Recently I finished reading an excellent book by James Rickards entitled Currency Wars. Let me quote from the concluding chapter:

“The dollar, for all its faults and weaknesses, is the pivot of the entire global system of currencies, stocks, bonds, derivatives and investments of all kinds. While all currencies by definition represent some store of value, the dollar is different. It is a store of economic value in a nation whose moral values are historically exceptional and therefore light to the world. The debasement of the dollar cannot proceed without the debasement of those values and that exceptionalism.”

I doubt that it could have been said better.

Given that this is the final commentary for 2011, and that we have published in the previous commentary our initial thoughts for 2012, allow me to use again some allegorical language to portray a bigger than 2012 picture. But first, some definitions:

Modernity: The era characterized by the movement to democratic institutions, capitalism, reason, and the secular ethos of relationships. The timeline for modernity could be said to last from the 16th to mid 20th century. During that era, the Enlightenment, the Renaissance, the Industrial Revolution, and major empires were formed and dissolved. During that era gold was money.

Postmodernity: The era where there is no absolute and universal truth since the latter is constructed and not discovered. “Your truth is as good as mine,” constant change is the status quo, or to quote Ludwig Wittgenstein “reading the Socratic dialogues one has the feeling: what a frightful waste of time”. During that era fiat money prevails.

Metamodernity: An era that is to come where society re-discovers its purpose and identity, where morality is not separated from the economic ethos, and where people are educated and not trained in illiberal thinking. Currencies in this era are tied to a basket of hard assets with gold playing a major role.

Classical Capitalism: Competitive market forces determine the economic outcomes, classical liberal arts education enables tomorrow’s leaders to think in an interdisciplinary way. A level-plain field exists where power is restrained and liberty reigns.

Postcapitalism: Mega corporations determine economic outcomes, social (not income) inequality distorts the spirit of capitalism, incompetency and non-transparency prevail, government by the megacorporations for the megacorporations, debts for the sake of megacorporations, an era when social mobility is restrained, and when financial relationships determine the social ethos.

Metacapitalism: Capitalism re-discovers its identity and purpose. Sound money prevails, Homer is resurrected in the schools and liberal classical education equips thinkers and not bricks.

Persephone: In Greek mythology she was the daughter of Demeter. Her brother was Ploutos (a.k.a. wealth). Persephone personified spring and the fruits of vegetation. Persephone was held by Hades in the underworld and the world suffered fruitless years and destruction. The release of Persephone exemplifies production and prosperity.

Metalanguage: A language used to ascertain concepts embodied in another form/language.

Albert Altdorfer’s Battle of Issus: An amazing painting dated in 1529 portraying the historic battle between Alexander the Great and the Persian forces of Darius III. At the time of the painting war between the European forces and the Ottoman Empire was at the center of geopolitics of that era.

Altdorfer is known for his majestic landscapes. In this particular painting the artist uses anachronisms in an abundant way and in our mode of trying to remember the future we will employ Altdorfer’s metalanguage in order to decipher and understand the markets’ messages and direction.

The painting has an apocalyptic subliminal message. Alexander’s victory is one against the odds. His army has about 32,000 soldiers against Darius’ strong 300,000 men. Alexander’s cavalry counts 4,000 horsemen, while Darius’ 100,000. Alexander’s magnificent strategy not only forced Darius into retreat but opened the gates for the establishment of the greatest empire of the ancient world. The victory at Issus metaphorically released Persephone and planted the seeds of Hellenism that united cultures with trade and a common language to be used a few hundred years later by the Christian writers in order to spread the Christian message, and hence Altdorfer’s anachronistic use of a church in the background.

The times of the painting are characterized by insecurity, uncertainty, and fear. The apocalyptic landscape signifies that after that battle history will not be the same, and it was not. The sky’s panorama opens a new era in human history. The tablet at the top of the painting proclaims victory for that new era, and it is descending from the vaults of heaven. Altdorfer paints Darius’ soldiers in contemporary clothes to signify that at the age of the painting, an historic victory will unleash a new era.

The other paintings commissioned by Wilhelm IV also signified the turn of history, a rediscovery of antiquity’s values, and a new sense of the self as part of historical change. During the new era the people will obtain a unique identity, and thus unlike the Middle Ages, the unfolding of the Renaissance will celebrate individuality. An epoch with plentiful fruits of discovery is being unleashed by Persephone’s seeds. This epoch is bringing Columbus to America and allows Magellan to sail around the world. Altdorfer’s panorama is the Eastern Mediterranean which is featured also in today’s news.

In the painting Cyprus is shown as a disproportionately large island, with the Red Sea above it and to the left. As we contemplate to remember the future, we envision US, Israeli and Cypriot interests exploring the eastern Mediterranean waters nearby Cyprus, discovering large amounts of natural gas and feeding the whole of Europe with pipelines that will go south of Crete. Dormant assets seem to be awaken, real capital is being created, jobs and incomes thrive, monetary base is capable again to create money supply and credit for businesses through a competitive banking system that is no longer dominated by few powerful institutions that only care for themselves, and the dollar has found its place as not exactly a fiat currency but rather one that is based on hard assets.

In the contemporary – to the time of the painting – city a new era dawns (the sky occupies roughly one third of the painting). It could be either the epoch where Persephone is permanently released from Hades, the era when metamodernity meets metacapitalism, or a true apocalyptic age of catastrophic chaos where what we believe is there will soon cease to exist.

Ode to Issus!