“I’m not joking!” David Murrin says, staring across a table at the Waldorf-Astoria Hotel as he explains why the U.S. is doomed to economic and military decline. “That is not my attitude at all.”
It’s easy to get confused with Murrin, a geophysicist-turned global macro trader who seems to delight in thinking up ways to profit from the decline of the West. Murrin’s U.K. fund, Emergent Asset Management, has bought tens of thousands of acres of African farmland and made aggressive currency bets against the U.S. dollar, in the belief that the industrialized nations will lose the coming war with China for economic and military supremacy.
Murrin has positioned himself to make money on the decline, but he wants everybody to know he doesn’t like it. He speaks quickly, his ideas flowing out in bursts like the commands of the currency trader he once was. He’s even written a book, “Breaking the Code of History,” which explains how the U.S.-led Western empire is following a well-trod path of imperial overreach and decline.
Murrin’s grand theory revolves around the global fight over commodities. Murrin’s a believer in the Kondratieff wave, a roughly 25-year cycle in which populations that are growing both in number and in wealth make increasingly aggressive demands on a limited pool of commodities. That drives up the price and ultimately can lead to devastating wars.
Supercycle believers see patterns in world history that others might ignore. World War I? Germany’s fatal miscalculation that it could dominate England in the quest for resources to feed its growing, young population. The revolutions sweeping the Middle East? An assertive new generation trying to seize control of commodities – particularly oil – that are vital to the rest of the world.
In countries like Iran and Egypt, Murrin says, “you’re bulging at the seams and you need more resources.”
Behind it all is China, which is destined to become the world’s most powerful nation if it continues its current trajectory. There’s no sense in fighting this, Murrin says. “It’s relentless,” he says. The Chinese Navy may have one aircraft carrier to the U.S.’s 20, he says, but that balance will eventually flip. The same thing happened to the U.K. after it developed the Dreadnought, a speedy steel battleship that made the Royal Navy’s existing fleet obsolete. An economically superior Germany copied the design and matched the rebuilding U.K. navy ship for ship.
The falling dollar makes things worse, Murrin adds. When the U.S. economy was growing at a 1% real, or after-inflation rate and China was growing at 6%, both economies were reasonably healthy. Now China’s growing at 9% nominal, 4% real, and exporting its 5% inflation rate back to the U.S. to make for real growth of -1%. That’s stagflation, even if the U.S. refuses to admit it.
“As things start to go bad, you begin to fracture and argue,” Murrin says, perhaps describing the pitched civil war in the U.S. between taxpayers and public-sector unions. China, meanwhile, has a centralized government that may ultimately prove less resilient than a democracy, but is just the ticket during an empire’s commodity-grabbing ascent. Think: Bismarck, Caesar.
The seemingly benign revolutions in the Middle East mark the beginning of the end of the U.S. empire, Murrin says. As a British subject, perhaps he’s a little too captivated by the parallels between the collapse of the Mubarek regime in Egypt and Britain’s failed attempt to maintain control of the Suez Canal some 60 years before. Mubarek’s defeat was “an utter catastrophe for the U.S.,” Murrin asserts, eliminating a vital ally and insuring Israel’s encirclement and defeat by the Arab nations.
Murrin sees a way out of this trap, but it isn’t palatable or even realistic for most Americans to consider. First, the U.S. must make peace with the fact that China will ultimately overpower it militarily. So this currency trader-turned global macro manager’s advice is to cooperate with the Chinese and invite them into the “global structures of power.”
Cede power to China? “You need to, or they’ll take it,” Murrin says.
Next: Default on the U.S. debt. As a country in the late stages of empire, the U.S. piled up more external debt than it can possibly repay. The costs imposed on its own citizens would stifle economic activity and hasten the military decline. “America has to choose to default, so it can do it on its own terms,” Murrin says.
That leads back to the trading strategy: Short the dollar. The greenback is already down 20% since Murrin predicted a 50% decline in the pages of Forbes two years ago and he says it’s headed lower, flight-to-safety upturns be damned. “It’s going to be oversold all the way down,” he says, chuckling.
A parallel bet is to go long the Euro. “It’s a piece of crap, as a concept, but it’s the only way to absorb the outflows from the dollar so it will go up.”
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