Some assume that a retracting Global American Empire will cause economic chaos.
On the face of it, this makes sense. The US controls Middle East oil and the global currency (those two go together like electromagnetism), shipping lanes to Asia, plus it has massive sway in global bodies like the IMF, World Bank and so on.
Countries that attempt to break out of the GAE system tend to be destroyed or isolated and impoverished.
However, all of these are now under threat. Some countries are starting to use alternative currencies, including oil producers. China is asserting control over the South China Sea and is either taking over or creating alternatives to international organisations.
Small countries are not yet able to blatantly defy America and get away with it but China, Russia and India can do as they please. Much of the non-Western world is on the cusp of slipping the collar:
In addition, there are some who advocate for a Little America; one with a limited global military footprint, more modest ambitions and a greater focus on pressing issues at home.
Both situations have parallels in the unravelling of the British Empire, which was superseded by the United States and also began to wind back its foreign involvement as this became too expensive in the face of multiple independence movements.
If the end of that empire foreshadows what may happen to the GAE, what can Americans and adjacent peoples expect?
Let’s go straight to the money. It’s hard to say exactly when the British Empire ended, but we can agree that it was between the independence of India in 1947 and the handover of Hong Kong in 1997, happening mostly over the first half of that period.
Or if you like, around when keyboards stopped having a Pound Sterling key.
There’s no perfect index going far back enough to help here (the FTSE starts in 1984), but this paper has combined a few indexes to follow the biggest stocks on the British stock market since 1829 (the year the future Queen Victoria turned 10):
Seems like the Empire’s fortune and British stocks went in opposite directions.
European powers originally sought colonies for raw materials, but from the 1960s Britain developed closer trade links with what would become the EU and former colonies were locked out.
Britain is proof that it is possible in some cases to wind up an empire and not suffer too much for it. If done deliberately, I’m sure America could follow this path.
Britain has gone downhill in other respects, but most of these changes set in well after the end of the empire. I don’t see any problem Britain has today that was caused by having or losing an empire.
Of course, some nations do suffer terribly at the end of an empire. This is usually because the decline is caused by, or itself causes, other problems. Things weren’t great in Italy at the fall of Rome. Turkey was in turmoil when the Ottoman Empire breathed its last.
However, these problems can be avoided if an empire is carefully disbanded before disaster strikes.
If the GAE falls into chaos, it will not be because it loses its military base in Okinawa or its access to the European energy market. These things are survivable. Also, unlike Turkey and Italy, America does not suffer external threats.
The only threats are internal. If these issues are resolved somewhat peacefully, including the uneasy stalemate that no one is happy with as at the moment, then a complete collapse is unlikely and the S&P 500 is likely to keep chugging along.
In any case, I don’t see the GAE ending soon. It is becoming something new, perhaps completing its transition from republic to empire, and will be a major world power throughout this century and longer.
Quality of life will likely decline for average people in several different ways but here we’re talking purely about investment returns, which is a very different thing.
I won’t be making any changes to my investments that assume a Mad Max scenario in the Imperial Capital.
- This article provides general information. It does not take into account your personal circumstances and is not intended to influence readers’ financial decisions. Get your own, professional advice.