Lyn Alden, founder of Lyn Alden Investment Strategy, renowned for her investment strategies and global macro insights, has drawn stark parallels between the economic landscapes of the 2020s and the 1940s. Her recent X thread provides a sobering perspective on the current geopolitical tensions and economic challenges, which seem to eerily mirror past events.
Alden’s analogy started with a hopeful note some years ago, comparing the economic state of the 2020s to the 1940s and expressing optimism that the unfolding events would be “less kinetic”. However, recent developments have made her comparison feel “more kinetic”, hinting at increasing geopolitical turbulence and potential conflict.
One of the recurring themes in Alden’s tweets is the intertwined relationship between war and sovereign debt crises. She pointed out the cyclical nature of these events: sovereign debt crises can be a precursor to wars, and wars, in turn, can lead to more debt crises. Whether it’s an indebted empire lashing out or its adversaries sensing vulnerability, the end result often remains the same: conflict.
Delving deeper into her comparison, Alden emphasised that the US today, with its twin deficits, is more reminiscent of the UK in the 1940s. The US, once a rising producer, now mirrors the “incumbent decadent empire” image that the UK held during the Second World War.
Energy security further complicates the situation. Nations with either an abundance or scarcity of energy resources might find compelling reasons to engage in warfare. Alden was critical of the “degrowth” community, highlighting that a shrinking pie is likely to result in increased conflict. If resources don’t continue to grow, tensions could escalate dramatically.
Alden also touched upon the potential nature of future conflicts. While there have been speculations for decades that World War 3 might spell the end of civilisation, Alden posited an alternative scenario: instead of a single catastrophic war, the world might witness multiple smaller conflicts. This “death by a thousand cuts” approach could be the new reality, with various borders under simultaneous attack, each inviting further aggression.
Historical references further strengthened her arguments. The UK, despite emerging victorious from WW2, was financially overshadowed by the US. The 1956 Suez Crisis marked its decline, not through a military defeat, but due to financial shortcomings. Similarly, the Soviet Union’s collapse in 1991 was not the result of a military confrontation but economic and political disintegration.
Alden cautioned that as developed nations grapple with sovereign debt issues, financial repression, and threats to their global dominance, the path ahead might be tumultuous. Small wars challenging territorial boundaries could become commonplace, as opposed to a single, all-consuming conflict. Moreover, warfare in the modern era is likely to evolve, with financial, cyber, and social warfare playing significant roles alongside traditional military confrontations.
Lastly, Alden expressed concern over the diminishing unity within nations, particularly in the US. Contrasting the unified spirit of the 1940s US and UK populations with the fragmented sentiment of today, she remarked on the uncertainty of what modern nations are fighting for.
While Alden’s observations offer a bleak outlook, she ended on a note of responsibility, urging individuals to maintain a balanced perspective, seek the truth, and steer clear of extremes. As the world navigates these tumultuous times, it’s essential to remember that every individual plays a part in shaping the future.
The insights and arguments presented in this article are based on the thoughts shared by Lyn Alden on Twitter on 22nd October.
Lyn Alden recently authored a book titled “Broken Money”, which is available on Amazon.
