For instance, this week, headlines have focused on the recently announced two-week ceasefire of the U.S.-Israel-Iran war. But I believe the conflict in Iran is just one part of a larger potential world war, with countries like China, Russia, and Iran on one side and the United States and countries with U.S. military bases on the other.
Certainly, what will happen with the Strait of Hormuz (most significantly, whether control of passage through it will be taken away from Iran, and which countries are willing to spend how much blood and treasure to make that happen) will have many enormous repercussions all around the world. There are also the issues of whether Iran will still have a capacity to inflict harm on its neighbors through missiles and nuclear weapons, of how many troops the U.S. will send to the region, of the cost of gasoline, and of the upcoming U.S. midterm elections. All these near-term issues are important, but they lead people to miss the really big, even more important things. More specifically, because most people tend to have this short-term perspective, they now expect, and the markets are pricing in, that this war won’t last long, and when it ends, that we will get back to “normal.” Virtually nobody is talking about the fact that we are in the early stages of a world war that isn’t going to end any time soon.
It may sound like hyperbole to say we are in a world war, but it is indisputable that we are now in an interconnected world that has a number of shooting wars going on (e.g., the Ukraine-Russia- Europe- U.S. war; the Israel-Gaza-Lebanon-Syria war; the Yemen-Sudan-Saudi Arabia-UAE war that also involves Kuwait, Egypt, Jordan, and other related countries; and the U.S-Israel-GCC-Iran war). Most of these wars involve major nuclear powers, and there are also significant non-shooting wars (i.e., trade, economic, capital, technology, and geopolitical influence wars) that most countries are in. Together, these conflicts make up a very classic world war that is analogous to past “world wars.”
Countries are taking sides
Understanding how the sides are lining up and what their relationships are is very important.
These alliances matter a lot in imagining how things will go for the relevant players, so they need to be considered when observing what’s going on and what’s likely to happen. For example, we see that reflected in China’s and Russia’s votes at the U.N. on Iran needing to open the Strait of Hormuz. Similarly, while it’s said that China is particularly harmed by the closing of the Strait of Hormuz, that is wrong because China’s mutually supportive relationship with Iran will probably allow oil going to China to get through. Plus, China’s relationship with Russia will ensure China gets oil from Russia. China also has a lot of other energy (coal and solar), and it has a huge inventory of oil. Also noteworthy is that China consumes between 80% and 90% of Iran’s oil output, which adds to the power of its relationship with Iran. All things considered, it appears that China and Russia are the relative economic and geopolitical winners from this war. Though to be sure, the United States is relatively advantaged in terms of global energy economics, because it is in the enviable position of being an energy exporter.
Studying history is immensely valuable to me and helps me contextualize current events.
These changes will come in ways that have repeatedly happened before. For example, from studying history, it’s easy to identify over-extended empires, develop indicators for how overextended they are, and see how overextended empires have suffered from being overextended. In looking at what is happening now, it is natural to examine what is happening with the U.S., which now has 750–800 foreign military bases in 70–80 countries (site note: China only has 1) and has commitments that create expensive vulnerabilities all over the world. It is also obvious that overextended powers cannot successfully fight wars on two or more fronts, which would lead to doubts about the United States’s ability to fight a war on another front (e.g., in Asia and/or in Europe).
This dynamic might lead one to expect that other countries watching the dynamic with the U.S. and Iran might change their calculations and behaviors in ways that will reshape the world order. For example, it is logical that leaders of countries with U.S. military bases in them who expect the U.S. to defend them could learn lessons and change behaviors based on how things go for those Middle Eastern countries with U.S. military bases that expect the U.S. to defend them.
Here is the common pattern that has happened many times before that they are thinking about:
2. Big increases in economic wars take the form of economic sanctions and trade blockages.
4. Proxy wars increase.
6. Critical industries and supply chains are increasingly controlled by governments.
8. Powerful new technologies for war are built.
10. Within countries, loyal support for the country’s leadership is demanded, and opposition to the war and other policies is squashed.
12. There are big increases in taxes, debt issuance, money creation, FX controls, capital controls, and financial repression to finance the wars. In some cases, markets are shut down.
I have many indicators suggesting that the monetary order, some domestic political orders, and the geopolitical world order are breaking down. These indicators suggest that we are in a transition stage from the pre-fighting stage to the fighting stage, which is roughly analogous to the 1913-14 and the 1938-39 periods.
World wars don’t always have a clear start date
Historically, major wars were typically preceded by developments and indicators like military stockpiles and monies being drawn down; budgets, debts, money printing, and capital controls being built up; rival countries observing the countries fighting and learning what their strengths and weaknesses are; and the overextended leading world power facing the challenge of trying to fight wars on different fronts that are very far apart. These factors all matter, and my measures of them indicate that we should be concerned.
To reiterate, I’m not saying that things will definitely progress further to an all-out world war. I don't know what's going to happen. I still hope for a peaceful world built on win-win relationships rather than damaged by lose-lose ones.
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