Yes, wars are (mostly) about collateral

Key Markets report for Monday, 26 May 2025

During much of the 20th century and especially since September 11, 2001, permanent warfare has pretty much become part of our normal in the West. We seem to be always bombing somewhere or waging war on someone, either directly or by proxy. As this engulfed the country I grew up in, former Yugoslavia, it left me pondering the question, why war, where does it come from and what ultimately incentivizes it.

Whatever war in history you study, you find that, as a rule, people are hugely reluctant to go to war, and that especially includes soldiers and military generals. Wars are also hugely expensive and almost never go according to plan. Invariably, they result in great destruction, economic decline and tragic loss of life. I’m old enough to remember that political leaders used to talk about war as the solution of the last resort and supposedly wars were such serious business that they could only be declared by legislative bodies of people’s representatives in a large majority.

But somehow we’ve done away with all that and for some democratic nations, wars have become the single most captivating obsession of the political class and I thought, there had to be a reason for all this - some obscure moving principle behind the seeming dysfunction. At some point I came to the conclusion that the system of incentives driving us to wars must emanate from the banking system and that its main objective is the quest for capital.

First time I articulated that idea, it was met with incredulity and some experts from the world of finance told me I was wrong, that collateral was something different entirely, vaguely something to do with mushrooms (I can’t recall exactly, perhaps they used the word ‘fungible,’ or something like that) and that I was out of my depth. But still, the more I looked and paid attention, the evidence cropped up that wars are exactly about that. In March I published an article on Substack in which I articulated my argument: “The powers behind the throne and the forever wars.”

Then recently I had another unexpected corroboration. On Friday, 23 May, I had the pleasure of joining prof. Glenn Diesen on his podcast where several months earlier I explained my idea that wars are all about collateral. That time we didn’t move closer to a conclusion, but in our Fridays discussion (around the 19:18 mark), Prof. Diesen told me that he recently spoke with a person who had worked for British intelligence for “a few decades,” and who told him that the wars were over the “collateral for the banking system.” Our full discussion is below:

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Today’s trading signals

With Friday’s closing prices we have the following changes for the Key Markets portfolio: