I’d like to get at today’s quintessentially American holiday by first quoting a half-American prime minister of Great Britain on another perilous “4th”. The date was June 4, 1940, and followed the nearly miraculous evacuation of 338,000 troops from Dunkirk. This rescue averted an even worse disaster than that which was occurring, and Winston Churchill gave an update to Parliament and the nation which ended thusly:
Even though large tracts of Europe and many old and famous States have fallen or may fall into the grip of the Gestapo and all the odious apparatus of Nazi rule, we shall not flag or fail. We shall go on to the end, we shall fight in France, we shall fight on the seas and oceans, we shall fight with growing confidence and growing strength in the air, we shall defend our Island, whatever the cost may be, we shall fight on the beaches, we shall fight on the landing grounds, we shall fight in the fields and in the streets, we shall fight in the hills; we shall never surrender, and even if, which I do not for a moment believe, this Island or a large part of it were subjugated and starving, then our Empire beyond the seas, armed and guarded by the British Fleet, would carry on the struggle, until, in God’s good time, the New World, with all its power and might, steps forth to the rescue and the liberation of the old.
I feel certain that none of this language was poll-tested.
Now, we all know what happened on December 7 of the next year and then what happened in 1945. The past and present members of the British Empire allied with the (futurely-named) “Evil Empire” (‘EE’) and won the to-date most important global conflict in history.
That conflict set up the less violent one between the NATO/ANZUS/SEATO forces against those of the “EE”. This was won when the Soviet Union “de-unionized”, capitalism gained Eastern Europe’s affections, NATO expanded eastward, China moved further towards a “get rich is glorious” policy, and then the hub of the EE (Russia) went bankrupt in 1998.
In a mere century, the United States expanded from a regional power to first defeat the Spanish Empire, then assert dominance over Western Europe with the victories in the world wars, and then achieve a degree of global dominance in the 1990s that had never happened in the history of mankind. That this almost unbelievable, unpredictable ascendancy culminated not only as a century was ending but as a millenium was ending makes it no surprise that financial markets became irrationally exuberant. The United States deserved a celebration, and boy did it get one. Eventually, time and inflation will put that overvaluation in the distant past, though the after-effects of that party remain in some parts of the investment scene even now.
When Mrs. DoctoRx and I were dating, she being a CPA and I being an overworked young doctor, we used to spend “exciting” Friday nights watching Wall Street Week (followed by the more dynamic “Dallas”). One of the tropes on WSW was that the guest wanted that you should buy “an IBM” or “a GE”. Huh? That was typical mealy-mouthed doublespeak. There was only one IBM, only one GE.
Similarly, there is only one country that actually fought and won those global conflicts. There is still only one country that leads the world economically, financially, militarily, technologically, and culturally.
One may from time to time invest in “weak dollar” investments. When I have done so, it is because the administration and the Fed had signaled that they favored a weaker dollar for tactical reasons (this may be the case today with export growth now faltering). But in general, my investment mantra is: in the long run, it doesn’t pay to bet against the U.S. of A. Past performance usually does predict future performance, no matter what lawyers make investment funds say. Recessions and expansions come and go. Administrations and Fed-heads come and go. Paradigms shift.
But the many advantages of the New World of which Churchill spoke so hopefully in 1940 persist. America may have used up a lot of capital winning the above conflicts and may have consumed more in the ensuing decades. But the world remembers the evils of the Nazi, Japanese imperial, and Soviet empires. This reservoir of goodwill toward America as liberator is immense (though diminishing with time, and understanding that not everyone on Earth has that perspective) and still counts for a great deal. I think it continues to count for more (perhaps much more) than some of the doomsayers think.
The United States is rebuilding its capital base. Production and demand are coming back to equilibrium, though important structural imbalances remain (think student loans). We may hope that at some point soon, the national consensus of the 1990s that the government’s books should be balanced other than by borrowing or “QE” will again become a majority view. Right now, though, that’s not the consensus, but the “markets” have enough faith in the U.S. to cut the government an awful lot of slack in financing the deficits, again reflecting the fact that there is not “an America”.
There is only one United States, and it remains the cynosure of a great many of the world’s eyes.
Happy birthday, and many more.
