Put your feet up. We’re in the dog days of August. And even in turbulent times, we can be sure of one thing: Nothing of any importance happens during this month.
Yet, on closer examination, it turns out that August is often the most critical month of the year. It is a myth that not much happens.
This month, we have seen two turning points. The bull market in commodities and oil has burst. And the bear market in US dollars has ended. They may just be pauses for breath: We won’t know for another six months or so. If they continue, those are two trends that will dominate the global economy for the next few years. And they either started or gained momentum in August.
How about last year? The credit crunch started in August 2007 before the market froze and the European Central Bank was forced to pump extra liquidity into the system. There was nothing trivial about that.
Going further back, the Russian financial crisis—which precipitated the last big shattering of confidence in the financial markets— erupted in August 1998. In 1987, the Dow Jones Industrial Average reached its peak on 25 August, and then started the decline that culminated in the crash of October.
Nor is it just financial events. Plenty of big political and military stories have broken in August.
World War I began for Germany when it declared war on Russia on 1 August 1914; World War II ended when the Allies celebrated Japan’s surrender on 15 August 1945; the Russians sent tanks into Prague on 21 August 1968; Richard Nixon resigned as US president on 8 August 1974; Iraq invaded Kuwait on 2 August 1990; Elvis Presley died on 16 August 1977; and Princess Diana died on 31 August 1997. Those are among the most momentous events of the last century. It is hard to write them off as small news.
Of course, no one is saying August is the only month when important stuff happens. Plenty goes on in October as well: the Great Crash of 1929, for example, and Black Monday in 1987. Yet the idea that August is a quiet month is clearly a myth.
There is a reason for that. Political leaders, along with the people running big corporations and investment banks, like to think that they are dictating events. They imagine that nothing much will happen while they are away from the office.
They are kidding themselves. War and peace are dictated by much larger forces. Likewise, the global economy shifts in response to trends that are way beyond the control of any individual. So whether the president or the chief executive is in the office or the place is being run by interns, doesn’t make much difference. Big historical events are just as likely to happen in August as any other month.
So, enjoy the holiday. By all means, take your place on the best lounger by the hotel pool. But don’t forget to bring the charger for your BlackBerry. August isn’t over yet: This month may still prove to be the most crucial of the year.
Edited excerpts. Matthew Lynn is a Bloomberg columnist. Comment at firstname.lastname@example.org