Notes From the Fieldby Martin Weil

July 6, 2015

Ben Hunt Channels 1914

In 1914, Europe had arrived at a point in which every country except Germany was afraid of the present, and Germany was afraid of the future.

Sir Edward Grey

That from a Ben Hunt piece drawing parallels between today’s Greek debt crisis and the lead-up to WWI.

Since the 2008 financial crisis, I have held that the US parallel to that event was not 1929-32 but the financial panic of 1907. Subsequent events seem to at least loosely confirm this thesis. My biggest fear was, and remains, that in the inevitable game of global musical chairs (who ends up holding the bad debts), the risk was that one party or more was going to be a sore loser. And that war, not financial collapse, was the bigger concern.

Ben is not predicting a war in Europe over who should pay whom what. But his is a cautionary perspective and reminds us that we take the status quo for granted at our own peril.

In spite of all the apparent turmoil in the world and the terror events in our country and abroad, the seven decades since WWII have been among the most pacific in modern history. A great part of this is due to the establishment of international trade and the maintenance of a global order by the US. The Euro experiment was created in part as an add-on attempt to further preclude another catastrophe such as befell Europe twice in the 20th century. But the antecedent attempt to bridge European borders with a common currency (Austria Hungary in the 1880s) did nothing to prevent WWI. And I suspect when push comes to shove, neither the Euro, nor all the trade agreements in the world, can prevent a desperate country from doing what desperate countries do.

We shall see whether, hopefully, calmer heads prevail, or whether the US will be called upon (and is still willing) to play the global order enforcer should events take a more hostile turn.

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