Depression History Part 2: Wars and Despots Rising

Forrest Christian Financial crisis Leave a Comment

We’ve already looked at the American stock market activity from 1928-1942, bookending the collapse and America’s entry into the war at Pearl Harbor in Dec. 1941. Today I’ll look at Europe and the rise of despots, which is currently happening again.

I am speculating on what is likely to happen. That means that I am doing no more than making a guess. These guesses will focus on what you might need to do for your career. I’m not an expert in some of the topics I am discussing. Correct me where I have facts wrong.

What else happened during that time? There were wars and rumours of wars. New powers increased their scope by further wars. Machiavellian politicians rose in several nations and consolidated power. The nations who did well were militaristic and expansionistic.

Why did wars increase even though there was less money around? Partly because the offshore balancers chose not to get involved. But also because the decline of the markets shifted the balance of power. When a nation experiences an economic collapse, it is less able to field an army. This thinking may have led the Japanese to believe that they could force a settlement on the Americans.

Machiavellian personalities rise up because they are always there, waiting for opportunity. Although they make up about 5% of the population, they seem to make up around 15% or more of power positions. It may be that having a Machiavellian personality is a prerequisite for success in political situations.

Machiavellians rose up during the 1920s and 1930s in almost every form of government. This includes within democracies. Many were elected, with the populace fully knowledgeable of their predispositions. People elect dictators. That seems weird to many of us in the west these days, but it’s true. Machiavellians remove the elements that will balance their power because they say that it is necessary to protect the good people or restore prosperity.
Machiavellian “saviors” are very effective in turning around their economies. They are just as effective in destroying them (e.g., Mao). Populaces follow them often because they want to: this person is promising to restore our prosperity. I think people recognize (consciously or unconsciously) that Machiavellians will also make the “hard decisions” that lead to prosperity. Couple this with the Machiavellian’s ability to create Massive Fear (more below). It seems insane but non-Jewish, heterosexual, non-ethnic, pro-Nazi Germans did extremely well under Hitler, until the Allies took Germany back to the stone age. The mass killings worked as a massive redistribution of wealth to pro-Nazi Germans.

Expect this to work similarly everywhere in the world during this current financial collapse. Nations that could not have thought about going to war will soon be able to. Governments supported by the U.S. or the E.U. may find their old friends much less interested in them. Nations that had been contained are likely to become more aggressive because the decline of the world’s economy will sink all ships. Don’t just think of the usual suspects. Aggressiveness will arise on every inhabited continent.

Recall that economic historians who disagree over FDR’s efficacy do agree that FDR did not pull the United States out of the Great Depression: World War II did. America pursued a strong anti-internationalist stance throughout the 1930s. But that didn’t stop Americans from cashing in on European and Asian aggresssions. American corporations made a killing on funding the Nazis and the Japanese (even after America entered the war). They also made money off of the Allied powers who bought technologies and materiel.

The European wars were largely due to the rise of Machiavellian personalities who were strongly misunderstood by the non-Machiavellian diplomats dealing with them. (Slobodan Milošević is a wonderful recent of a complete Machiavellian.) These Machiavellians accomplished incredible things for their nations: I can’t think of another government that affected such an incredible turn around as National Socialism in 1930s Germany, showing that efficiency is not the godsend everyone makes it out to be. Expect these Machiavellian types, who are overly represented in any power structure, assume the mantle of economic saviors and be gleefully voted into power by a fearful populace.

My contacts are already warning of the rise of little despots in government agencies and programs across the western world. Look for some of these to start moving. They will promise salvation and we will take it with open arms. They will cut off our rights and we will thank them for it. The laws are already in place in the US, UK and Australia, allowing a despot to do things that would ensure power.

It is here that I think that hidden high potentials have much to offer, albeit in a dangerous and costly role of pointing out the rise of evil. It is already beginning: I am getting reports from across the globe of the rise of despotic personalities consolidating power in various governmental entities. They will attempt to destroy any social mechanism that prevents their assumption of complete control over whatever area they are in. They do this through encouraging fear and saying that only evildoers would resist stronger laws. You will have to look at actions because their words will be twisted. (Read up on gaslighting for more information.)

Crises are when hidden high potentials can move and do something exciting. It’s a shame but that’s the way it is. I’ve been writing about this for about four years now, and I still think that horrible crises are when hidden high potentials are useful.

More on that later today or tomorrow.

I’ll end by saying that I’m less sanguine than my colleague, Andrew Olivier. If you subscribe to his newsletter, you’ll know that he sees this as an inflection point leading to something new and good. I agree that it’s an inflection point but I’m not sure where it will go. That’s why inflection points are so tricky: you can never see where they are going.

I do believe in you. You have the ability to respond in important ways to the challenges that could face us. It will take courage, perspicacity and endurance. But you’re the ones who can do the work.

If you’ve missed my newsletter this week and want to read where I see the thematic similarities and differences, send me a note at manasclerk at sign gmail dot com.

Let’s first look at a couple of thoughts again on the Dow Jones Industrial Average (DJI).

If the current crisis continues to show thematic similarities to the 1929-1932 collapse, DJI 3,500 is not impossible. It may be “unthinkable” but we’ve been thinking the unthinkable a lot over the past few weeks, since it keeps on happening. In the Great Depression, the DJI lost 15 years and 90% of its value. That’s either around 3,800 or 1,700, depending on which of those two you use. Recall, too, that after losing 15 years of value (starting in 1929 and bottoming in 1932), it took fifteen years from peak to get back up to 381 (late 1954). This is a different time and you can never tell what is going to happen.

We’re a year into this collapse, and we’ve already gotten to the collapse of banking (which took until 1932) and a right-wing president nationalizing an entire major industry (which to my memory has never happened in US history). So we may be moving at Internet Time, meaning the bottom of the collapse will come in six months or so, and then some incredible percentage growth in the DJI but no real recovery until the next war. I’ve already laid money on a war in Asia led by China but the collapse makes the Paki and North Korean gambits more likely.

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