by Gary Alexander

May 17, 2022

Why is America so successful … still? Just look back to May of 1792, especially to today’s date:

The New York Stock Exchange was unofficially born on May 17, 1792, under a buttonwood tree, outside 68 Wall Street. On this date, 21 brokers and three firms signed the Buttonwood Agreement. Investopedia says Buttonwood was a response to the Panic of 1792 by “the creme de la crème of the New York business/financial world in order to trade directly and exclusively with each other under common rules.”

The Buttonwood Agreement Painting Image

Two other events happened that month that laid the foundation for America’s domination in the 20th Century and beyond. First, on May 7, 1792, Congress passed an Act that would “provide for the National Defense by establishing a uniform militia throughout the United States.” According to that Act, every able-bodied white male citizen between the ages of 18 and 45 was required to enroll in his local militia and to supply himself with a gun and no fewer than 24 cartridges. (For some reason, that Act has now stretched out to mean that the U.S. is responsible for defending Ukraine while Europe can’t raise squat.)

A third big event was the official birth of our decimal system of coins, first devised by Thomas Jefferson. Abandoning the cumbersome British pound (12 pence per shilling, 20 shillings per pound), or the Spanish pieces of eight, America blended the decimal system with the Constitutionally mandated gold and silver backing to sculpt The Coinage Act of 1792, passed in April, which decreed coins of Gold (in $10, $5, and $2.50 units) and Silver ($1.00, $0.50, $0.25, $0.10, and $0.05). The last piece of the puzzle came in place May 7, with “An Act to Provide for a Copper Coinage,” signed into law by President George Washington on May 8, 1792. This legislation resulted in the birth of the copper cent, from which our penny evolved.

Lest we forget, America also has a West Coast. In my neck of the woods, the San Juan Islands, it was around 5 pm on May 18, 1792, on the southern tip of what the Spanish called “Isla y Archipelago San Juan” that a British ship entered Cattle Pass (between what Spaniards called San Juan and Lopez islands) and His Majesty’s Armed Tender Chatham disgorged an armed skiff to claim these islands for the Crown.

Thus began a squabble between Spain, Britain, and America to claim the islands. The U.S. finally won.

Major Events on May 18th Images

And, lest we forget, nearby Mount St. Helens blew its top off exactly 188 years later, on May 18, 1980.

Putting aside my home state, the birth of our triplets: Wall Street, the U.S. Dollar, and America’s standing Army are three huge reasons why the U.S. still dominates the world, and they were each born in May 1792. Compare those generally bottoms-up solutions to our financial and security needs after our 1789 Constitutional Convention to the French Revolution of 1789, where a Reign of Terror had already begun.

Here’s an interesting contrast between the French and American Revolutions from two years later:

On May 8, 1794, the U.S. Post Office was permanently established. On the same day in France, chemist Antoine Laurent Lavoisier was decapitated in Paris for his former role as a tax collector. Lavoisier, a key founder of modern chemistry, had demonstrated the role of oxygen in chemical processes and codified the process of respiration, which, alas, halted for him that day. That sort of mob rule didn’t spread in the U.S.

The leaders of the Reign of Terror started as good neighbors, professionals. Georges-Jacques Danton was a lawyer; Jean-Paul Marat, a physician, scientist, and journalist; and Maximilian Robespierre, a lawyer and statesman – all raised in bourgeois families. (So were Lenin and Trotsky.) But power went to their heads, and they soon began taking off the heads of others, leading to Napoleon’s wars of terror throughout Europe.

Those who say that America is a “young” or “immature” nation, compared to wise old Europeans need to adjust their timelines. America is still robust, while Europe is sclerotic, an old folk’s home. Now, 75 years after the end of World War II, Europe cannot defend itself against a tin-pot dictator like Vladimir Putin. It must rely on an overseas giant, while bragging about their superior social services and greener policies.

Man up, Europe.

Wall Street, the U.S. Dollar, and U.S. Defense Make America #1 By a Large Margin

The U.S. stock market has widely eclipsed all other global stock markets in the last decade, with the U.S. MSCI Index eclipsing the markets outside the U.S. by about 250% since 2010 in U.S. Dollar terms.

United States Market Performance Versus the World Charts

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Speaking of the dollar, the bears keep painting a dark picture of the dollar’s decline but I’d ask them, “Compared to what?” With currencies, you must ask, “What form of paper money is in better shape?”

The U.S. Dollar Index (DXY) is up over 15% in the last 12 months as Europe and Japan continue to pay near-zero (or even negative) interest rates while the U.S. pays positive rates and is now raising its rates while providing more economic growth prospects than either Japan or Europe. Longer term, there are few survivors in the paper money game, due to wars, devaluations, and regime change. In his 2021 book, “The Changing World Order: Why Nations Succeed and Fail,” the legendary founder and co-chairman of Bridgewater Associates, Ray Dalio, makes a detailed case why nations succeed or fail in the long-term.

Speaking of currencies in Chapter 4 (“The Changing Value of Money,”), Dalio writes, “By the mid-1950s, the dollar and the Swiss franc were the only currencies worth even half of their 1850s exchange rate.”  (The Swiss are Europe’s only neutral power, giving them an edge.) In fact, we are coming up to the centennial of the massive German hyper-inflation of 1923, which gave rise to Nazism. Dalio charted the real returns (per year) of 10 top nations from 1850 to 2020* as measured by continuous government bills:

Currency Winners Table

Looking more broadly at global currencies over a longer time, Dalio writes, “Of the roughly 750 currencies that have existed since 1700, only about 20% remain, and all of them have been devalued.”

And finally, our military budget is more than the next 10 nations combined, as the world continues to look to America as the policeman of last resort. As you scan this chart, wouldn’t you say it’s about time we trust #8-Germany and #9-France with enough guns to defend Europe without Uncle Sam’s hardware?

United States Military Spending Versus the World Pie Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

As Ray Dalio shows in great detail, this spending imbalance can’t go on forever. We need to make wise choices going forward, but those who sing the praises of other systems over America need some eyewash.

All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.

Please see important disclosures below.

Also In This Issue

Global Mail by Ivan Martchev
Stock Market Headed Between Scylla and Charybdis

Sector Spotlight by Jason Bodner
When Will the Selling End?

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Read Past Issues Here

About The Author

Gary Alexander

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander

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