United States Of Rome

Geopolitics: The rise of the American superpower and the rise of ancient Rome are an example of history repeating itself and comparing the two can help us become better investors.
Stretching back to the dawn of Western civilization the center of military power was the old world of North Africa and the Mideast. In 264 BC Rome defeated the strongest old world power (Carthage) and the world’s military center began shifting to the new world of Europe. Over the next 91 years Rome fought two more wars against Carthage. Once the third and final war was over Europe had become the world’s military center and Rome the world’s sole superpower. For the next 2135 years the world’s military power was concentrated in Europe. It became the old world. Of the 3 big wars that Rome fought against Carthage the biggest by far was the second, where Hannibal’s columns of armored war elephants came pouring into Europe. To this day Hannibal remains a mythic figure of terror and dread.

In 1918 America was instrumental in defeating the strongest old war power (Germany) and the world’s military center began shifting from the old world (Europe) to the new world (North America). Over the next 71 years America fought two more wars against the strongest old world powers (Germany and then Russia) and once the third and final war (the Cold War) was over the world’s military power became concentrated in the new world. And once again the world had a single superpower. The second of the 3 European wars was by far the biggest, where Hitler’s mechanized armored columns nearly conquered the world. Hitler remains a mythic figure of terror and dread.

Around the time that Carthage fell Rome began to conquer, one by one, almost every country in the known world. Rome built roads in the provinces that it conquered. These roads linked the markets of individual towns together and formed larger markets. The outer provinces were literally emerging markets. A socialist rot infected the core of the empire as Roman citizens demanded government supplied bread and circuses. But the dynamic emerging markets countered the rot in the core and the imperial economy flourished. At about the time of Christ, Rome stopped conquering other countries and there was world peace for two centuries. During this period of peace the countries not conquered by Rome became stronger and stronger while the socialist rot in the heart of the empire got worse and worse. Rome engaged in what we call Quantitative Easing (printing money out of thin air) by debasing its currency. When the barbarians began pouring into Rome its financial system was so screwed up it couldn’t afford to raise big enough armies and the empire collapsed in 476 AD after centuries of bloody conflict.

America is today where Rome was in 190 BC, when it conquered Syria and began its domination of the Western world’s small powers. It is no small coincidence that America’s recent conquest of Iraq is right next to Syria. What roads were to Rome, stock markets and free trade accords are to America. So the American global empire can flourish for centuries even with a socialist rot at its core as long as it keeps fighting and winning the Long War, plus stock markets and free trade accords follow in the wake of its military victories. So far this is happening. The Pentagon dismantled Iraq’s trade barriers and turned it into a free trade zone. If we were ancient Roman investors we would want to focus on emerging markets and so it is today.