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Al Jacobs invites you to take a look at his most recent book, Roadway to Prosperity, which embodies the heart of his nearly half-century in the investment business.  You'll find a wealth of information there.

 

ROADWAY TO PROSPERITY

THE DECLINE AND FALL OF THE U.S.A.

PART I – HOW

Over the millennia, every society which became dominant eventually ebbed.  The preeminence of the Egyptian dynasties under the pharaohs Ramses during the 13th Century BC became but a memory two hundred years later.  The powerful Assyrian, Persian and Macedonian Empires of the 7th, 5th and 3rd Centuries BC, respectively, all disappeared as if they never existed.  The world’s most spectacular colossus, the Roman Empire, managed to hang on valiantly for several hundred years, but in the end became but a shadow of itself.  Since then we’ve seen the rise and fall of many contenders: the Mongols of Attila, Islam during the time of Mohammed, the Franks under Charlemagne, the Byzantine Empire, the Ottoman Turks, the France of Napoleon, the Third German Reich – which its creator, Adolf Hitler, boasted would last a thousand years – and last of all, the British Empire.  Each of them reigned gloriously for a time, but all encountered a specific turning point where decline irrevocably set in.

The world’s current dominant power is my homeland, the United States of America, having gained this status in 1918, during the final year of World War I, when we proved ourselves militarily superior to every other nation.  Although we retired from active involvement in the world’s affairs following that conflict, we reestablished our superiority during World War II, and at its conclusion in 1945, we stood unquestionably as the supreme presence in the world – as much so as the Roman Empire at its zenith.

Thereafter, and despite our military and economic potency, we’ve become far less influential in the world, with a trajectory marking us as clearly in decline.  Our first misstep, the Korean War of the early 1950s, an involvement dubbed a “police action,” found us conducting hostilities in a way where success became unachievable.  It ended in a draw with a militarily inferior opponent and revealed our inability to pursue a goal to a favorable conclusion.

Our next major military involvement encompassed the Southeast Asian area known as French Indochina.  Following the French debacle at Dien Bien Phu in the spring of 1954, the United States took it upon itself to combat Communist expansion throughout the region.  Through the administrations of Presidents Eisenhower, Kennedy, Johnson and Nixon, we established ourselves as the protector of the anti-Communist presence in the areas of Viet Nam, Laos and Cambodia.  During the next decade and a half we increased our military presence and participation until, by the late 1960s, over a half-million American combat troops found themselves committed.  Yet despite our clearly superior organizational and tactical performance, we acceded to an unfavorable cessation, allowing our foes to commandeer the entire area by the spring of 1975.

Our next misstep occurred in a part of the world that eventually came to haunt us.  The February 1979 overthrow of our Iranian ally, Shah Mohammad Reza Pahlavi, by militant Islamists and the subsequent seizure of the U.S. embassy staff, exacerbated by our timid response while they remained hostages for 444 days, marked the start of a new low in our national resolve.  From then onward, the avowed enemies of the United States perceived they could act with near impunity. 

Although we consistently fail to respond aggressively to direct challenges to our national interests, we dabble in various conflicts around the world, usually with no recognizable intent or goal.  Following the death of Yugoslavian President Josep Broz Tito in 1980 and that nation’s subsequent breakup, we involved ourselves in the ethnic rivalries of the successor Balkan nations.  To this day we maintain, for no discernible reason, a military presence through NATO in the Republic of Kosovo.

Over the past several decades it‘s the Muslim world from which anti-American hostility has erupted most violently.  Examples are numerous.  In October 1983, 214 American servicemen died in the bombing of the Marine barracks in Beirut, Lebanon.  Our vow to retaliate never effectively materialized.  In October 2000, the bombing in Yemen of a navy guided-missile destroyer, the U.S.S. Cole, resulted in the death of 17 sailors.  The event is still under investigation.  And in September 2011, most horrendous of all, now known as “9/11,” the destruction of the two World Trade Center high-rise office buildings in New York and a wing of the Pentagon by Al-Qaeda terrorists, resulting in 2,996 dead and $10 billion in property damage.  Although we’ve responded by spending untold billions and transforming the lives of our citizens in countless ways, our enemies are more potent than ever.

And now the finale: During the past eight years we’ve displayed our poorest performance.  The kickoff of “Arab Spring” – a term popularized by the western media – commenced December 18, 2010, as waves of revolutionary activity began to spread throughout the Middle East and North Africa.  Since then a number of longtime rulers were forced from power, most prominently Hosni Mubarak of Egypt, Muammar Gaddafi of Libya and Ali Abdullah Saleh of Yemen, with Bashar al-Assad of Syria fighting to retain his position.  Add to the mix the continuing conflict going on in Iraq since the United States ended the Saddam Hussein regime in 2003.

Who or what replaced those aging dictators?  We might have hoped for representative governments which truly serve its citizens by promoting economic fairness and social justice, but no such luck.  Power flows to the groups with the muscle, including among others, Hamas, Hezbollah, Al-Qaeda, Muslim Brotherhood, Fatah, Taliban, and most recently Islamic State of Iraq and Syria (ISIS).  All are hostile to traditional western values, proclaim fundamentalism under the pretext of imposing Sharia Law, and are actively engaged in the slaughter of Christians, Jews and fellow Muslims.  It appears the Shia-Sunni controversy over Muhammad’s successor, dating back to the Seventh Century AD, rages on.

I’ll concede that I didn’t admire the old despots: Mubarak, Gaddafi, Saleh, Hussein – you may add Bashar’s father, Hafez al-Assad, as well as Iran’s Shah, Mohammad Reza Pahlavi, to the list.  All were opportunistic secularists who merely milked their positions for fun and profit.  Nonetheless, despite their corruption, they exercised discretion in how they offended the western world, and particularly the United States.  Specifically, we didn’t witness public beheadings of our citizens.  But during this cataclysmic period, what response did our government offer?  Under some idealistic illusion, we’ve supported the concept of “Islamic Reform,” thereby assisting our sworn enemies in destroying regimes which suppressed the revolutionary fervor.  Far better had we backed the tyrants in power.  Hamlet said it well: Better to “… bear those ills we have than fly to others that we know not of.”

PART II – WHY

My nation’s ineffectual response to its foes these past many decades is not a matter of simple inattentiveness.  Through the terms of a dozen presidents we’ve developed an approach wherein inconsistency is an ingrained foreign policy characteristic.  In particular, we’re unable to pursue our objective with resolve; we falter over the long haul. 

Invariably, a nation’s ability to engage in sustained aggressive action is tied to an overriding factor: economics.  Consider a prime example of this: the creation of the United States.  The 1783 Treaty of Paris, where Great Britain granted independence to its thirteen American colonies, did not reveal an inability of the armies of George III to maintain military superiority over the local inhabitants.  Rather, it reflected Britain’s unwillingness to expend the resources necessary to chase revolutionists through the underbrush year after year.  Though there’s often more to lackluster national vigor than a shortage of funds, economics normally plays an important, if not decisive, role.

Let’s take a look at the U.S. balance sheet to see how we stack up.  Our total public debt now stands at over $20 trillion, with several trillion of it added over the past eight years.  We’re hopelessly unable to hold our spending to our income, for which our political leaders consistently blame one another.  The truth is, there’s no intent by any elected officials to correct the problem.  Spending is now on automatic pilot, with the three major nondiscretionary programs – Social Security, Medicare and Medicaid – all scheduled to operate perpetually in the red.  Electoral realities reveal this to be uncorrectable.

You may add another massive expense to our profit and loss sheet: military expenditures.  Unfortunately, the pouring out of dollars to sustain a massive military structure does not guarantee an effective military presence.  This is not a recent revelation.  On January 17, 1961, in the final presidential address by Dwight Eisenhower, he warned the nation of the increasing power of the military-industrial complex, stressing that with presence of an “… immense military establishment and a large arms industry … we must guard against the acquisition of unwarranted influence.”  Apparently his advice went unheeded.  Military expenditures now consume about $600 billion per year, support 1.4 million men and women in uniform and 700,000 civilians.  The Pentagon’s accounts are so convoluted that a reliable audit is unobtainable.  As for cost controls, consider a single expenditure: the F-35 Joint Strike Fighter program.  The cost overrun on this one weapons system is $160 billion – more than the total defense budget of Britain and France combined.  What’s your guess as to when the U.S. budget will be in balance?

The United States is on a spending binge, with many of its expenditures politically untouchable.  The Supplemental Nutrition Assistance Program, formerly known as the Food Stamp Program, administered by the Department of Agriculture, oversees the annual distribution of over $75 billion in food-purchasing assistance to roughly 48 million low-income Americans.  Another program, established for the poor (and sometimes not-so-poor), operating under the direction of the Department of Housing and Urban Development, is known simply as Section 8.  It authorizes the payment of rental housing assistance to private landlords on behalf of approximately 3.1 million low-income households.  The cost of this program started low many years ago; today it accounts for nearly $25 billion annually. 

In addition, thanks to legislation of all description designed to benefit various organizations, groups, and select individuals, untold billions flow in a never-ending cascade.  Is it any wonder our country finds itself forever in the red?  And is it even more understandable why programs which might enhance our prominence throughout the world, are never enacted?

PART III – WHEN

Quite often the commencement of a civilization’s decline can be pinpointed to a particular event.  The Macedonian empire under the rule of Alexander the Great, a brilliant tactician, expanded during his 13-year reign to encompass all the lands between Greece and the Indian province of Punjab, as well as the North African areas of Egypt and Libya.  Alexander’s vision of “a world brotherhood of all men” under Macedonian domination might well have come to pass had he lived to make it so.  On June 11, 323 BC, at the age of 33, Alexander died.  Thereafter, the Macedonian empire began to disjoint and eventually dissolve.

During the Fifteenth and Sixteenth Centuries the kingdom of Spain grew to prominence.  Through conquest and exploration it came to dominate the New World, making Spain the wealthiest and most powerful European state, boasting a naval presence without rival.  In 1588, under the rule of King Phillip II, Spain dispatched its “Invincible Armada” of 129 vessels, with 8,000 sailors and 19,000 soldiers, for an invasion of England.  Although Queen Elizabeth I gathered only 80 ships to oppose the onslaught, they performed so well the Armada crumbled.  Only 54 vessels returned to Spanish ports.  With the partial destruction of Spain’s navy, that nation began its descent into a province of little consequence.  The start of their decline can be pinpointed to July 28, 1588.

The inception of both Macedonian and Spanish disintegrations proved to be striking and easily documented.  However, the onset of a decline can be subtle, which is the case for the United States.  What might cause the world’s foremost superpower to permit its relatively impotent antagonists to dominate and humiliate it?  It’s evidently some basic flaw in the public’s psyche.  I truly believe a substantial portion of Americans are ashamed of our success and feel we’re unworthy of our position of leadership.  In response, there’s an apologetic strain in a segment of our leadership.  When they’re in charge, they do what they can to subvert us in every way.

And what event triggered the malfunction?  I trace it to August 10, 1949, when we formally declared to the world our intention to embrace passivity as a national policy.  On that date, President Harry Truman signed the National Security Act Amendment of 1949, by which the National Military Establishment officially became the “Department of Defense.”  The Secretary of War, a one-time cabinet member who headed the army, as well as the Secretary of the Navy, were removed from the cabinet.  The official jointly replacing them assumed the title “Secretary of Defense.”  Although these changes may appear merely organizational and semantic, I believe they reflected an intent by their creators to alter our nation’s direction.  Despite the various military fracases in which we’ve involved ourselves over these past sixty-seven years, the fact we’ve never formally declared a state of war under any circumstance is significant.  And in every instance we avoided the sort of aggressive action that might have lead to a favorable conclusion.  Instead, we merely dabbled along to reach understandings and compromises, none of them rational or enforceable.   Is it any wonder our allies distrust us while our enemies hold us in contempt?

PART IV – FINIS

I can offer no advice on how the problems I described might be remedied.  Neither would I have offered suggestions in 1789 to Louis XVI of France, shortly before he was deposed as regent and later guillotined.  The ascendency and decay of regimes are as certain as are the rise and fall of the tides.  As a rule of thumb, the likely span of a nation’s continuity is roughly two hundred years.  The United States is now approaching its two-hundred-fifty-year mark, and exhibiting a decadence normal in old age.

What are the signs of our decrepitude as a society?  Communication in a single language, English, is becoming less common.  The bedrock of the family, marriage between a man and woman, is systematically denigrated.  Our judicial system is unable to process a growing number of felons, while the penal system fails to build enough prisons to house them.  Forty-three percent of all U.S. children live without a father, and the percentage is growing.  Our government proclaims unemployment to be under 5% when, in reality, it’s closer to 20%.  The regular use of mind-altering drugs by all segments of the populace is increasingly condoned.  Taxation of the citizen in ever more pernicious ways is established governmental policy at all levels

What the United States of America is devolving into is uncertain, but devolving it most certainly is.  It’s truly a pity the society where freedom and opportunity most effectively functioned is now in free fall.  Unless it can recover from its current downward spiral, it appears my country is destined to become the globe’s most prominent third world nation.

 

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