America Questions Role As World’s Super-Cop

On Monday, President Trump asked, “Why are we protecting the shipping lanes for other countries (many years) for zero compensation?”

America Polices the Middle East

Few American voters give much thought to the U.S. Navy’s role in ensuring safe passage for seaborne trade around the world. This interactive map, although seven years old, provides a fascinating picture of the volume and location of merchant ships. Choke points such as the Straits of Hormuz look like commuters at the Times Square subway station.

The U.S. has protected shipping lanes for decades, picking up from the British Navy’s historical role. The world benefits from free trade, but America bears more of the cost of security than any other country, and perhaps most of it. American taxpayers who considered the issue would likely seek some burden-sharing. Trump’s supporters and critics alike can agree that when he asks simple questions like this, he understands the prevailing mood of the electorate.

It reminded me of Paul Kennedy’s 1987 book, The Rise and Fall of the Great Powers; Economic Change and Military Conflict from 1500 to 2000. Kennedy chronicled the challenges faced by the Spanish, French and British empires as they successively succumbed to “imperial overstretch.” This is the inability of any great nation to support sufficient military power to retain control of its conquered territory. Kennedy’s central premise that Japan was about to surpass the U.S. was spectacularly wrong, but his concept of imperial lifecycles is provocative.

The U.S. does not occupy foreign countries. There is no American empire analogous to the historical versions. But the U.S. leads an empire of culture, values and economic liberalism. Soft power, along with hard.

Military power flows from GDP, and in 1945 America’s share of the global economy was at its peak. Today, China and India enjoy faster economic growth which inexorably diminishes America’s share of world GDP. In time, relative military strength must reflect this, and the U.S. will once again contend with a multi-power world. Today, the U.S. defense budget is more than 2X China and as much as the next seven countries combined. Military dominance is not in doubt.

But Trump’s comments reflect an isolationism that questions the need to be the world’s police force. It’s a rational adaptation to a world in which many U.S. allies have prospered under security provided and funded by the U.S. Enough already.

The seductive simplicity of problem-solving by tweet glosses over complexity. Trump’s comments were likely prompted as he cancelled a planned military strike on Iran and wondered why the U.S. was in the Persian Gulf in the first place. The two stricken tankers were from Japan and Norway. The lost U.S. drone was patrolling the area. Is it really our job? Chinese warships aren’t about to start patrols there, but Trump’s sentiments were valid.

Here’s where the Shale Revolution provides geopolitical flexibility. The U.S. is on the verge of becoming a net exporter of crude and petroleum products.  For decades, we’ve maintained a significant military presence in the Middle East and fought two wars there in part to assure the world’s continued access to crude oil. Without this resource, the region would be governed like Somalia and we wouldn’t care.

U.S. energy independence affords geopolitical flexibility. This includes the freedom to be more selective about our military commitments. It reduces our vulnerability to supply disruptions. It lowers our exposure to Paul Kennedy’s imperial overstretch. America’s energy renaissance has many benefits. Add to that list increasing burden sharing among other countries in providing global security.

SL Advisors is the sub-advisor to the Catalyst MLP & Infrastructure Fund.  To learn more about the Fund,  please click here.

SL Advisors is also the advisor to an ETF (USAIETF.com).

Print Friendly, PDF & Email

Important Disclosures

The information provided is for informational purposes only and investors should determine for themselves whether a particular service, security or product is suitable for their investment needs. The information contained herein is not complete, may not be current, is subject to change, and is subject to, and qualified in its entirety by, the more complete disclosures, risk factors and other terms that are contained in the disclosure, prospectus, and offering. Certain information herein has been obtained from third party sources and, although believed to be reliable, has not been independently verified and its accuracy or completeness cannot be guaranteed. No representation is made with respect to the accuracy,  completeness or timeliness of this information. Nothing provided on this site constitutes tax advice. Individuals should seek the advice of their own tax advisor for specific information regarding tax consequences of investments.  Investments in securities entail risk and are not suitable for all investors. This site is not a recommendation nor an offer to sell (or solicitation of an offer to buy) securities in the United States or in any other jurisdiction.

References to indexes and benchmarks are hypothetical illustrations of aggregate returns and do not reflect the performance of any actual investment. Investors cannot invest in an index and do not reflect the deduction of the advisor’s fees or other trading expenses. There can be no assurance that current investments will be profitable. Actual realized returns will depend on, among other factors, the value of assets and market conditions at the time of disposition, any related transaction costs, and the timing of the purchase. Indexes and benchmarks may not directly correlate or only partially relate to portfolios managed by SL Advisors as they have different underlying investments and may use different strategies or have different objectives than portfolios managed by SL Advisors (e.g. The Alerian index is a group MLP securities in the oil and gas industries. Portfolios may not include the same investments that are included in the Alerian Index. The S & P Index does not directly relate to investment strategies managed by SL Advisers.)

This site may contain forward-looking statements relating to the objectives, opportunities, and the future performance of the U.S. market generally. Forward-looking statements may be identified by the use of such words as; “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “potential” and other similar terms. Examples of forward-looking statements include, but are not limited to, estimates with respect to financial condition, results of operations, and success or lack of success of any particular investment strategy. All are subject to various factors, including, but not limited to general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors affecting a portfolio’s operations that could cause actual results to differ materially from projected results. Such statements are forward-looking in nature and involves a number of known and unknown risks, uncertainties and other factors, and accordingly, actual results may differ materially from those reflected or contemplated in such forward-looking statements. Prospective investors are cautioned not to place undue reliance on any forward-looking statements or examples. None of SL Advisors LLC or any of its affiliates or principals nor any other individual or entity assumes any obligation to update any forward-looking statements as a result of new information, subsequent events or any other circumstances. All statements made herein speak only as of the date that they were made. r

Certain hyperlinks or referenced websites on the Site, if any, are for your convenience and forward you to third parties’ websites, which generally are recognized by their top level domain name. Any descriptions of, references to, or links to other products, publications or services does not constitute an endorsement, authorization, sponsorship by or affiliation with SL Advisors LLC with respect to any linked site or its sponsor, unless expressly stated by SL Advisors LLC. Any such information, products or sites have not necessarily been reviewed by SL Advisors LLC and are provided or maintained by third parties over whom SL Advisors LLC exercise no control. SL Advisors LLC expressly disclaim any responsibility for the content, the accuracy of the information, and/or quality of products or services provided by or advertised on these third-party sites.

All investment strategies have the potential for profit or loss. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be suitable or profitable for a client’s investment portfolio.

Past performance of the American Energy Independence Index is not indicative of future returns.

Print Friendly, PDF & Email
1 reply
  1. Robert Perrin
    Robert Perrin says:

    You oversimplify to an extreme.
    1. The 21st century will be the Chinese century. Nothing we can do about it. Their investments abroad are astounding. I traveled through Africa in 1972 and came upon the Chinese building a major railroad in Zambia, Congo and Tanzania . Where has the USA been? And that was 50 years ago.
    2. Trump’s only foreign policy is to hit our allies over thew head with tariffs. Why talk when you can use the economic power build over 200 years, which he had nothing to do with, like an atomic weapon. We need to sit down and negotiate, stop the name calling and bullying tactics.
    3. It is in our best interest to keep those shipping lane open. Guess you forgot about Israel and Indian and Japan and S Korea.
    4. You can write what you want from your excellent blog on oil but when you veer into world politics especially with the lunatic leader we have, you sure as shooting will lose your credibility.

    Reply

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.