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Jim Rickards - The Myth of August
Jim Rickards continues to shine as one of the truly brilliant and original thinkers in today’s financial world. We were chatting not too long ago about some of the historic events in the month of August and Jim decided to write about the subject.
The following is Jim’s piece exclusively for the King World News blog that discusses the turbulent history of the month of August which lies directly in front of us and it is a must read:
July 26, 2010
July 26 (King World News) - It comes as no surprise that European bank regulators completed their bank stress tests in late July. After all, what self-respecting European bureaucrat wants to spend the month of August thinking about the word stress. August, of course, is the European vacation time par excellence and the continent practically grinds to a standstill except for those jobs directly involved in the transportation, lodging and feeding of vacationers. Over time, this sense of August as a “time out” has become firmly entrenched in the United States and, as a result of globalization, is now truly a worldwide phenomenon. Whether it’s central bankers in Jackson Hole, Russian apparatchiks in the Crimea or Chinese mandarins in Dalian, the whole world seems ready for a break. And if the power elites are letting their hair down and applying the SPF 50, then it seems safe for us mere mortals to do likewise, secure in the knowledge that no geopolitical or economic catastrophes will occur if the leaders who cause them are on the beach.
It’s a nice thought, but it’s half false. The part about the world being on vacation is true but the part about immunity from disaster is definitely not the case. In fact, a non-scientific survey of many of the greatest man-made and other catastrophes of the past twenty years shows a disproportionate number of them occurring while the world is trying to enjoy a well-earned rest. Historically, two of the most significant events in world history, the beginning of World War I and the dropping of the atomic bombs on Hiroshima and Nagasaki causing the end of World War II occurred in August. Those two events; the beginning of one world war and the end of another, are bookends for what some historians view as a single 30-year stretch of war, depression, holocaust and mass bombings of civilians at the heart of the bloody 20th century. More recent decades seem to bring a momentous event almost every August. Herewith, a partial chronology:
August 2, 1990 – Saddam Hussein invades Kuwait
August 7, 1990 – U.S. launches Desert Shield; first U.S. troops in Saudi Arabia
August 19, 1991 – Attempted coup d’état in the Soviet Union
August 19, 1991 – Top Officers of Salomon Bros. resign due to bond scandal
August 11, 1996 – Western states and Mexican power blackout
August 7, 1998 – Al Qaeda bombings of U.S. embassies in Tanzania and Kenya
August 17, 1998 – Russia defaults on bonds and currency starting global panic
August 17, 1998 – President Clinton admits to relationship with Monica Lewinsky
August 14, 2003 – Great Northeastern U.S. power blackout
August 29, 2005 – Hurricane Katrina slams into Louisiana
July 12 – August 14, 2006 – Israel-Hezbollah War
August 3, 2007 – Jim Cramer’s rant marks unofficial start of New Depression
August 7, 2008 – Russian full-scale invasion of Georgia
Hopefully the reader will agree that these events are not just headlines but are more in the nature of world-historical events that mark major turning points in our political, economic or military history. August does not produce a shock every year, although some years are busier than others; 1998 is in a class of its own. Lately the tempo has picked up a little with major events happening every year from 2005 to 2008. We seemed to catch a break in August 2009 although that month did mark a kind of peak in the H1N1 flu pandemic, which had been spreading since March.
Maybe August is trying to tell us something. After all, it is named after Gaius Julius Caesar Augustus, the founder of the Roman Empire whose name in English means “the revered one”. Maybe August feels slighted, ignored and taken for granted and wants us to sit up and take notice. If so, she’s doing a great job because the events listed above were impossible to ignore.
So, as you’re heading out on vacation next week, whether to the beach, the mountains, a cabin in the woods or just on the road, here’s hoping we have an uneventful month that allows us time with our families and for ourselves for reading, recreation, relaxation, meditation and just plain fun. My own plan is to leave my computer and iPhone turned off as much as possible. But I’ll keep them handy – just in case.
James G. Rickards is a writer, economist, lawyer and investment advisor living in Darien, CT. His specialty is the intersection of global capital markets and geopolitics. Follow Jim Rickards on Twitter at twitter.com/JamesGRickards
