The Big Cycles Over The Last 500 Years
Comment of the Day

May 21 2020

Commentary by Eoin Treacy

The Big Cycles Over The Last 500 Years

This article by Ray Dalio may be of interest to subscribers. Here is a section:

In brief, after the creation of a new set of rules establishes the new world order, there is typically a peaceful and prosperous period.  As people get used to this they increasingly bet on the prosperity continuing, and they increasingly borrow money to do that, which eventually leads to a bubble.  As the prosperity increases the wealth gap grows.  Eventually the debt bubble bursts, which leads to the printing of money and credit and increased internal conflict, which leads to some sort of wealth redistribution revolution that can be peaceful or violent.  Typically, at that time late in the cycle the leading empire that won the last economic and geopolitical war is less powerful relative to rival powers that prospered during the prosperous period, and with the bad economic conditions and the disagreements between powers there is typically some kind of war.  Out of these debt, economic, domestic, and world-order breakdowns that take the forms of revolutions and wars come new winners and losers.  Then the winners get together to create the new domestic and world orders.  

That is what has repeatedly happened through time.  The lines in the chart signify the relative powers of the 11 most powerful empires over the last 500 years.  In the chart below you can see where the US and China are currently in their cycles.  As you can see the United States is now the most powerful empire by not much, it is in relative decline, Chinese power is rapidly rising, and no other powers come close.  

Eoin Treacy's view

There is a clear message here. Empires rise and fall. Empires rise because of a competitive advantage. Success breeds hubris which sows the seeds of decay. Success also breeds decadence with societies spending beyond their means. All the while competitors learn to emulate the competitive advantage and iterate upon it. As a result, they gain strength, confidence and a willingness to challenge the status quo.

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