The Centuries Old Pattern That Should Have Every Investor Paying Attention

World powers come and go. From the Spanish empire to English dominance.

But one thing is for certain, they didn’t become world powers by accident. Nearly every instance in world history has one thing in common: domination over the seas.

Even the Vikings ruled the seas in and around Europe from the late 800’s until the early 1100’s. All it took was twenty men rowing oars with one wool sail that got a ship moving at around five knots.  

That effectively let a small, Scandinavian country control many parts of Europe from the British Isles to the Mediterranean and into Eastern Europe.

But it was the Elizabethan age that truly showed the world just what naval power could do.

In the late 16^th century, the Spanish ruled the seas. From the time Colombus made his first voyage to the Americas and over the next century, the Spanish armada was a major sea power. Much of that due to the riches brought back from its expeditions to the Americas.

But King Philip II of Spain had a problem. For years, British “sea dogs” – state-sanctioned pirates – wreaked havoc on Spanish trade. They carried letters of marque to seize enemy ships and cargo. And they included some of the most well-known sea captains of the day, like Sir Walter Raliegh, Sir Francis Drake and John Hawkins.

Philip finally had enough. He intended to put England in its place using his superior naval power. So in late May 1588, Philip’s armada sailed from Lisbon to escort an invasion force against England.

The English had other plans.

With the Spanish fleet anchored off Calais, the English set a plan in motion that changed the balance of power. On the night of August 7, 1588, they sent fireships to attack the Spanish fleet.

The plan worked. And it broke Spain’s defensive formation.

At dawn on August 8, the English attacked the fleet at Gravelines.  It badly damaged many Spanish ships. But not enough to wipe it out.

That came later with the Spanish deciding to flee north. They hoped to return to Spain by sailing around Scotland and Ireland.

That’s where Atlantic storms finished the job the English started. By the end, fewer than half of the original 130 ships made it home.

The English won. And it kicked off two centuries of British dominance of the seas…and of world trade.

Raliegh was a key player in recognizing the importance of opening sea lanes for trade. Controlling those sea lanes – or in effect, defending them – is how a country can transform or supercharge its economy.

Something we can actually see by looking at what happened to England after the Battle of Gravelines.

In the years that followed, England poured money into building the best fleet in the world. It built permanent royal dockyards to build ships more effectively. Eventually, that led to ships like the Sovereign of the Seas in 1637. At the time, it was the most powerful warship around at 1,500 tons and 100 guns.

Then came the Commonwealth Navigation Act of 1651 led by Oliver Cromwell. It said only English ships could carry English colonial goods. It was an extension of Raleigh's old saying about sea power. But this time it was law.

It was also a shot across the bow at the Dutch, who were one of the other dominant forces in world commerce at the time. The policy directly triggered the First Anglo-Dutch War (1652–54). England was now willing to use naval power to enforce trade exclusivity.

It worked. The English won supremacy of the seas. Trade flourished. And its fleet continued to grow.

In fact, we can visually see how this played out just by looking at a few data points. Like the British merchant fleet tonnage.

Between 1588 and the early 1800’s, the British fleet grew more than 43-fold. Meanwhile, the number of ships as part of the Crown grew from 198 to around 900 over the same period.

And trade exploded.

Exports went from just under £1 million to £58 million. That’s like going from an approximate £10 billion in today’s value to more than £6.5 trillion. (Or from $13 billion to $9 trillion using U.S. dollars.)

Wealth flowed throughout the British Empire. This translated into rising national income and an expanding middle‑class. Which in turn led to substantial capital accumulation as England became the first true industrialized nation.

That also helped it become a leading financial center of the world.

All that did was prove that Walter Raliegh was right. Control the seas, control the trade of the world. Control the trade of the world and command its riches.

The Next Chapter

The old British Empire eventually gave way to American dominance as the world’s superpower. Dominance that many pundits today are calling into question with the rise of China over the past several decades.

But is that truly the case? Or is something else happening today that may prove otherwise?

Just as I talked about in my most recent posts on the changing landscape in the world of money (which you can read here and here), I believe if you take a step back, look at the board and connect some dots, something else is afoot.

Something that looks like it’s already realigning world trade. Something that’s shifting the balance of power in ways we haven’t seen for decades. And something that may have major implications for how you position your portfolio.

So stay tuned for the next installment of Strategic Edge where I’ll break it all down.

Regards,

Editor, Strategic Trader