Debt Crisis and War: The Final Phase of a Collapsing Global Order

17th November, 2025

Debt is the most reliable indicator of decline. It begins as a policy instrument and ends as a survival mechanism. Governments borrow to bridge political convenience and economic reality, and in doing so, they guarantee both inflation and instability. What we call a debt crisis is not simply an accounting failure; it is the exhaustion of a system that can no longer finance its own legitimacy.

Martin Armstrong’s long-term economic models track this exhaustion as part of a recurring cycle: the loss of public confidence in governments and monetary systems. When a state’s credibility collapses under the weight of its obligations, it seeks external means of control through regulation, propaganda, or, ultimately, conflict. War becomes an extension of fiscal policy by other means.

Yet Armstrong’s most striking observation is not political, but financial. The markets themselves often anticipate war. Capital flees from risk long before headlines confirm it. Commodities like gold and oil spike in advance of open hostilities. Defense contractors rally before policy announcements. This suggests that information moves ahead of public awareness. War, in this sense, is not an unpredictable shock but an instrument traded upon.

Financial Signals Before a Debt Crisis

The pattern is consistent across history. Prior to every major conflict, from the world wars to modern interventions, financial markets have adjusted in advance, as though anticipating the script. Armstrong’s economic models interpret this as the response of capital to shifts in confidence; it’s an almost biological reaction within markets that sense instability long before governments admit it.

But this anticipation also implies a more troubling reality: that insiders, institutions, or networks with access to intelligence and influence can position themselves to profit. In the months before war, money moves. Portfolios shift from cyclical assets to those aligned with defense, energy, and logistics. The market signals are visible to those who know where to look.

This correlation between financial foresight and military action is not coincidence. It reflects how closely political decision-making is intertwined with capital flows. The elites who preside over an unsustainable debt system have every incentive to redirect economic pressure outward. War resets the balance sheet. It boosts aggregate demand, excuses deficits, and transforms social anger into patriotic unity. A collapsing financial system finds its lifeline in controlled chaos.

False Flags and Manufactured Legitimacy

When societies reach this stage, they often need a pretext. History calls them false flags – deliberate provocations designed to legitimize aggression or distract from domestic weakness. From the Reichstag fire to the Gulf of Tonkin, and from weapons of mass destruction to modern cyber incidents, the method is consistent: construct a moral narrative around an external enemy, divert attention from the internal failure, and rally support for measures that would otherwise be rejected.

The political class faces a familiar choice when the debt gets out of control; admit failure and allow markets to reset, or invent an external enemy to redirect public anger. Historically, the latter is almost always chosen. False flags, “crisis” narratives, and moral crusades against foreign states become political tools, but not to protect citizens, rather to preserve power for the ruling elites.

Martin Armstrong captured this cynicism with chilling precision when he remarked:

“This is like a giant chess board to these neocons and they couldn't care less if we live or die. There's too damn many of us anyhow from their perspective.”

It’s a statement that reveals the moral bankruptcy underlying the modern state. The wars of our era are not fought for survival or justice, but for liquidity and legitimacy. When debt systems begin to fail, governments seek war not as strategy, but as anesthesia – a means to unify the population under fear, and to suppress the economic reckoning their own policies created.

Armstrong has repeatedly noted that such tactics emerge precisely when governments are cornered by a debt crisis. Political elites understand that fiscal collapse erodes authority. To preserve it, they turn crisis outward. False flags serve as the emergency valve of failing empires, they’re the means by which a discredited leadership converts insolvency into ideology.

The Debt Crisis Cycle of Confidence and Collapse

Armstrong’s broader thesis ties these events to a recurring confidence cycle – roughly 51.6 years between the peak of trust in institutions and the trough of disillusionment. This is, in many ways, the same cycle described by Ray Dalio with his long-term debt cycle. During the upward phase, societies expand credit, build empires, and embrace centralization. In the downward phase, debt exceeds production, governments turn authoritarian, and faith migrates from public to private systems of value.

We are now deep into that downward slope. The postwar financial order, built on the dollar and underwritten by military supremacy, is showing the same stress fractures that preceded the decline of every great power. Sovereign debt is unpayable, monetary policy is exhausted, and political discourse has devolved into factionalism. Confidence, the invisible infrastructure of civilization, is evaporating.

As Armstrong warns, the debt crisis is the engine behind it all. Debt defines not only the limits of an economy, but the psychology of its rulers. When borrowing becomes infinite, accountability disappears. When debt servicing costs consume tax receipts, governance collapses into propaganda. The last act of the cycle is not reform, but repression i.e., capital controls, censorship, and, ultimately, conflict.

Debt, War, and the Search for Control

What connects debt and war is not ideology but necessity. Both arise from the same refusal to accept limits. A government unable to service its obligations must find new sources of income or distraction. War provides both. It justifies inflation, sanctions, and surveillance. It converts financial weakness into geopolitical drama. It transforms public despair into manufactured resolve.

But the cost is civilizational. Each new conflict deepens the structural crisis it seeks to mask. Each intervention accelerates capital flight and distrust. Armstrong’s research, drawn from centuries of empirical data, shows that war is never a cause of recovery; it is a symptom of decay. The markets know this instinctively, which is why they move first. The elites know it strategically, which is why they play along.

The debt crisis, then, is not a fiscal anomaly but the signal of a systemic realignment. The global order that emerged after 1945 is dissolving under its own contradictions; economic, moral, and political. What comes next will not be engineered in think tanks or parliaments, but determined by the same forces that have governed history since antiquity: confidence, corruption, and the collapse of overextended power.

The Analytical View Ahead

To study this moment is to see that the sequence is predictable; debt expansion, loss of confidence, market anticipation, political deception, and finally, conflict. What varies is only the scale and the players. As Armstrong’s models suggest, capital mobility itself behaves as a living system, migrating from danger to safety, from public to private assets, from empire to frontier.

Understanding this does not prevent the cycle, but it clarifies our position within it. The global debt crisis has already reached the point where financial containment is impossible. What remains is narrative containment, the effort to manage perception as the numbers deteriorate. False flags, strategic distractions, and the rebranding of chaos as morality are the final instruments of control.

When the next war begins, whether by accident or design, the markets will already have moved. The charts will tell the story long before the news does. The pattern is visible, the timing uncertain, but the direction unmistakable. The debt crisis cycle is closing, and the signs, as Armstrong’s data show, are not ideological but mathematical.

Source:

Martin Armstrong - Empires Always Fall

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Opinion Column

About the Author
Steve Bain is an economics writer and analyst with a BSc in Economics and experience in regional economic development for UK local government agencies. He explains economic theory and policy through clear, accessible writing informed by both academic training and real-world work.
Read Steve’s full bio

Debt Crisis and War: The Final Phase of a Collapsing Global Order

Financial Signals Before a Debt Crisis

False Flags and Manufactured Legitimacy

The Debt Crisis Cycle of Confidence and Collapse

Debt, War, and the Search for Control

The Analytical View Ahead

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