Blain’s Morning Porridge Nov, 24^th 2025 – The end of the American Age – what will follow?

“Let me die in the uniform in which I fought my battles for freedom, may God forgive me for putting on another.”

The end of the exceptional American Century is happening faster than we think. America is dispensing with friends and allies, and American Tech leadership is no longer unquestioned. It spells rising instability and threats. Defence has never been more critical as Europe seeks to define its future.

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Sometime in the next few years markets will be forced to make a fundamental reassessment of macro-market themes based what will follow the American age. History shows Empires rotate on a 2K cycle – every 100-120 years or – often accompanied by conflict. What comes next will literally change everything – and it will require market participants to be prepared and be nimble and swift. History shows all Empires rise, mature and are replaced by the next one – it’s inevitable economic evolution.

The American age has been exceptional. We’ve seen incredible technological advances, rising health and prosperity, enabled by an explosion of global trade – but now it’s in its end-phase. The world’s population has quadrupled from 2 billion in 1925 to 8 billion today, as advances in medicine, agriculture, and resources became readily available. The last 80-years have seen a relatively more peaceful and stable world avoiding mass conflict of the scale that previously decimated populations.

No small part of the American Century of success was due to the strength and support of its friends and allies. The West embraced American culture, and spent trillions on American weaponry. We backed American IT, enabling its Tech giants to become the most valuable firms on the planet. An isolated USA – as many US politicians wanted in the 1930s – would have achieved none of America’s remarkable post-war successes.

The global economy is now in a period of hegemonic change. As the next leading nation(s) emerges – it will be a time of heightened uncertainty. It comes at a time of increased tensions and instability in the West. Long-held alliances are breaking down. Democracy appears caught on the ropes. Populists say only they can fix it, while real politicians realise democratic states come with unaffordable costs.

China is already flexing its power. One hint may come from Japan: Sanae Takaichi – the new Japanese Premier – has kicked the hornets’ nest. By threatening to intervene if China were to assault Taiwan, she’s triggered a massive counterstrike on Japanese sea-food exports. Chinese tourists have been advised against visiting Japan. It’s weakened the yen, but the threat of China boycotting Japan goods could trigger a bigger slowdown. The Chinese will want to test just how far they can push the new girl in Japan…. China accounts for 20% of Japanese exports.

The macro-economic consequences of debt mountains, potential unemployment, trade wars, political discontent and income inequality, rising inflation, threatened supply chains, and political demagoguery, are magnified by our fears of an uncertain future – we just don’t know who and what comes next.

Periods of change breed invention and innovation, but can anyone really replace America? China has become the global manufacturing powerhouse, and now challenges in terms of tech innovation. India is the largest democracy with keen entrepreneurial ambitions. But it’s not all about tanks and guns. America’s success was because it had an attractive narrative: freedom, democracy, the individual, mom, pop and apple pie. Mickey Mouse and MickyDees (McDonalds) conquered more nations than Sherman tanks ever would have. Neither China or India have captured global consumers the way America did – and that’s one reason I suspect this period of hegemonic change could be particularly drawn-out and unsettling.

What will be critical to the global economy will be how peacefully the process of hegemonic change takes place. Wars are avoided by being prepared for them – deterrence works, which I why I’m spending most of this week as Special Advisor, fund raising for Spitfire Strategic Capital. (See Tomorrow Depends on Today)

The must-read book of 2025 has been Breakneck, Dan Wang’s excellent book on “China’s Quest to Engineer the Future”. He characterises the USA and China as essentially very similar, run by people seeking to get rich and powerful. But while China is run by Engineers who’ve driven its breakneck (and often careless) rush forward by breaking rules fast, in contrast the USA is now governed by a class of lawyers who slow the nation.

Why do Empires rotate? Not because of conquest, but from internal pressures. The rising tide of “innovational friction” seems to be true of all late-stage democracies.  Process and procedure dominate activity and slow the pace of urgent decision making. While government is blamed for the stickiness of bureaucracy, corporates and global money arbitrage the opportunities such inefficiency spawns. The result is widening inequality and dissatisfaction, leading to populism and potentially worse. Such is the way empires decay. (The fall of the British Empire was slightly different – we made the mistake of teaching the locals to play cricket, and then they started beating us!)

Today the obvious challenge is between China and the USA. And one key battleground will be Europe.

In the current negotiations on Ukraine’s future, Europe has been dismissed in the American calculus. Ukraine should be Europe’s problem. The tired old continent is seen as mired in the past, weak and divided. That is incorrect – Europe is not divided. Its problem is it is not connected. 80 years of baby steps towards European unity are still trumped by national self-interest – for instance, the French are trying to keep the UK at arms-length in the race to rearm against the Russian threat.

Europe should matter. It has economic heft: it comprises 600 million relatively prosperous consumers with over $100 trillion in private wealth. (This excludes 145 million dirt-poor Russians worth just $4.5 trillion.)

There is no doubt South-East Asia will be the future economic focus of rising wealth and prosperity. Including China and India, it will continue to grow more rapidly, with a market of some 3.7 billion consumers and net worth around $100 trillion. The middle classes are spending at an increasing rate. It is the market to play for.

From the perspective of China or the USA, Europe should remain a trading partner of some significance. China has the choice to compete and trade with Europe, or would they prefer to dominate and keep Europe destabilised through it proxy, Russia?  Trade feels more likely – but only if Europe shows its willingness to defend itself! Which is why the rearmament trade is a long-term play.

As the American age ends, America is surprising the globe. The governing party doesn’t want to fund or be involved in other people’s wars. America First policies including the threats to Canada, to acquire Greenland, and now a task force threatening the mighty Narco State of Venezuela, all hint at it’s the intention of being the big fish in the smaller pool of an American Hemisphere.

Europe still has choices.

How will Europe now perceive America following the treatment it is meting out to friends and allies? The shocking betrayal of Ukraine to the Russian aggressor does not look the considered or wise actions of a friend and ally.  The 28 proposals on the President’s ultimatum look like The Ribbentrop – Molotov Pact that carved up Poland just days ahead of World War 2.  It is a deal neither Europe nor Ukraine should accept.

It is America that has surrendered here. It has walked away from friends and allies, betraying democracy and freedom.

The consequence will be to force Europe to make tough choices, and adopt a very different approach to the new global economic reality. To be relevant within it – Europe will need to be open to trade and well armed. The future of AI and later quantum computing are already shifting China’s direction. Energy will be transformed by fusion – where Europe has a lead. There is trade – careful, cautious and protected – between China and Europe is there to be done.

For America, the outlook will be interesting – as global trade rebalances in Asia and with Europe, the role of the dollar in trade will continue to fall, meaning the dollar trade remittances global banks funded into the US treasury market will also decline. Who will buy US Treasury bonds in the future if global trade moves away?

Consequences, consequences… Mistakes are made swiftly. We regret them at leisure.

(Extra points will be awarded to anyone who gets the significance of this morning’s top line quote.)

Out of time, and back to the day job..

Bill Blain

CEO – Windshift Capital

Author – The Morning Porridge

Partner – Shard Capital

Special Advisor – Spitfire Strategic Capital