The Bronze Age Collapse

Bronze Age Crete is an inspiration for our business. Especially as interpreted by Mary Renault, the East London writer who reimagined the myths of Theseus in two historical novels. The time of the setting was a time of change. Towards the end of 2nd Millennium BCE the societies around the Mediterranean Sea began to show signs of decline. Early written sources refer to ‘Sea Peoples’ invading these prosperous areas; in Crete we can see clear evidence of numerous settlements being burnt.

All of this marked the end of the first period of prolonged and concurrent economic growth that the world had ever seen; globalisation in a sense. The Egyptians, Hittites, Minoans and Mycenaeans were all trading profitably with each other before coinage or modern alphabets existed. Then something happened.

Most historians suggest that there were many factors leading to the decline. A complex international system of trade had grown up, but prosperity was fragile; it relied on cooperation and peace. War and conflict intervened.

If one were being morose, you could draw a parallel to today. We have had a generally prosperous and globalising world for 45 years with little interruption. There are many reasons to worry that the trend may not continue. From the emergence of new international rivalries and the fracturing of political consensus, to the increasingly worrying fiscal position of developed market economies, the world can appear frightening.

From an investment perspective the biggest concern is the deficits of the major western economies, particularly the US. We have a very flexible global monetary system that allows the US government (and foreign banks!) to create money in response to economic perils. This happened in a big way in 2008 and during COVID. It can be hard to know whether we need to worry about this; commentators tend to polarise along ideological and political lines.

One set of commentators will point to Nixon’s abandonment of the gold standard as the root of all 21st century monetary evils. Basing sovereign currencies on a finite physical commodity forced discipline on government spending. Abandoning it has led to a prolonged fiscal experiment that has stimulated constant economic growth through the creation of unparalleled amounts of new debt. This used to be restrained by a link to gold; we now risk ruinous government profligacy and wealth destroying inflation. This view unites some strange bedfellows – Alan Greenspan (sometimes), documentary filmmaker Adam Curtis and modern myth Satoshi Nakamoto (the creator of Bitcoin).

The alternate view is one that unites almost all modern central bankers and most academic historians of the Great Depression. This is that a system where money can be created by central banks without the restrictions of a physical asset provides necessary flexibility. Without the ability to conduct ‘quantitative easing’ in 2008 and during the Pandemic the world would have seen much deeper recessions. In fact, the parallel with the Great Depression was drawn frequently at the time; avoiding that outcome was top of mind in both crises.  

It is difficult to know what lesson to draw. A look deep into Bronze Age history tells us that long periods of decline do occur; we should not rely on an innate process of historical progress over all time periods. But recent history tells us that these periods of decline have been getting shorter.

What does all this history and economics boil down to in terms of decision about personal finance? I think the concept of resilience is a useful one. It seems best to give some thought to how to cope with changes of economic or political regime, whilst maintaining a positive outlook about the world’s ability to adapt to new challenges. Our job here at Minos Wealth is to help you think about and prepare for all the eventualities that can divert you from your financial plan. That includes weighing the cost of protecting yourself from a range of risks and to avoid complacency. In short, to give you the best shot at achieving your goals.