Ray Dalio’s book on the changing World Order has been universally praised since its publication. I fear that may be because nobody has read it.
So far it seems like my “drama” videos have been more successful when they go after folks who are native to the app rather than establishment figures. Ray Dalio happens to be both. He’s one of the most successful Hedge fund investors of all time, and he racks up tens of millions of YouTube views. Here’s hoping this video is successful. Reading his book was a bit of a chore.
It’s interesting how far my politics have evolved. If you had told me in 2014 that this channel would include a full-throated call for more stimulus spending, even after a year with a near 4 trillion dollar US budget deficit, I would have been appalled. I’m in surprisingly strong company. The inflation hawks and bond vigilantes on Wall Street have mostly retired in failure. The new generation is now just as eager for a big spending government as I am. What happened to all of us was… events. An under-appreciated aspect of Donald Trump’s presidency is the way that he sort of blew up the argument for fiscal conservatism. The Republicans let him do all the economic stimulus that they denied Obama, and the economy really did kick into higher gear. The threatened inflation never happened, and while people are a little less eager to buy our debt, the Federal Reserve seems to have stepped into the breach without consequences.
The only thing standing in the way of the emerging “magic money” era is the Republican Senate. And they’re only standing in the way until they can put a Republican back in power. Which is way I think we shouldn’t let them do that, as I lay out in today’s video on Georgia’s January 5th elections. As I briefly note in this video, however, I still suspect that those failed bond vigilantes and Republican Senators may actually be right. The British Empire fell because it ran out of people willing to give them money, and I think it’s likely that will be the case with us as well. We just don’t know the time scale. And as Keynes pointed out, “In the Long run, we’re all dead”. 2021 is not the year to try to solve the national debt.
There are some standard stories about the fall of the British Empire, like imperial overstretch, and the rise of nationalism world-wide. But they are rarely linked to what I see as the real cause of the Empire’s fall: incessant war mongering. As we close out this epic week of content on the British empire, World War One will take center stage. World War One has a much more central part in British mythology than it does in the US. That may be the reason why people are reluctant to draw the connection between that “victory” and the end of the Empire as closely as I do.
To some extent, today’s video is about what empire means. Is it just about territory? I think not. Later in the week we will show how the British Empire quickly disintegrated after it lost something more intangible: its “informal empire”. This concept is pretty amorphous, and as I think about the way I’m using it this week, I think I may not do a very good job of sticking to just one definition either. Informal Empire includes what is currently known as “soft power”, the financial and cultural weight that a society has, distinct from its military power. But I consider some aspects of military power to be part of “informal empire” as well. If you are undertaking some sort of quick punitive expedition to get people to act more in accordance with your wishes, I think that’s informal empire too. Obviously, when we’re talking about military action, the lines between informal and formal empire become less clear.
I think my definition of informal empire probably includes everything that is not formal empire. If you’re not planting a flag, or a near century-long “temporary presence” like the British had in Egypt, we’re talking informal empire. US military bases abroad are formal empire. Everything else the US does in those countries, from the bankers to the diplomats, to the fact that people in that country love Apple iPhones… is informal empire. I hope this has been clarifying rather than mystifying, and I hope you enjoy today’s video “Is the United States an Empire?”
I really like today’s video, but I think I stuck my foot in my mouth a bit at one point. I just sort of declared that Tunisia is not a “white country”. I already know I’ll be getting a ton of comments on that. There is no settled definition of “White”. Because of some historical weirdness, in the US Arabs have generally been described as white, long before Italians or Slavs were considered to be in that category. That hasn’t kept US foreign policy from being heavily focused on bombing Arabs for the past two decades.
I try to avoid using desperately inexact terminology like “white” and “Latino”. But what I was trying to get at with today’s video was the fact that certain countries are inside the charmed circle of countries that are seen as deserving of serious help and foreign aid, and some are not. Tunisia, whatever you may think of the country’s relation to “whiteness”, is not in that charmed circle. It should be.
Today’s video, in addition to almost being late, and a lot more difficult to put together than most, tries something new. Rather than talk about what is, or what was, I go in depth on what could happen if we continue on our current path. Essentially today’s video is science fiction. I’d like to do more of this. There isn’t enough imagination in foreign policy discussion. There should be more thinking about where we are going. This can be pretty negative, like today’s forecast of how a war between the US and Iran would go. But it can also be positive.
There’s an assumption that politics and geopolitics should be serious, boring stuff. This is a problem, because it fundamentally misunderstands what we’re dealing with here. Everything in government and politics is based on fantasy. Everybody’s trying to figure out what comes next, and also imagine it. Not reckoning with this fact has led to people taking the past 15 years of US foreign policy seriously, which is a terrible mistake. It’s had very serious consequences, but it’s basically one big practical joke that everybody is expected to take seriously for some reason.
I read a lot. It’s roughly 75% history, and 25% science fiction. Some might see that 25% as recreational, but I don’t necessarily see it that way. History is the study of the past, Science Fiction is the study of the future. By looking at both, I think I get better at understanding the present. Which is a long way of saying I might be doing more Sci-Fi themed vids like today’s in the recent future.
Economies are funny things. I just noticed that I forgot to tie today’s video into one of the central messages of this “Markets Are Dumb” series. That’s the importance of Confidence to markets. I sometimes think that’s all there is to them. In our last installment on the Turkish economy I talked about how the fundamentals of the Turkish economy had been disastrous for half a decade. Everybody knew this. All the experts agreed. Yet the Turkish economy kept trucking along, and sometimes putting up very impressive growth numbers. How did it happen? Confidence.
The Turkish people weren’t exposed to the basic facts of their economy, and their misplaced faith, or confidence, kept the wheels spinning. The growth this led to prompted international investors to keep pouring money it. It seems that this perpetual motion machine may finally have stopped. As today’s video makes clear, Trump can’t be held responsible for any of the disastrous choices that Turkish policy makers have made over the past decade. But he is the guy who finally punctured that last bubble of confidence. And that’s actually pretty important.
Sigh. Sunday’s election in Turkey was pretty depressing. Erdogan won re-election as president of Turkey, and his coalition retained a majority in the Turkish parliament. This puts him in a dramatically more powerful position. The recently revised constitution makes the President the center of Turkey’s political system. And with this election, the office of the Prime Minister is done away with, and Erdogan is now in more full control of the country than he has ever been.
You can find an infinite number of articles talking about how bad this development is, and I largely agree with them. But I remain optimistic about Turkey, just in the longer term. Here are two things to make you feel a bit better…
First, this is exactly what we expected when the elections were announced a couple months back. I have said repeatedly in my Turkey videos that I expected Erdogan to win the next couple elections. This has happened. But over the past two months, something really exciting happened. The CHP, the party that has failed to adequately oppose Erdogan for almost two decades now, finally put up a candidate that people actually liked. Muharrem İnce is likable, has a compelling story, and actually seems to be a decent leader, which is at least two things, if not three things that the CHP’s leader Kemal Kılıçdaroğlu does not have. In the weeks leading up to the election, İnce held rallies attended by literally millions of people. This, combined with the founding of Meral Akşener’s Iyi party last year made people surprisingly hopeful.
Those hopes were dashed. The AKP, in an alliance with the (suspiciously successful) hyper-nationalist MHP party, has managed to hold onto a majority in parliament, and Erdogan himself was re-elected. This sucks. But it’s exactly what we expected out of this election before we got our hopes up. The opposition parties remain very successful in Turkey in spite of some truly extraordinary obstacles. We shouldn’t get too depressed about something we expected all along.
The Second reason not to get too depressed about this election is the topic of today’s video. Turkey’s economy is a mess. It’s been on the edge for years now, and 2018 has a good chance of being the year when it finally tips over. When that happens, whether it’s this year or next year, Erdogan will own it completely. Last week, as people were getting more excited about the possibility of an upset, all I could think about was 2015. In June of that year, Erdogan’s party, the AK party, lost its parliamentary majority for the first time. I was quite literally dancing in the streets that June. But because the opposition parties were a disaster, they couldn’t get it together to form the coalition government necessary to get rid of Erdogan. He was able to create a new crisis with the Kurds, and call a new election. He won that 2nd election in November 2015. That felt a lot worse than Sunday did. For me anyway. If the opposition had won this time, I could have easily seen that happening again. It wouldn’t have been the Kurds this time. The economy could have crashed, and as President, Erdogan could have blamed the opposition and called a new election. We’re not going to have to do 2015 again, and for that at least I’m grateful. Today’s video lays out just how difficult a time Erdogan is about to have with the Turkish economy.
Over the past year Saudi Arabia has experienced a perfect storm of factors in its favor. Asset prices in the US economy and elsewhere have gone nuts. Saudi Arabia is a country that owns a lot of stock, land and everything else, so that’s been very helpful. On the oil market front, the most important front there is for Saudi Arabia, they’ve had unprecedented cooperation on the OPEC production slow-down, and a series of competitors have given up millions of barrels a day in production due to sundry wars and dictatorships.
If Saudi Arabia’s ambitious plans for the future were ever going to work, 2017 would have been the year for it. But as this video shows, some of the key metrics that illustrate the hole Saudi Arabia is in haven’t changed much at all. As I said in last year’s video, and as I repeat in today’s video… Saudi Arabia is still finished.