The Consequences of Our Current Monetary Policy

"Now, you may think that I have become insane. That is partially true because I am convinced that the US Fed's monetary policies will lead to exponentially widening wealth inequity and impoverish the majority of US households, which will then lead to social strife, protectionism, war, and the breakdown of the capitalistic system."
Marc Faber

War Cycles

Mike Alexander's War Cycle
http://radio.weblogs.com/0107127/stories/2002/12/30/mikeAlexandersWarCycle.html

War Cycles: Generational Cycles in Conflict and World Leadership
The American political scientist Quincy Wright was the first to describe the phenomenon of regular cycles in warfare. Although wars themselves are scattered more or less randomly throughout history the incidence of major wars is not. Wright identified clusters of major wars spaced about 50 years apart. A good way to see these cycles is by looking at total fatalities in great power wars over time. Today the great powers are the United States, Britain, France, Germany, Italy, Russia, Japan, China and maybe India. These eight nations possess the largest economies or largest populations, and six of them have nuclear capability. Prior to the Gulf War we would delete India. Before World War I we would delete China and Japan and add the Austrian (Hapsburg) empire. Prior to the mid nineteenth century, we would delete Italy and the United States and replace Germany with Prussia. Prior to the nineteenth century we would add Spain, and before 1715 we would delete Russia and add the Ottoman Empire, Sweden and the Netherlands.

Figure 1. Generational average war deaths per 100,000 population

Wright also advanced the idea that cycles in warfare were related to Kondratiev cycles. Specifically, Kondratiev upwaves show more intense warfare than downwaves. Figure 2 shows that war cycles do indeed line up very well with Kondratiev cycles, peaks in war intensity are associated with Kondratiev peaks. The placement of World War II just 27 years after World War I breaks this neat pattern. Instead of occurring at a K-peak like all the other cycles, World War II occurred at a K-trough.

Wright also identified a second pattern of unusually big wars that occurred every other cycle. These big wars were associated with the rise and fall of great powers. The historian Arnold Toynbee also discussed the existence of one hundred year cycles of war and peace. The leading proponents of this cyclic view of war today are the political scientists George Modelski and William Thompson. Modelski and Thompson stress naval power (and its modern extension, carrier-based airpower) as the key military underpinning of world political leadership. Their choice of successive world leaders: Portugal, the Netherlands, Britain and the United States reflects this bias. All four of these nations projected military power over a world-girdling trading empire through a first rank navy.

The other major determinant of power is economic, specifically the pioneering of new leading sectors of the world economy. Modelski and Thompson argue that the pioneering fifteenth century voyages down the African coast, begun under Portugal's Prince Henry the Navigator, set the stage for Portugal's world leadership period early in the sixteenth century. Similarly, the maritime and financial innovations made by the Dutch in the sixteenth century set the stage for Dutch leadership in the seventeenth century. The pioneering of tobacco cultivation in Virginia and the coming of "Dutch finance" to Britain during the Glorious Revolution set the stage for British leadership in the eighteenth century. Britain won another round of leadership in the nineteenth century by their pioneering of the industrial revolution late in eighteenth century. Finally the spread to America of British ideas of liberal democracy in the eighteenth century and the practice of industrial capitalism on a continental scale in the nineteenth led to American leadership in the twentieth century, which continues to this day.

This idea of a nation's pioneering of a new leading sector (what we have called "new economies") leading directly to subsequent world leadership fits in very well with the correspondence between war cycles and Kondratiev cycles. We have already seen that the development of new economies is closely aligned with the Kondratiev cycle. What is not so clear is why leadership cycles should occur every two Kondratiev cycles (~100 years) when development of new economies and outbursts of great power war occur every Kondratiev cycle (~50 years).

The role of challenger typically is played by a continental power, whose major strength is land-based. Ludwig Dehio has developed a view on war cycles that focuses on these land-based powers. He notes a tendency for peaks in land-based power to occur around the time of low points in sea-based power, and vice versa.

War, The Economy, and Suddam

I believe that history has shown that a long war is good for the economy. I hope that we regain momentum without one. I think that the Middle East will continue to be hot. The big question will be oil prices. One bomb at Suddam and the whole equation changes.

Have a great Thanksgiving!!