africa, Southeast Asia, Australia and the Americas that they were able to colonize huge expanses of territory. The locals may have had ‘rights,’ but only those the conquerors chose to give them. 

Megapolitics exposes the patterns and realities that few people want to think about. It makes us suspicious about ‘what everybody knows’ and skeptical about ‘what everybody believes.’ Does the war in the Ukraine really make any sense? Can the Fed really know what interest rates America needs? Does US democracy really work the way the voters believe? 

We have more questions than answers. But merely asking them gives us an advantage over most investors. 

Questions

How, when, why does a great empire die? The US/Anglo/Western empire seemed to peak out around 1999. Since then, despite record highs in nominal terms, US stocks and bonds have lost ground in real terms — measured in gold. This has happened against a background of soaring debt — from $5 trillion to $35 trillion of government debt alone — which was supposed to ‘stimulate’ growth.  

And what is going on in the markets? In addition to the trends of days, weeks, and months, there are “Primary” trends that can take decades to play out. It appears that a major turning point was reached between the summer of 2020, when US bond yields bottomed out, and the end of 2021, when US stocks hit all-time highs. Where to now? Checking with CNN or Bloomberg won’t tell us. Maybe the Primary Trend patterns will. 

And what about inflation and debt cycles? What’s in store for a country that has nearly four times as much debt as GDP? And what’s ahead for a democracy in which most voters want neither candidate and the most important issues are decided by big money influencers?  

Few people will want to go too deeply into these questions. Good guys versus bad guys, us versus them, red versus blue — that’s enough for most of us. 

But in the difficult years ahead, shallow analysis could prove disastrous. 

Stay tuned. 

Regards, 

Bill Bonner