America’s Biggest Challenge Since the Civil War.
It was the rise of Athens and the fear that this instilled in Sparta that made war inevitable.
- Thucydides, History of the Peloponnesian War
Thucydides is quite possibly the world’s first war correspondent.
The Athenian military general started writing his History of the Peloponnesian War as soon as hostilities broke out. He was living it while writing about it, and interviewing people involved.
He started his tome several years before war erupted, noting that Sparta, an established land power, had lost its mind over the rise of Athens, an up-and-coming sea power. Clearly, the two could not coexist on the same piece of Earth.
And, so, war.
More important to today’s dispatch is that Thucydides, 2,500 years later, has unknowingly lent his name to “the Thucydides Trap,” a term coined by an American poli-sci dude named Graham Allison.
The nut of the trap, as Graham wrote in a 2012 Financial Times piece, is this: When a rising power (Athens) scares the bejeezus out of a ruling power (Sparta), war becomes extremely likely. Graham described 16 occasions in history where this power struggle emerged, 12 of which ended in war.
Granted, there are other poli-sci types who scoff at Graham’s analysis…
But it does make a lot of sense.
So, for today’s dispatch we’re latching our story to Graham’s narrative…
I’ve been saying for several years now that America is smack-dab in the middle of not one, but two Thucydides Traps. Both are playing out side-by-side, and they have the potential to converge this decade, much like the 1991 Perfect Storm, when a low-pressure system off eastern Canada absorbed a dying hurricane to restrengthen into a small monster that battered the US Northeast.
This is what we have brewing…
Storm #1: The Red/Blue Sundering
This is not news to anyone, but Red State residents hate their Blue State counterparts. And vice versa. One side cherishes things that the other side appalls—whether culturally, philosophically, or religiously.
For the first time since before the Civil War, there’s legit talk about carving the country up in a Kramer vs. Kramer-style divorce—meaning, ugly—as this Thucydides Trap plays out.
Will that mean a soft revolution where states split peacefully?
Will it be something less soft?
I can’t say.
But I am more than halfway to 100% sure—maybe 65% sure—that America’s geographic boundaries as they exist today will not exist by the end of the decade.
I get that that sounds loony tunes to lots of people. But all you need do is look at the changing national borders all over Europe in the last few decades to understand that countries do split apart… and why it happens (usually two sides despise each other on cultural, philosophical, or religious grounds).
When politicians and even state leaders are calling for separation, that messaging begins to stick.
People start to think: “Well, hell— why not? I hate those people and how they think. Might as well get them out of my country…”
If/when that occurs, the impact on the US dollar and the American economy is going to be cataclysmically bad.
Storm #2: China/Russia and a BRICS Currency
As with America cleaving apart, lots of people eye-roll at this one, too…
“A BRICS currency? Really? You think China and Russia can beat America at the currency game?” they exclaim, mockingly.
Yes. I do believe that.
But that’s neither here nor there.
Because it’s not me who has to believe it. It’s other countries all over the world.
If they believe it—and they already do—then they will be moving national reserves out of dollars and into a hard-asset-backed BRICS currency.
Moreover, as I’ve written before, many countries (representing a decent-sized slug of the global economy) are already abandoning the dollar to trade with other nations in local currencies.
Thus, our Thucydides Trap: An upstart currency already gaining appeal—even though it doesn’t yet exist—threatens the dollar’s hegemony.
Does the military/financial industrial complex in D.C. just shrug and say, “Well, we had a helluva runs, boys. Time to pack it in and go home…”
Nope. Not a chance that happens. A real war could very well be the result. Or, China could unleash a financial nuke—dumping all American assets—to destroy the US economy in one fell withdrawal.
And as I regularly point out, that shrinks demand for greenbacks. And shrinking demand for greenbacks is a big problem, because of America’s debt insanity.
The US is nearly $35 trillion in the hole, and the hole continues to get deeper…
Uncle Sam is now adding $1 trillion in new debt every 100 days, or $3.65 trillion every year. That will only grow larger, not smaller.
What is $3.65 trillion?
It’s about 45% of Biden’s projected budget for 2025.
Imagine adding 45% more debt to your family budget every year. How soon before your house of debt collapses into a heap of dashed dreams?
Yes, government budgets are not the same as family budgets. Government can create new money whenever it wants, and increase taxes. Of course, both just lead to knock-on effects that undermine both of those efforts.
Debt at the level America now has is what I call “Glenn Close Debt”—i.e., family-rabbit-boiling-on-the-kitchen-stove debt.
Though many commentators will ridicule my analysis, they do so from the ignorant perspective of the status quo never changing.
History says the status quo is just a moment in time, as changeable as any other…
These two Thucydides Traps are the biggest challenges America has faced since the Civil War.
Two world wars, the Great Depression—they did not call into question the very notion of the United States’ existence or its economic heft.
These two traps do.
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