Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail by Ray Dalio

(New York: Simon & Schuster, 2021), 564

Economic Principles website (additional information beyond the book)

Every chaos is a transition. In the end disorder cures and balances itself with dictatorship; old obstacles are roughly cleared away, and fresh growth is free. Revolution, like death and style, is the removal of rubbish, the surgery of the superfluous; it comes only when there are many things ready to die. China has died many times before; and many times she has been reborn.
The Story of Civilization: Our Oriental Heritage by Will Durant, 823

  • Dalio changing world order take-aways:
    • learn about China
    • debt: be ok having it, don't own it
    • own land and gold; live below your means and prep for the coming crash
    • need to study history: pretty clear what the options are
    • what's our escape plan?
    • what are the 2-3 most likely scenarios and how does your portfolio respond to each?




Part I: How the World Works

Chapter 1: The Big Cycle in a Tiny Nutshell

Chart on pg 41 shows that education, technology, and competitiveness tend to be leading indicators of power, while reserve status is trailing:

Chapter 2: The Determinants

Chapter 3: The Big Cycle of Money, Credit, Debt, and Economic Activity

Chapter 4: The Changing Value of Money

Chapter 5: The Big Cycle of Internal Order and Disorder

Chapter 6: The Big Cycle of External Order and Disorder

Chapter 7: Investing in Light of the Big Cycle

Part II: How the World Has Worked Over the Last 500 Years.

Chapter 8: The Last 500 Years In a Tiny Nutshell

Chapter 9: The Big Cycle Rise and Decline of the Dutch Empire and the Guilder

Chapter 10: The Big Cycle Rise and Decline of the British Empire and the Pound

Chapter 11: The Big Cycle Rise and Decline of the United States and the Dollar

Chapter 12: The Big Cycle Rise of China and the Renminbi

Chapter 13: US-China Relations and Wars

Part III: The Future

Chapter 14: The Future

Appendix: Computer Analysis of the Conditions of, and Prospects for, the World's Leading Countries

Kindle Highlights

598 Highlight(s) | 31 Notes
==location x is on x, y on y, can interpolate between==


  • The times ahead will be radically different from those we’ve experienced in our lifetimes, though similar to many times in history. (Location: 46)
  • confluence of huge debts and zero or near-zero interest rates that led to massive printing of money in the world’s three major reserve currencies; big political and social conflicts within countries, especially the US, due to the largest wealth, political, and values gaps in roughly a century; and the rising of a new world power (China) to challenge the existing world power (the US) and the existing world order. (Location: 52)
  • studied past analogous periods, (Location: 57)
  • history, I saw that it typically transpires via relatively well-defined life cycles, (Location: 64 *2020-07-03-The Fourth Turning)
  • This Big Cycle produces swings between 1) peaceful and prosperous periods of great creativity and productivity that raise living standards a lot and 2) depression, revolution, and war periods when there is a lot of fighting over wealth and power and a lot of destruction of wealth, life, and other things we cherish. (Location: 77)
  • the swinging of conditions from one extreme to another in a cycle is the norm, not the exception. (Location: 91)
  • the really big boom periods and the really big bust periods, like many things, come along about once in a lifetime and so they are surprising unless one has studied the patterns of history over many generations. (Location: 95)
  • the future we encounter is likely to be very different from what most people expect. (Location: 97)
  • no system of government, no economic system, no currency, and no empire lasts forever, yet almost everyone is surprised and ruined when they fail. (Location: 109)
  • one’s ability to anticipate and deal well with the future depends on one’s understanding of the cause/effect relationships that make things change, and one’s ability to understand these cause/effect relationships comes from studying how they have changed in the past. (Location: 121)
  • I believe that the reason people typically miss the big moments of evolution coming at them in life is because they experience only tiny pieces of what’s happening. We are like ants preoccupied with our jobs of carrying crumbs in our very brief lifetimes instead of having a broader perspective of the big-picture patterns and cycles, the important interrelated things driving them, where we are within the cycles, and what’s likely to transpire. (Location: 156 Note:This is why you need to read history)
    1. The Long-Term Debt and Capital Markets Cycle: (Location: 199)
    1. The Internal Order and Disorder Cycle: (Location: 215)
  • Wealth, values, and political gaps are now larger than at any other point during my lifetime. (Location: 215)
  • when wealth and values gaps are large and there is an economic downturn, it is likely that there will be a lot of conflict about how to divide the pie. (Location: 218)
    1. The External Order and Disorder Cycle: (Location: 224)
  • For the first time in my life, the United States is encountering a true rival power. (The Soviet Union was only a military rival, never a significant economic one.) China has become a rival power to the United States in most ways and is becoming strong in most ways at a faster rate. (Location: 224)
  • the great empires typically lasted roughly 250 years, give or take 150 years, with big economic, debt, and political cycles within them lasting about 50 to 100 years. (Location: 238)
  • to see the big picture, you can’t focus on the details. (Location: 250)
  • Still, I can’t be sure that I’m right about anything. (Location: 289)
  • I have been wrong more times than I can remember, which is why I value diversification of my bets above all else. (Location: 294)
  • Outline
    • Part I, I will summarize all that I learned in a simplified archetype of the rises and declines of empires, (Location: 305)
    • Part II, I will show the individual cases in greater depth, (Location: 309)
    • Part III, I will discuss what all of this means for the future. (Location: 311)



  • the biggest thing affecting most people in most countries through time is the struggle to make, take, and distribute wealth and power, though they also have struggled over other things too, most importantly ideology and religion. (Location: 351)
  • throughout time and in all countries, the people who have the wealth are the people who own the means of wealth production. In order to maintain or increase their wealth, they work with the people who have the political power, who are in a symbiotic relationship with them, to set and enforce the rules. (Location: 354)
  • we are now seeing an archetypical big shift in relative wealth and power and the world order that will affect everyone in all countries in profound ways. (Location: 377)
  • The most important three cycles are the ones I mentioned in the introduction: the long-term debt and capital markets cycle, the internal order and disorder cycle, and the external order and disorder cycle. (Location: 383)
  • Embedded in the swings in one direction are the ingredients that lead to the swings in the opposite direction. (Location: 389)
  • Evolution is the upward movement toward improvement that occurs because of adaptation and learning. Around it are cycles. To me, most everything transpires as an ascending trajectory of improvement with cycles around it, like an upward-pointing corkscrew: (Location: 407)
  • Human productivity is the most important force in causing the world’s total wealth, power, and living standards to rise over time. (Location: 416)
  • This is shown in the following charts: estimated output (i.e., estimated real GDP) per person and life expectancy over the last 500 years. (Location: 428)
  • The fact that the trends are so pronounced relative to the swings around the trends shows how much more forceful the power of human inventiveness is relative to everything else. (Location: 431)
  • Throughout time, the formula for success has been a system in which well-educated people, operating civilly with each other, come up with innovations, receive funding through capital markets, and own the means by which their innovations are turned into the production and allocation of resources, allowing them to be rewarded by profit making. (Location: 457)
  • capitalism has created wealth and opportunity gaps and overindebtedness that have led to economic downturns and revolutions and wars that have caused changes in the domestic and world orders. (Location: 460)
  • Countries with large savings, low debts, and a strong reserve currency can withstand economic and credit collapses better than countries that don’t have much savings, have a lot of debt, and don’t have a strong reserve currency. (Location: 464)
  • Because these turbulent times are small in relation to the evolutionary uptrend of humanity’s capacity to adapt and invent, they barely show up in the previous charts of GDP and life expectancy, (Location: 471)
  • There are always arguments or fights between those who want to make big redistributions of wealth and those who don’t. (Location: 485)
  • Most cycles in history happen for basically the same reasons. (Location: 501)
  • These periods of destruction/reconstruction devastated the weak, made clear who the powerful were, and established revolutionary new approaches to doing things (i.e., new orders) that set the stage for periods of prosperity (Location: 509)
  • while these revolution/war periods typically lead to a lot of human suffering, we should never, especially in the worst of times, lose sight of the fact that one can navigate them well—and that humanity’s power to adapt and quickly get to new and higher levels of well-being is much greater than all the bad stuff that can be thrown at us. (Location: 524)
  • China was dominant for centuries (consistently out-competing Europe economically and otherwise), though it entered a steep decline starting in the 1800s. The Netherlands, a relatively small country, became the world’s reserve currency empire in the 1600s. The UK followed a very similar path, peaking in the 1800s. Finally, the US rose to become the world’s superpower over the last 150 years, though particularly during and after World War II. The US is now in relative decline while China is rising again. (Location: 546 Note:Why did china decline in 1800s?)
  • China was almost always the most powerful, (Location: 554)
  • while the leading powers covered in this study were the richest and most powerful, they weren’t necessarily the best-off (Location: 556)
  • interestingly, there was little correlation between the wealth and power of a nation and the happiness of its people, (Location: 562)
    • 1) education
    • 2) competitiveness
    • 3) innovation and technology
    • 4) economic output
    • 5) share of world trade
    • 6) military strength
    • 7) financial center strength
    • 8) reserve currency status.
  • I call this cyclical, interrelated move up and down the Big Cycle. (Location: 577)
  • The Rise: The rise is the prosperous period of building that comes after a new order. It is when the country is fundamentally strong because there are a) relatively low levels of indebtedness, b) relatively small wealth, values, and political gaps between people, c) people working effectively together to produce prosperity, d) good education and infrastructure, e) strong and capable leadership, and f) a peaceful world order that is guided by one or more dominant world powers, (Location: 584)
  • The Top: This period is characterized by excesses in the form of a) high levels of indebtedness, b) large wealth, values, and political gaps, c) declining education and infrastructure, d) conflicts between different classes of people within countries, and e) struggles between countries as overextended empires are challenged by emerging rivals, (Location: 588)
  • The Decline: This is the painful period of fighting and restructuring that leads to great conflicts and great changes and the establishment of new internal and external orders. It sets the stage for the next new order and a new period of prosperous building. (Location: 592)
  • embedded in the rewards of the successes are the seeds of decline. (Location: 628 Note:Cf Deneen)
  • The new generation is less battle-hardened, steeped in luxuries, and accustomed to the easy life, which makes them more vulnerable to challenges. (Location: 636 Note:Need to create hardship for ourselves and our children)
  • Typically, the country’s decline comes gradually and then suddenly. (Location: 660)
  • It’s only when the forces that produce internal disorder and instability align with an external challenge that the entire world order can change. (Location: 681)
  • When all of these forces line up—indebtedness, civil war/revolution at home, war abroad, and a loss of faith in the currency—a change in the world order is typically at hand. (Location: 694)
  • To summarize, around the upward trend of productivity gains that produce rising wealth and better living standards, there are cycles that produce prosperous periods of building in which the country is fundamentally strong because there are relatively low levels of indebtedness, relatively small wealth, values, and political gaps, people working effectively together to produce prosperity, good education and infrastructure, strong and capable leadership, and a peaceful world order that is guided by one or more dominant world powers. These are the prosperous and enjoyable periods. When they are taken to excess, which they always are, the excesses lead to depressing periods of destruction and restructuring in which the country’s fundamental weaknesses of high levels of indebtedness, large wealth, values, and political gaps, different factions of people unable to work well together, poor education and infrastructure, and the struggle to maintain an overextended empire under the challenge of emerging rivals lead to a painful period of fighting, destruction, and then a restructuring that establishes a new order, setting the stage for a new period of building. (Location: 700 ==Note: Good to re-read this section in detail==)


  • In this chapter, I will review the most important determinants and summarize how I put them into my “model.” (Location: 775)
  • All peoples throughout history have had systems or orders for governing how they deal with each other. I call the systems within countries “internal orders,” those between countries “external orders,” and those that apply to the whole world “world orders.” These orders affect each other and are always changing. (Location: 810)
  • Everything that has happened and everything that will happen has had and will have determinants that make it happen. If we can understand those determinants, we can understand how the machine works and anticipate what will likely be coming at us next. (Location: 820)
  • Determinants lead to effects that become subsequent determinants that produce subsequent effects (Location: 927)
  • If I were to add two more determinants to keep in mind, they would be 4) the pace of innovation and technological development to solve problems and make improvements and 5) acts of nature, most importantly droughts, floods, and diseases. That is because innovation and technological advances can solve most problems and further evolution, and acts of nature such as droughts, floods, and diseases have had enormous impacts throughout history. These are the five most important forces, which I call the “Big Five,” (Location: 940)
  • ==Sorry, we’re unable to display this type of content. (Location: 951)==
      1. Inherited Determinants: They include a country’s geography, geology, (Location: 983)
      1. Human Capital Determinants: They are the ways people are with themselves and each other. (Location: 984)
      1. Geography. (Location: 994)
      1. Geology. (Location: 999)
      1. Acts of Nature. Acts of nature come in many forms, such as epidemic diseases, floods, and droughts. (Location: 1,005)
      1. Genealogy. (Location: 1,010)
  • While the inherited assets and liabilities of a country are very important, history has shown that the way people are with themselves and others is the most important determinant. (Location: 1,016)
  • When humans have the capacity to produce more revenue than they expend, there is good human capital and self-sufficiency. (Location: 1,022)
  • While many countries have natural resources that they are able to draw upon, human capital is the most sustainable capital because inherited assets that are drawn down eventually disappear, whereas human capital can exist forever. (Location: 1,027)
    1. Self-Interest. Self-interest, especially self-survival, is the most powerful motivator for most people, organizations, and governments. (Location: 1,036)
    1. The Drive to Gain and Keep Wealth and Power. (Location: 1,039)
  • To be successful over the long run, a country must earn an amount that is at least equal to what it spends. Those that earn and spend modestly and have a surplus are more sustainably successful than those that earn and spend a lot more and have deficits. History shows that when an individual, organization, country, or empire spends more than what it earns, misery and turbulence are ahead. (Location: 1,042)
    1. Capital Markets. The ability to save and obtain buying power through one’s capital markets is essential to a country’s well-being. (Location: 1,045)
    1. The Ability to Learn from History. Most people don’t have this, which is an impediment, though it varies by society. For example, the Chinese are excellent at this. (Location: 1,048)
    1. The Big Multigenerational Psychological Cycle. (Location: 1,054 Note:Cf fourth turrning)
    1. Favoring Short-Term Gratification over Long-Term Well-Being. (Location: 1,059 Note:Cf safidean timeepreference)
    1. Humanity’s Inventiveness. Humanity’s greatest power is what drives human evolution, which is manifest in increased productivity and higher living standards. (Location: 1,066)
    1. Culture. As the saying goes, “culture is destiny.” (Location: 1,073)
    1. Openness to Global Thinking. This is a good leading indicator of strength because isolated entities tend to miss out on the world’s best practices, which weakens them, while learning about the best the world has to offer helps people be their best. (Location: 1,082)
    1. Leadership. (Location: 1,088)
  • In each generation, roughly a few hundred people made all the difference. (Location: 1,092)
    1. Wealth Gaps. (Location: 1,095)
    1. Values Gaps. (Location: 1,097)
    1. Class Struggles. (Location: 1,103)
  • In all countries throughout time, though to varying degrees, people are sorted into “classes,” either because they choose to be with people like themselves or because others assign them to a class. (Location: 1,103)
    1. The Political Left/Right Cycle. (Location: 1,112)
    1. The Prisoner’s Dilemma Must Be Solved for Peace to Exist. (Location: 1,118)
    1. Whether There Are Win-Win Relationships or Lose-Lose Relationships. (Location: 1,124)
    1. The Big Balance of Power Cycle That Drives the Big Peace/War Cycle Both Within Countries and Between Countries. (Location: 1,131)
    1. Military Strength and the Peace/War Cycle. (Location: 1,138)
  • Like everything else, internal orders and world orders are constantly evolving and moving circumstances forward through time, as existing circumstances interact with each other and the forces that act on them to produce new circumstances. (Location: 1,146)


    1. Self-Interest. While self-interest is the primary motivator for most people, organizations, and governments, the question of which “self” is most important—is it the individual, the family, the tribe (Location: 1,178)
  • The “self” that people are most attached to is the one they will do the most to protect and this will drive their behaviors. (Location: 1,183)
    1. The Drive to Gain and Keep Wealth and Power. (Location: 1,203)
  • Wealth = Buying Power. (Location: 1,206)
  • Real Wealth ≠ Financial Wealth. (Location: 1,208)
  • Making Wealth = Being Productive. (Location: 1,211)
  • That is why being continuously productive is so important. (Location: 1,213)
  • investment is a good leading indicator of prosperity. (Location: 1,216)
  • Wealth = Power. (Location: 1,217)
  • Wealth Decline = Power Decline. (Location: 1,225)
  • To be successful one must earn an amount that is at least equal to the amount one spends. (Location: 1,226)
    1. The Big Multigenerational Psychological Cycle. (Location: 1,231)
  • Stage 1: People and Their Countries Are Poor and They Think of Themselves as Poor. (Location: 1,233)
  • Stage 2: People and Their Countries Are Rich but Still Think of Themselves as Poor. (Location: 1,242)
  • Stage 3: People and Their Countries Are Rich and Think of Themselves as Rich. (Location: 1,255)
  • Stage 4: People and Their Countries Are Poorer and Still Think of Themselves as Rich. (Location: 1,271)
  • Stage 5: People and Their Countries Are Poor and They Think of Themselves as Poor. (Location: 1,285)
    1. Humanity’s Inventiveness. (Location: 1,295)
  • Humanity’s capacity to invent solutions to its problems and to identify how to make things better has proven to be far more powerful than all of its problems combined. (Location: 1,295)
  • The degree of inventiveness and innovation in a society is the main driver of its productivity. (Location: 1,306)
  • Innovation + Commercial Spirit + Thriving Capital Markets = Great Productivity Gains = Increases in Wealth and Power (Location: 1,315)
    1. Class Struggles. For as long as there has been recorded history, in almost all societies a very small percentage of the population (the “ruling classes” or “the elites”) have controlled most of the wealth and power (Location: 1,319)
  • Throughout time and in all countries the people who have the wealth are the people who own the means of wealth production and, in order to maintain it, they work with the people who have the power to set and enforce the rules. (Location: 1,336)
  • In all countries throughout time (though in varying degrees) people find themselves within “classes” either because they choose to be with people like them or because others stereotype them as part of certain groups. (Location: 1,384)
  • those societies that draw on the widest range of people and give them responsibilities based on their merits rather than privileges are the most sustainably successful because 1) they find the best talent to do their jobs well, 2) they have diversity of perspectives, and 3) they are perceived as the fairest, which fosters social stability. (Location: 1,411)
    1. The Political Left/Right Cycle. (Location: 1,423)
  • the ability to make money, save it, and put it into capital (i.e., capitalism) is an effective motivator of people and allocator of resources that raises people’s living standards. But capitalism is also a source of wealth and opportunity gaps that are unfair, can be counterproductive, are highly cyclical, and can be destabilizing. In my opinion, the greatest challenge for policy makers is to engineer a capitalist economic system that raises productivity and living standards without worsening inequities and instabilities. (Location: 1,437)
    1. The Big Balance of Power Cycle That Drives the Big Peace/War Cycle Both Within Countries and Between Countries. (Location: 1,442)
  • Step 1: The formation of alliances. (Location: 1,447)
  • Step 2: War to determine the winners and losers. (Location: 1,462)
  • Step 3: Fighting among the winners. (Location: 1,473)
  • Step 4: Peace and prosperity occur but eventually lead to excesses reflected in large wealth and opportunity gaps and overindebtedness. (Location: 1,483)
  • Step 5: Increasing conflict leads to revolutionary changes in domestic and world orders. (Location: 1,487)



  • What most people and their countries want most is wealth and power, and money and credit are the biggest influences on how wealth and power rise and decline. If you don’t understand how money and credit work, you can’t understand how the system works, and if you don’t understand how the system works, you can’t understand what’s coming at you. (Location: 1,508)
  • All entities—people, companies, nonprofit organizations, and governments—deal with the same basic financial realities, and always have. (Location: 1,526)
  • They have money that comes in (i.e., revenue) and money that goes out (i.e., expenses) that, when netted, make up their net income. (Location: 1,527)
  • The way entities collectively handle their finances as reflected in their income statements and balance sheets is the biggest driver of changes in internal and world orders. (Location: 1,536)
  • See how we are interconnected and what changes in conditions might mean for you and others who might affect you. (Location: 1,545)
  • debt eats equity. What I mean by that is that debts have to be paid above all else. (Location: 1,551)
  • when your income is less than your expenses and your assets are less than your liabilities (i.e., debts), you are on the way to having to sell your assets. (Location: 1,554)
  • there isn’t a fixed amount of money and credit in existence. Money and credit can easily be created by central banks. (Location: 1,555)
  • The biggest problem that we now collectively face is that for many people, companies, nonprofit organizations, and governments, their incomes are low in relation to their expenses, and their debts and other liabilities (such as those for pensions, healthcare, and insurance) are very large relative to the value of their assets. (Location: 1,572)
  • there are many people, companies, nonprofit organizations, and governments that look rich even while they are in the process of going broke. (Location: 1,575)
  • debt eats equity but central banks can feed debt by printing money instead. (Location: 1,591)
  • Having a reserve currency is great while it lasts because it gives a country exceptional borrowing and spending power and significant power over who else in the world gets the money and credit needed to buy and sell internationally. (Location: 1,598)
  • However, having a reserve currency typically sows the seeds of a country ceasing to be a reserve currency country. That is because it allows the country to borrow more than it could otherwise afford to borrow, and the creation of lots of money and credit to service the debt debases the value of the currency and causes the loss of its status as a reserve currency. (Location: 1,601)
  • having a reserve currency is one of the greatest powers a country can have because it gives the country enormous buying power and geopolitical power. (Location: 1,603)
  • Money is a medium of exchange that can also be used as a storehold of wealth. (Location: 1,612)
  • Money is what settles claims—you pay your bills and are done. Debt is a promise to deliver money. (Location: 1,622)
  • most money and credit (especially the government-issued money that now exists) have no intrinsic value. They are just journal entries in an accounting system that can easily be changed. The purpose of that system is to help allocate resources efficiently so that productivity can grow, rewarding both lenders and borrowers, but the system periodically breaks down. (Location: 1,628)
  • When that happens (as it always has, since the beginning of time), the currency supply is “monetized”3 and currency values fall or are destroyed, and wealth shifts in a big way, (Location: 1,631)
  • you cannot create more wealth simply by creating more money and credit. To create more wealth, you have to be more productive. The relationship between the creation of money and credit and the creation of wealth is often confused, yet it is the biggest driver of economic cycles. (Location: 1,638)
  • there is both a financial economy and a real economy. Though they are related, they are different. (Location: 1,642)
  • By raising and lowering supplies of money and credit, central banks are able to raise and lower the demand and production of financial assets, goods, and services. (Location: 1,648)
  • Where the money and credit flow is important to determining what happens. For example, when they no longer go into lending that fuels increases in economic demand and instead go into other currencies and inflation-hedge assets, they fail to stimulate economic activity and instead cause the value of the currency to decline and the value of inflation-hedge assets to rise. At such times high inflation can occur because the supply of money and credit has increased relative to the demand for it, which we call “monetary inflation.” That (Location: 1,652)
  • if you own a house and the government creates a lot of money and credit, there might be many eager buyers who would push the price of your house up. But it’s still the same house; your actual wealth hasn’t increased, just your calculated wealth. (Location: 1,670)
  • The central bankers who control money and credit (i.e., central banks) vary the costs and availability of money and credit to control markets and the economy. (Location: 1,677)
  • The short-term debt cycles of ups and downs typically last about eight years, give or take a few. (Location: 1,687)
  • the long-term debt cycle, which typically plays out over 50 to 75 years (Location: 1,691)
  • The long-term debt cycle transpires in six stages: (Location: 1,713)
    • Stage 1: little or no debt and hard money
    • Stage 2: claims on hard money (i.e., notes or paper money).
    • Stage 3: increased debt.
    • Stage 4: debt crises, defaults, and devaluations, the printing of money and the breaking of the link to hard money.
    • Stage 5: fiat money and the debasement of money.
    • Stage 6: flight back into hard money.
  • Stage 1: It begins with a) little or no debt and b) money being “hard.” (Location: 1,714)
  • money being “hard” is important because no trust—or credit—is required to carry out an exchange. (Location: 1,718)
  • Stage 2: Then come claims on hard money (i.e., notes or paper money). (Location: 1,724)
  • Soon people treat these paper “claims on money” as if they are money itself. (Location: 1,728)
  • Stage 3: Then comes increased debt. (Location: 1,730)
  • Trouble approaches when there isn’t enough income to service one’s debts, or when the amount of claims people are holding in the expectation that they can sell them to get money to buy goods and services increases faster than the amount of goods and services by an amount that makes the conversion from that debt asset (e.g., a bond) impossible. (Location: 1,738)
  • Stage 4: Then debt crises, defaults, and devaluations come, which leads to the printing of money and the breaking of the link to hard money. (Location: 1,747)
  • Inevitably the central bank breaks the link, prints the money, and devalues it because not doing that causes an intolerable deflationary depression. The key at this stage is to create enough money and devaluation to offset the deflationary depression but not so much as to produce an inflationary spiral. When this is done well, I call it a “beautiful deleveraging,” which I describe more completely in my book Principles for Navigating Big Debt Crises. (Location: 1,755)
  • Stage 5: Then comes fiat money, which eventually leads to the debasement of money. (Location: 1,774)
  • There is nothing wrong with having an increase in money growth instead of an increase in credit/debt growth, if the money is put to productive use. The risk is that it will not be. (Location: 1,802)
  • History has shown that we shouldn’t rely on governments to protect us financially. (Location: 1,805)
  • we should expect most governments to abuse their privileged positions as the creators and users of money and credit (Location: 1,806)
  • When one can manufacture money and credit and pass them out to everyone to make them happy, it is very hard to resist the temptation to do so. (Location: 1,817)
  • Throughout history, rulers have run up debts that won’t come due until long after their own reigns are over, leaving it to their successors to pay the bill. (Location: 1,819)
  • When governments print a lot of money and buy a lot of debt, they cheapen both, which essentially taxes those who own it, making it easier for debtors and borrowers. When this happens to the point that the holders of money and debt assets realize what is going on, they seek to sell their debt assets and/or borrow money to get into debt they can pay back with cheap money. They also often move their wealth into better storeholds, such as gold and certain types of stocks, or to another country not having these problems. (Location: 1,830)
  • inflation-hedge assets, such as gold, commodities, and inflation-linked bonds). (Location: 1,837)
  • All currencies devalue or die, and when they do, cash and bonds (which are promises to receive currency) are devalued or wiped out. (Location: 1,842)
  • As I explained comprehensively in my book Principles for Navigating Big Debt Crises, there are four levers that policy makers can pull to bring debt and debt-service levels down relative to the income and cash flow levels required to service debts: 1. Austerity (spending less) 2. Debt defaults and restructurings 3. Transfers of money and credit from those who have more than they need to those who have less than they need (e.g., raising taxes) 4. Printing money and devaluing it (Location: 1,846 Note:Cf price of tomorrow )
  • printing money is the most expedient, least well-understood, and most common big way of restructuring debts. (Location: 1,856)
  • It’s tough to identify any harmed parties that the wealth was taken away from to provide this financial wealth (though they are the holders of money and debt assets). (Location: 1,858)
  • Hardly anyone acknowledges that governments don’t actually have this money to give out. Governments aren’t rich entities with piles of money lying around. They are just their people collectively, who will ultimately have to pay for the creation and giving out of money. (Location: 1,863)
  • Stage 6: Then the flight back into hard money. (Location: 1,869)
  • When taken too far, the overprinting of fiat currency leads to the selling of debt assets and the earlier-described “bank run” dynamic, which ultimately reduces the value of money and credit, which prompts people to flee out of both the currency and the debt. (Location: 1,869)
  • The debasement of the currency leads people to run from it and from debt denominated in it and into something else. (Location: 1,876)
  • Eventually the debt is largely wiped out, usually by making the money to pay it back plentiful and cheap, which devalues both the money and the debt. (Location: 1,882)
  • the Old Testament describes a year of Jubilee every 50 years, in which debts were forgiven. Knowing that the debt cycle would happen on that schedule allowed everyone to act in a rational way to prepare for it. (Location: 1,893)
  • Helping you understand this debt cycle so that you are prepared for it, rather than surprised by it, is my main objective in writing this book. (Location: 1,895)
  • get out of the country. (Location: 1,914 Note:What is our escape country?)
  • Monetized means the central bank’s creation of money to buy debt. (Location: 1,932)


  • In this chapter we will focus on the supply-and-demand dynamics of the financial economy to explore what determines the value of money. (Location: 1,944)
  • Most people worry about whether their assets are going up or down; they rarely pay much attention to the value of their currency. (Location: 1,945)
  • Of the roughly 750 currencies that have existed since 1700, only about 20 percent remain, and all of them have been devalued. (Location: 1,949 Note:Enter bitcoin)
  • The goal of printing money is to reduce debt burdens, so the most important thing for currencies to devalue against is debt (Location: 1,957)
  • In cases in which debt relief facilitates the flow of this money and credit into productivity and profits for companies, real stock prices (i.e., the value of stocks after adjusting for inflation) rise. When the creation of money sufficiently hurts the actual and prospective returns of cash and debt assets, it drives flows out of those assets and into inflation-hedge assets like gold, commodities, inflation-indexed bonds, and other currencies (including digital). (Location: 1,960)
  • There are systemically beneficial devaluations (though they are always costly to holders of money and debt), and there are systemically destructive ones that damage the credit/capital allocation system but are needed to wipe out debt in order to create a new monetary order. (Location: 1,973)
  • devaluations typically occur fairly abruptly during debt crises that are separated by longer periods of prosperity and stability. (Location: 1,984)
  • Sorry, we’re unable to display this type of content. (Location: 1,989 Note:What does this chart say about holding gold?)
  • Here are the most notable takeaways: (Location: 1,990 Note:What follows is summary history of currency)
  • Big devaluations are abrupt and episodic rather than evolutionary. (Location: 1,990)
  • Germany suffered a complete wipeout of the value of money and credit, which led to the most iconic hyperinflation in history during the Weimar Republic (which I describe in great detail in Principles for Navigating Big Debt Crises). (Location: 2,034)
  • The average annual return of interest-earning cash currency between 1850 and the present was 1.2 percent, which was a bit higher than the average real return of holding gold, which was 0.9 percent, though there were huge differences in returns at various periods of time and in various countries. (Location: 2,057)
  • The real return for bills since 1912 (the modern fiat era) has been -0.1 percent. The real return of gold during this era has been 1.6 percent. (Location: 2,063)
  • history has shown that there are very large risks in holding interest-earning cash currency as a storehold of wealth, especially late in debt cycles. (Location: 2,149)
  • The loss of reserve currency status is a product of chronic large devaluations. (Location: 2,153)


  • In this chapter, we will explore the timeless and universal cause/effect relationships that shape the internal orders and the behaviors that drive the shifts between periods of order and periods of disorder. (Location: 2,193)
  • The biggest thing affecting most people in most countries through time is how people struggle to make, take, and distribute wealth and power, though they also struggle over other things, most importantly ideology and religion. (Location: 2,202)
  • there is growing disorder in a number of leading countries around the world, most importantly in the United States. (Location: 2,212)
  • Stage 1, when the new order begins and the new leadership consolidates power, (Location: 2,231)
  • Stage 2, when the resource-allocation systems and government bureaucracies are built and refined (Location: 2,232)
  • Stage 3, when there is peace and prosperity, (Location: 2,233)
  • which leads to… … Stage 4, when there are great excesses in spending and debt and the widening of wealth and political gaps, (Location: 2,233)
  • Stage 5, when there are very bad financial conditions and intense conflict, (Location: 2,235)
  • Stage 6, when there are civil wars/revolutions, (Location: 2,235)
  • when there are 60–80 percent of the red flags present, there is around a 1-in-6 chance of severe internal conflict. (Location: 2,293)
  • The US is in the 60–80 percent bucket today. (Location: 2,295)
  • Stage 1: When the New Order Begins and the New Leadership Consolidates Power (Location: 2,301)
  • Stage 1 is what follows the war; it is a time when the winners gain control and the losers must submit. (Location: 2,303)
  • revolutions typically come in two parts—the first part is the fight to bring down the established leaders and systems, and the second part is the fight to remove those who were loyal to the former leaders and the fight for power among those who won. (Location: 2,306)
  • Stage 2: When Resource-Allocation Systems and Government Bureaucracies Are Built and Refined (Location: 2,327)
  • to be successful the system has to produce prosperity for most people, especially the large middle class. (Location: 2,338)
  • Stage 3: When There Is Peace and Prosperity (Location: 2,359)
  • Stage 4: A Period of Excesses (Location: 2,397)
  • “bubble prosperity phase.” (Location: 2,398)
  • continue to reinvest a significant amount of their earnings and their time into being productive when they become richer. (Location: 2,414)
  • In almost all cases, after becoming rich, the country (and its leaders) become decadent, overspend, borrow to finance excess consumption, and lose competitiveness. (Location: 2,418)
  • Stage 5: When There Are Bad Financial Conditions and Intense Conflict (Location: 2,422)
  • Because Stage 5 is such a pivotal stage in the internal cycle and because it’s the stage that many countries, most importantly the US, are now in, (Location: 2,436)
  • The classic toxic mix of forces that brings about big internal conflicts consists of 1) the country and the people in the country (or state or city) being in bad financial shape (e.g., having big debt and non-debt obligations), 2) large income, wealth, and values gaps within that entity, and 3) a severe negative economic shock. (Location: 2,439)
  • It creates a financial stress test. The financial conditions (as measured by incomes relative to expenses and assets relative to liabilities) that exist at the time of the stress test are the shock absorbers. The sizes of the gaps in incomes, wealth, and values are the degrees of fragility of the system. (Location: 2,443)
  • the single most reliable leading indicator of civil war or revolution is bankrupt government finances combined with big wealth gaps. (Location: 2,449)
  • Those places (cities, states, and countries) that have the largest wealth gaps, the largest debts, and the worst declines in incomes are most likely to have the greatest conflicts (Location: 2,469)
  • History shows that raising taxes and cutting spending when there are large wealth gaps and bad economic conditions, more than anything else, has been a leading indicator of civil wars or revolutions of some type. (Location: 2,478)
  • I fear what the future might hold because of the existing circumstances and how they are likely to worsen. (Location: 2,493)
  • Averages don’t matter as much as the number of people who are suffering and their power. (Location: 2,496)
  • To have peace and prosperity, a society must have productivity that benefits most people. (Location: 2,499)
  • An essential ingredient for success is that the debt and money that are created are used to produce productivity gains and favorable returns on investment, rather than just being given away without yielding productivity and income gains. If it is given away without yielding these gains, the money will be devalued to the point that it won’t leave the government or anyone else with much buying power. (Location: 2,504)
  • History shows that lending and spending on items that produce broad-based productivity gains and returns on investment that exceed the borrowing costs result in living standards rising with debts being paid off, so these are good policies. (Location: 2,507)
  • improvements in education and infrastructure, even those financed by debt, were essential ingredients behind the rises of virtually all empires, and declines in the quality of these investments were almost always ingredients behind empires’ declines. (Location: 2,515)
    • Decadence (Location: 2,519)
  • What a society spends money on matters. When it spends on investment items that yield productivity and income gains, it makes for a better future than when it spends on consumption items that don’t raise productivity and income. (Location: 2,525)
    • Bureaucracy (Location: 2,527)
  • While early in the internal order cycle bureaucracy is low, it is high late in the cycle, which makes sensible and needed decision making more difficult. (Location: 2,527)
    • Populism and Extremism (Location: 2,538)
  • The more that populism and polarization exist, the further along a nation is in Stage 5, and the closer it is to civil war and revolution. (Location: 2,551)
    • Class Warfare (Location: 2,553)
  • during times of increased hardship and conflict there is an increased inclination to look at people in stereotypical ways as members of one or more classes and to look at these classes as either being enemies or allies. (Location: 2,554)
    • The Loss of Truth in the Public Domain (Location: 2,564)
  • The perceived truth in media, both traditional and social, is lower than at any other time in our lifetimes. (Location: 2,580)
  • Even very capable and powerful people are now too afraid of the media to speak up about important matters or run for public office. (Location: 2,590)
    • Rule-Following Fades and Raw Fighting Begins (Location: 2,602)
  • When the causes that people are passionately behind are more important to them than the system for making decisions, the system is in jeopardy. Rules and laws work only when they are crystal clear and most people value working within them enough that they are willing to compromise in order to make them work well. (Location: 2,602)
  • When winning becomes the only thing that matters, unethical fighting becomes progressively more forceful in self-reinforcing ways. When everyone has causes that they are fighting for and no one can agree on anything, the system is on the brink of civil war/revolution. (Location: 2,609)
  • Late in Stage 5 it is common for the legal and police systems to be used as political weapons by those who can control them. (Location: 2,612)
  • Late in Stage 5 there are increasing numbers of protests that become increasingly violent. (Location: 2,616)
  • People dying in the fighting is the marker that almost certainly signifies the progression to the next and more violent civil war stage, which will continue until the winners and losers are clearly determined. (Location: 2,625)
  • when in doubt, get out—if you don’t want to be in a civil war or a war, you should get out while the getting is good. (Location: 2,628)
  • when things get bad, the doors typically close for people who want to leave. (Location: 2,630)
  • Crossing the line from Stage 5 (when there are very bad financial conditions and intense internal and external conflict exist) to Stage 6 (when there is civil war) occurs when the system for resolving disagreements goes from working to not working. (Location: 2,631)
  • When one is in Stage 5 (like the US is now), the biggest question is how much the system will bend before it breaks. (Location: 2,640)
  • The biggest risk to democracies is that they produce such fragmented and antagonistic decision making that they can be ineffective, which leads to bad results, which leads to revolutions led by populist autocrats who represent large segments of the population who want to have a strong, capable leader get control of the chaos and make the country work well for them. (Location: 2,648)
  • history has shown that during times of great conflict federalist democracies (like the US) typically have conflicts between the states and the central government over their relative powers. (Location: 2,652)
  • Different stages require different types of leaders to get the best results. (Location: 2,661)
  • Stage 6: When There Are Civil Wars (Location: 2,667)
  • Civil wars inevitably happen, so rather than assuming “it won’t happen here,” which most people in most countries assume after an extended period of not having them, it is better to be wary of them and look for the markers to indicate how close one is. (Location: 2,668)
  • we won’t let imprecision stand in the way of seeing what we couldn’t see if we insisted on being precise. (Location: 2,676 Note:Good lesson for strategic planning)
  • Civil wars and revolutions inevitably take place to radically change the internal order. They include total restructurings of wealth and political power that include complete restructurings of debt and financial ownership and political decision making. (Location: 2,697)
  • The periods of civil war are typically very brutal. (Location: 2,706)
  • The elites and moderates generally flee, are imprisoned, or are killed. (Location: 2,709)
  • broad economic prosperity is the biggest reason a new regime succeeds or fails, (Location: 2,722)
  • when there was internal disorder, foreign enemies were more likely to challenge the country. (Location: 2,742)
  • Almost all civil wars have had some foreign powers participating in attempt to influence the outcome to their benefit. (Location: 2,749)
  • The beginnings of civil wars and revolutions aren’t clear when they are happening, though they are obvious when one is deeply in the middle of them. (Location: 2,751)
  • While civil wars and revolutions are typically extremely painful, they often lead to restructurings that, if done well, can establish the foundation for improved future results. (Location: 2,765)
  • To get a rich picture of what makes great leaders great in different types of circumstances, I recommend Henry Kissinger’s forthcoming book on leadership. (Location: 2,778)


  • international relations are driven much more by raw power dynamics. (Location: 2,825)
  • When individual countries have more power than the collectives of countries, the more powerful individual countries rule. (Location: 2,832)
  • There are five major kinds of fights between countries: (Location: 2,837)
    1. Trade/economic wars: (Location: 2,838)
    1. Technology wars: (Location: 2,839)
    1. Geopolitical wars: (Location: 2,840)
    1. Capital wars: (Location: 2,842)
    1. Military wars: (Location: 2,843)
  • All-out wars typically occur when existential issues (ones that are so essential to the country’s existence that people are willing to fight and die for them) are at stake and they cannot be resolved by peaceful means. The wars that result from them make it clear which side gets its way and has supremacy in subsequent matters. (Location: 2,853)
  • the two things about war that one can be most confident in are 1) that it won’t go as planned and 2) that it will be far worse than imagined. (Location: 2,866)
  • domestic and military strength go hand in hand. (Location: 2,873)
  • the financial strength to outspend one’s rivals is one of the most important strengths a country can have. (Location: 2,876)
  • The greatest risk of military war is when both parties have 1) military powers that are roughly comparable and 2) irreconcilable and existential differences. (Location: 2,882)
  • As of this writing, the most potentially explosive conflict is that between the United States and China over Taiwan. (Location: 2,884)
  • to get more win-win outcomes one needs to negotiate with consideration given to what is most important to the other party and to oneself, and know how to trade them. (Location: 2,891 Note:need to study China)
  • Winning means getting the things that are most important without losing the things that are most important, so wars that cost much more in lives and money than they provide in benefits are stupid. (Location: 2,897)
  • have power, respect power, and use power wisely. (Location: 2,915)
  • it is often the case that using one’s “hard powers” is not the best path and that using one’s “soft powers” is preferable. (Location: 2,922 Note:Relevant to raising children)
  • Though it is generally desirable to have power, it is also desirable to not have power that one doesn’t need. That is because maintaining power consumes resources, most importantly your time and your money. Also, with power comes the burden of responsibilities. I have often been struck by how much happier less powerful people can be relative to more powerful people. (Location: 2,932)
  • CASE STUDY: WORLD WAR II (Location: 2,935)
  • the United States and China are in an economic war that could conceivably evolve into a military war and comparisons between the 1930s and today provide valuable insights into what might happen and how to avoid a terrible war. (Location: 2,941)
  • Consider the following three big choices that a country has to make when selecting its approach to governance: 1) bottom-up (democratic) or top-down (autocratic) decision making, 2) capitalist or communist (with socialist in the middle) ownership of production, and 3) individualistic (which treats the well-being of the individual with paramount importance) or collectivist (which treats the well-being of the whole with paramount importance). (Location: 2,996 Note:Make a diagram of these options)
  • Fascism is autocratic, capitalist, and collectivist. (Location: 3,001)
  • Raising tariffs to protect domestic businesses and jobs during bad economic times is common, but it leads to reduced efficiency because production does not occur where it can be done most efficiently. (Location: 3,008)
  • Harmful acts of nature (e.g., droughts, floods, and plagues) often cause periods of great economic hardship that when combined with other adverse conditions lead to periods of great conflict. (Location: 3,016)
  • Deflationary depressions are debt crises caused by there not being enough money in the hands of debtors to service their debts. They inevitably lead to the printing of money, debt restructurings, and government spending programs that increase the supply of, and reduce the value of, money and credit. The only question is how long it takes for government officials to make this move. (Location: 3,019)
  • From 1933 until the end of 1936 the stock market returned over 200 percent, and the economy grew at a blistering average real rate of about 9 percent. (Location: 3,030)
  • In 1936, the Federal Reserve tightened money and credit to fight inflation and slow an overheating economy, which caused the fragile US economy to fall back into recession and the other major economies to weaken with it, further raising tensions within and between countries. (Location: 3,032)
  • During periods of severe economic distress and large wealth gaps, there are typically revolutionarily large redistributions of wealth. (Location: 3,036)
  • Before there is a shooting war there is usually an economic war. (Location: 3,040)
  • common tactics used when economic and capital tools are weaponized. (Location: 3,048 Note:General: the next big war will be the first with nukes)
    1. Asset freezes/seizures: (Location: 3,049)
    1. Blocking capital markets access: (Location: 3,052)
    1. Embargoes/blockades: (Location: 3,055)
  • When countries are weak, opposing countries take advantage of their weaknesses to obtain gains. (Location: 3,089)
  • In July and August 1941, Roosevelt responded by freezing all Japanese assets in the United States, closing the Panama Canal to Japanese ships, and embargoing oil and gas exports to Japan. This cut off three-fourths of Japan’s trade and 80 percent of its oil. Japan calculated that it would run out of oil in two years. This put Japan in the position of having to choose between backing down or attacking the US. (Location: 3,093)
  • In war one’s ability to withstand pain is even more important than one’s ability to inflict pain. (Location: 3,102)
  • As for investing, sell out of all debt and buy gold (Location: 3,203)


  • The game I play for handling both my life and my career is to try to figure out how the world works, develop principles for dealing with it well, and then place my bets. (Location: 3,238)
  • While I won’t get deeply into all of them here, but will discuss most of them in my next book, Principles: Economics and Investing, I will convey one important principle. (Location: 3,248)
  • All markets are primarily driven by just four determinants: growth, inflation, risk premiums, and discount rates. (Location: 3,250)
  • Governments influence these factors through their fiscal and monetary policies. As a result, interactions between what governments want to happen and what is actually happening are what drive the cycles. (Location: 3,258)
  • Most investors who look at longer-term returns look at those in the US and the UK (the countries that won World War I and World War II) as being representative. That is because there are not many stock and bond markets that survived World War II. But these countries and time periods are not representative because of their survivorship bias. (Location: 3,281)
  • Up until around 1350, lending with an interest rate was prohibited by both Christianity and Islam—and in Judaism it was banned within the Jewish community—because of the terrible problems it caused, with human nature leading people to borrow more than they could pay back, (Location: 3,297)
  • The alchemy of lending as we know it today was first created in Italy around 1350. (Location: 3,303)
  • Wealth became promises to deliver money—what I call “financial wealth.” (Location: 3,304)
  • With the invention and growth of financial wealth, money was not constrained by a link to gold and silver. (Location: 3,309)
  • The creation of new forms of money was and still is a kind of alchemy. Those who could create it and use it—bankers, entrepreneurs, and capitalists—became very rich and powerful. (Location: 3,315)
  • when credit is created, buying power is created in exchange for a promise to pay back, so it is near-term stimulating and longer-term depressing. (Location: 3,325)
  • investment risk is failing to earn enough money to meet your needs. (Location: 3,334)
  • the three biggest risks most investors face are that their portfolios won’t provide the returns needed to meet their spending needs, that their portfolios will face ruin, and that a large share of their wealth will be taken away (e.g., through high taxes). (Location: 3,336)
  • Seven of these 10 countries saw wealth virtually wiped out at least once, (Location: 3,342)
  • US investors lost about a quarter of their real equity returns on average to taxes in any given 20-year period. (Location: 3,956)
  • CYCLE (Location: 3,978)
  • when there is a lot of financial wealth relative to real wealth it reverses and real returns of financial wealth, especially cash and debt assets (like bonds), are bad. (Location: 3,987 Note:Bonds aren't safe, especially late in a debt cycle; i should rebalance away from bonds)
  • during periods of the devaluation of money, hard money and hard assets rise in value relative to cash. (Location: 3,996)
  • One of the most important questions investors need to regularly ask themselves is whether the amount of interest that is being paid more than makes up for the devaluation risk they face. (Location: 4,001)
  • Financial money and financial wealth are valuable only to the extent that they get you the real money and real wealth that have real (i.e., intrinsic) value. (Location: 4,004)
  • The purpose of investing is to have money in a storehold of wealth that one can convert into buying power at a later date. (Location: 4,025)
  • Rather than get paid less than inflation, why not instead buy stuff—any stuff—that will equal inflation or better? I see a lot of investments that I expect to do significantly better than inflation. (Location: 4,033)
  • While they were terrible, they were more than matched by terrific upswings that came after the painful transition from the old order to the new order. Because these things have happened many times before, and because I can’t say for sure what will happen in the future, I can’t invest without having protections against these sorts of things happening and my being wrong. (Location: 4,040)



  • THE WORLD IN 1500 (Location: 4,082)
  • The World Was Much “Bigger” Then. (Location: 4,086)
  • Countries Didn’t Exist—Instead, Territories Were Run by Families. (Location: 4,096)
  • Religions and Religious Leaders Were Much More Powerful—and Science as We Know It Today Didn’t Exist. (Location: 4,102)
  • The World Was Much Less Egalitarian. (Location: 4,108)
  • THE WORLD’S EMPIRES IN 1500 (Location: 4,113)
  • The Habsburg family dynasty controlled Spain and all the territories that Spain controlled plus a collection of territories that formed the Holy Roman Empire. This included parts of what we now call the Netherlands, Belgium, Italy, Germany, and Austria. (Location: 4,114)
  • The Valois (later Bourbon) family dynasty, which was the main rival to the Habsburgs, controlled France. (Location: 4,116)
  • The Tudor dynasty controlled England, (Location: 4,117)
  • Florence, Venice, and Milan, which were frequently run as republics with prominent families, (Location: 4,118)
  • The Papal States were run by the pope and the Catholic Church. (Location: 4,121)
  • The Rurik dynasty, and later the Romanovs, ruled Russia, (Location: 4,124)
  • The Ottoman Empire, named after its ruling family, (Location: 4,126)
  • The Ming Dynasty controlled almost all of China (Location: 4,131)
  • “Neo-Confucianism,” which was dominant at the time, shifted the focus of the belief system toward a more rational, philosophical, academic, and humanistic form. (Location: 4,138 Note:Confucianism a key to understanding Chinese history?)
  • In his wonderful book, The Rise and Fall of the Great Powers, historian Paul Kennedy (Location: 4,145 Note:Read to learn about China)
  • “Of all the civilizations of premodern times, none appeared more advanced, none felt more superior than that of China. (Location: 4,147)
  • the enormity of the Ming Dynasty’s wealth and power is one possible explanation of what eventually led to its fall. (Location: 4,151)
  • WHAT HAS HAPPENED SINCE 1500 (Location: 4,171)
  • The most important changes were the changes in thinking that led to people changing behaviors, particularly about how wealth and power should be shared. (Location: 4,173)
  • The Commercial Revolution (1100s–1500s) (Location: 4,179)
  • The Commercial Revolution was the move away from a solely agriculture-based economy to one that included trade in a variety of goods. (Location: 4,179)
  • The ability to borrow quickly at reasonable rates was an enormous boon to Venice. (Location: 4,200)
  • The Renaissance (1300s–1600s) (Location: 4,202)
  • Knowledge and ideas spread rapidly because of the invention of the printing press in the mid-15th century. (Location: 4,211)
  • The Age of Exploration and Colonialism (1400s–1700s) (Location: 4,220)
  • It roughly coincided with the Renaissance because the technological marvels of the Renaissance translated into advancements in shipbuilding and navigation, and the riches that those ships brought back financed further Renaissance advancements. (Location: 4,223)
  • The Reformation (1517–1648) (Location: 4,254)
  • The New World Order Following the Thirty Years’ War (1648) (Location: 4,271)
  • At the end of the war the new order was laid out at the Peace of Westphalia. The most important breakthroughs that came from it were the establishment of geographic borders and the sovereign rights of the people within those borders to decide what happens in their domains. (Location: 4,274)
  • the Dutch emerging from the chaos as the leading global economic power. (Location: 4,276)
  • The Invention of Capitalism (1600s) (Location: 4,278)
  • Beginning with the Dutch, the development of publicly available and popularly used equity markets allowed savers to effectively transfer their buying power to entrepreneurs who could put that buying power to productive and profitable use. This significantly improved the allocation of resources and was stimulative to economies because it produced new buying power. It also produced the capital markets cycles. (Location: 4,279)
  • The Scientific Revolution (1500s–1600s) (Location: 4,287)
  • The First Industrial Revolution (1700s–1800s) (Location: 4,298)
  • The Enlightenment and the Age of Revolutions (1600s–1700s) (Location: 4,309)
  • the Enlightenment was essentially the scientific method applied to how humans should behave. (Location: 4,310)
  • The Napoleonic Wars and the New World Order that Followed (1803–1815) (Location: 4,319)
  • Western Powers Move into Asia (1800S (Location: 4,324)
  • Second Industrial Revolution (1850s–early 1900s) (Location: 4,334)
  • Invention of Communism (1848) (Location: 4,339)


  • the two most important inventions they came up with were 1) uniquely effective sailing ships that could take them all around the world, which, with the military skills they acquired from the fighting they did in Europe, allowed them to collect great riches, and 2) the capitalism that fueled these endeavors. (Location: 4,438)
  • invented the world’s first publicly listed company (the Dutch East India Company) and the first stock exchange in 1602. (Location: 4,445)
  • money and geopolitics mattered more than religious ideologies. (Location: 4,480)
  • that wars are devastating financially; that is true for the winners and much more so for the losers. (Location: 4,493)
  • The Dutch Golden Age led the Dutch to shift their attentions to “living the good life” in a way that weakened their finances. (Location: 4,500)
  • wealthy Dutch savers moved their cash into British investments, which were more attractive due to their strong growth and higher yields. (Location: 4,558 Note:US buying in China now?)
  • see Henry Kissinger’s World Order). (Location: 4,630)


  • I wonder what I would have thought at the time. I wonder whether in looking at the readings of my indicators and systems and thinking about the situations whether I would have bet well. That is why it is so important to me to have the data and the decision rules to see what I would have actually (Location: 4,753 Note:Backtest your forecasts, skin in the game)
  • If I were alive in the early 1700s and looking at my indicators, I would have seen the Dutch still at their peak and Bourbon France as a major power on the rise also, and I would have seen bullish conditions for them both at that time. (Location: 4,757)
  • Why Not the French? (Location: 4,759)
  • Without a modern financial system, France had more difficulty funding its government through debt than Britain did so it had to rely more on burdensome taxes, which were unpopular. (Location: 4,793)
  • done at Westphalia, the quadruple alliance of Great Britain, Austria, Prussia, and Russia reorganized the world order in their favor at the Congress of Vienna (1814–15), creating a system of checks and balances among the European powers that would more or less hold for the next century. (Location: 4,841)
  • Classically, before all-out wars begin, there is typically about a decade of economic, technological, geopolitical, and capital skirmishing. (Location: 4,963)


  • The US went through many boom/bust cycles, in which classically a flurry of debt-financed investments (into land, railroads, etc.) became overextended, leading to credit losses and a credit crunch. As a result, banking system panics were extremely common. (Location: 5,177)
  • Many of the most important financial innovations in the emerging New York financial center came out of its needs as a large trading center. (Location: 5,186)
  • international relations are driven much more by raw power dynamics. (Location: 5,237)
  • While there are a number of high-risk scenarios, in my opinion, the most worrying is a forceful move by China to bring Taiwan under its control. (Location: 5,256)
  • Because spending on the military takes government money away from spending on social programs, and because military technologies go hand in hand with private sector technologies, the biggest military risk for the leading powers is that they lose the economic and technology wars. (Location: 5,259)
  • Bretton Woods, New Hampshire, in 1944 to make a monetary system that linked the dollar to gold and other country’s currencies to the dollar. (Location: 5,270)
  • Transactions between countries are very different from transactions within countries. (Location: 5,272)
  • As a result of the Bretton Woods Agreement, the dollar became the world’s leading reserve currency. (Location: 5,281)
  • The economies of Europe and Japan had been destroyed by the war. As a solution, and to fight the spread of communism, the US supplied them with massive aid packages (known as the Marshall and Dodge plans), which were a) good for these devastated nations, b) good for the US economically because these countries used the money to buy US goods, c) good for the US’s geopolitical influence, and d) good for reinforcing the dollar’s position as the world’s dominant reserve currency. (Location: 5,284)
  • Americans never thought about how much the space program, the War on Poverty, and the Vietnam War would cost. Because they felt so rich and the dollar seemed secure as a reserve currency Americans assumed they could afford a “guns and butter” fiscal policy indefinitely. (Location: 5,312)
  • The 1970s: The Balance of Payments Problem Unfolds—Low Growth, High Inflation (Location: 5,318)
  • August 1971, the US defaulted on its commitments to pay in gold, offering paper money instead. (Location: 5,335)
  • The Post-Bretton Woods System (Location: 5,351)
  • After the 1971 delinking of the dollar and other currencies from gold, the world moved to an unanchored fiat monetary system (Location: 5,352)
  • (or, Type 3, as I explained in Chapter 3) and the dollar fell in value against gold, other currencies, stocks, and eventually just about everything. (Location: 5,353)
  • I remember the inflation psychology of that time very well; it led Americans to borrow money and immediately take their paychecks to buy things to “get ahead of inflation.” They also bought things that you couldn’t make more of, like gold and waterfront properties. (Location: 5,360)
  • The 1979–1982 Move to Tight Money and Conservatism (Location: 5,373)
  • In October 1979, Volcker announced that he would constrain money (M1) growth at 5.5 percent. (Location: 5,375)
  • Economics and politics have swings between the left and the right in varying extremes as the excesses of each become intolerable and the memories of the problems of the other fade. (Location: 5,384)
  • the value of assets is the reciprocal of the value of money and credit (i.e., the cheaper money and credit are, the more expensive asset prices are) and the value of money is the reciprocal of the quantity of it in existence, so when central banks are producing a lot of money and credit and making it cheaper, it is wise to be more aggressive in owning assets. (Location: 5,398 This is why to borrow to buy land now)
  • Most people pay attention to what they get and not where the money comes from to pay for it, so there are strong motivations for elected officials to spend a lot of borrowed money and make a lot of promises to give voters what they want and to take on debt and non-debt liabilities that cause problems down the road. (Location: 5,435)
  • In 2008 the debt crisis led to interest rates being lowered until they hit 0 percent, which led the three main reserve currency central banks (led by the Fed) to move from an interest-rate-driven monetary policy to a monetary policy of printing money and buying financial assets. (Location: 5,451)
  • when there is a great increase in money and credit, it drives down the value of money and credit, which drives up the value of other investment assets. (Location: 5,483)
  • The printing and buying of debt that the Fed undertook in 2020 was much like Roosevelt’s March 1933 move, Nixon’s August 1971 move, Volcker’s August 1982 move, Ben Bernanke’s November 2008 move, and Mario Draghi’s July 2012 move. It has become standard operating procedure for central banks, and it will persist until it no longer works. (Location: 5,484)
  • The stats in my model suggest that the US is roughly 70 percent through its Big Cycle, plus or minus 10 percent. The United States has not yet crossed the line into the sixth phase of a civil war/revolution, when the active fighting begins, but internal conflict is high and rising. (Location: 5,488)
  • greater polarization equals either a) greater risk of political gridlock, which reduces the chances of revolutionary changes that rectify the problems or b) some form of civil war/revolution. (Location: 5,495)
  • The three most important markers I am watching now are: 1) the rules being disregarded, 2) both sides emotionally attacking each other, and 3) blood being spilled. (Location: 5,498)
  • Changing Fortunes by Paul Volcker and Toyoo Gyohten. (Location: 5,506)


  • What I can say is that between my own experience, the efforts of my research team, and my extensive triangulation with some of the most knowledgeable China scholars and practitioners on the planet, I have a high degree of confidence in my conclusions. (Location: 5,537 Note:Simiar to Barron on faith: can't prrorve it but rigorous and reasonable)
  • China is now roughly tied with the US in being the leading power in trade, economic output, and innovation and technology, and it is a strong and quickly rising military and educational power. (Location: 5,567)
  • Confucius, who developed the philosophy that most influences how the Chinese behave with each other to this day, lived from 551 to 479 BCE. (Location: 5,579)
  • With the notable exception of the period from around 1840 to 1950, when it experienced a steep decline, China has historically stood among the most powerful empires in the world. (Location: 5,583)
  • The Tang Dynasty (618–907) is considered by many Chinese to be a high point of Imperial China. (Location: 5,588)
  • Then came the Northern and Southern Song dynasties (960–1279), during which China was the most innovative and dynamic economy in the world. (Location: 5,598)
  • Kublai Khan founded the comparatively short-lived Yuan Dynasty (1279–1368). (Location: 5,609)
  • The Ming Dynasty (1368–1644) presided over an empire that was largely prosperous and peaceful. (Location: 5,614)
  • The Qing Dynasty (1644–1912) came to power when the neighboring Manchu people capitalized on instability and rebellions in Ming China to challenge it. (Location: 5,623)
  • How the Typical Dynastic Cycle Transpires (Location: 5,635)
  • common themes in the decline of the different dynasties—themes (Location: 5,670)
    1. Growing inequality and fiscal problems over the course of the dynasty are critical drivers of the decline. (Location: 5,671)
    1. Monetary problems were common contributors to the decline of the empires. (Location: 5,678)
    1. The quality of governance and infrastructure tended to rise early in each dynasty and then fall over the course of the dynasty. (Location: 5,681)
    1. Internal conflict usually arose from economic differences combined with bad times (Location: 5,686)
    1. Bad conditions and large wealth gaps led to the most significant uprisings, (Location: 5,693)
    1. Isolation and Confucian cultural influences that favored scholarship over commerce, technology, and military strength led to China’s weaker competitiveness in business, technology, and the military, which led it to be beaten by or fall behind stronger “barbarians”—e.g., the Mongols, the foreign powers in the Opium Wars, and the rest of the world in the Mao isolation period. (Location: 5,696)
  • China’s physical geography and geology have also had a big impact on the rise and fall of dynasties. (Location: 5,699)
  • China has often been food-insecure (Location: 5,704)
  • China also has shortages of important natural resources, (Location: 5,704)
  • 300 years seems like a very long time ago to Americans, but for the Chinese, it isn’t long at all. (Location: 5,718)
  • While most Americans focus on particular events, especially those that are happening now, most Chinese leaders view current events in the context of larger, more evolutionary patterns. (Location: 5,721)
  • Americans are impulsive and tactical; they fight for what they want in the present. Most Chinese are strategic; they plan for how they can get what they want in the future. (Location: 5,722)
  • Chinese history and philosophy, most importantly Confucian/Taoist/legalist/Marxist philosophies, have a much bigger influence on Chinese thinking than American history and its Judeo-Christian/European philosophical roots have on American thinking. (Location: 5,737)
  • If you are interested in what Mao thought or, more importantly, how he thought, I suggest you read On Practice, On Contradiction, and of course The Little Red Book, (Location: 5,742)
  • The planning horizon that Chinese leaders concern themselves with is well over a century (Location: 5,744)
  • Its ultimate goal is to make the Chinese economy about twice the size of the US’s and to have the benefits of its growth broadly shared. (Location: 5,751)
  • Chinese leaders don’t just try to implement their plans; they set out clear metrics by which to judge their performance, and they achieve most of their goals. (Location: 5,755)
  • Confucianism seeks to bring about harmony by ensuring that people know their roles in the hierarchy and how to play them well, (Location: 5,773)
  • Legalism favors the rapid conquest and unification of “everything under heaven” by an autocratic leader. (Location: 5,777)
  • Taoism teaches that it is of paramount importance to live in harmony with the laws of nature. (Location: 5,780)
  • All of these Chinese systems are hierarchical and nonegalitarian. (Location: 5,783)
  • America is run from the bottom up (e.g., democracy) and optimized for the individual; China is run from the top down and optimized for the collective. (Location: 5,786)
  • FROM 1800 UNTIL NOW (Location: 5,909)
  • The Decline from 1800 until 1949 (Location: 5,912)
  • It is easy to see the important role that period has played in shaping Chinese leaders’ perspectives—e.g., why Mao saw capitalism as a system in which companies pursued profits through imperialism (Location: 5,937)
  • Enter Marxism-Leninism (Location: 5,946)
  • Marx’s most important theory/system is called “dialectical materialism.” (Location: 5,952)
  • dialectical materialism is a system for producing change by observing and influencing the “contradictions” of “opposites” that produce “struggles” that, when resolved, produce progress. Marx meant it to apply to everything. The conflict and struggle between the classes that is manifest in the conflict between capitalism and communism is just one of many such examples. (Location: 5,954)
  • I consider the conflicts between the classes (i.e., the “haves” and the “have-nots”) to be among the main drivers of the rise and decline of empires, and hence the progress of history, with those drivers being the three big cycles—money and credit, internal order/disorder, and external order/disorder—discussed (Location: 5,974)
  • Mao liked the Marxist-Leninist approach, in which the achievement of the communist ideal came at the end of a very long evolutionary process. (Location: 5,986)
  • The Rise from 1949 until Now (Location: 5,994)
  • From 1949 until he died in 1976, Mao (with his various ministers, most importantly Zhou Enlai) consolidated power; built China’s foundation of institutions, governance, and infrastructure; and ruled China as a communist emperor. (Location: 5,999)
  • Deng and his ministers ran China directly or indirectly until his death in 1997. (Location: 6,003)
  • Xi Jinping came to power in 2012, presiding over a richer, more powerful China that was becoming overly indebted, too corrupt, and increasingly at odds with the United States. (Location: 6,012)
  • Phase One: Building the Foundation (1949–1976) (Location: 6,019)
  • Whether one worked or not, one received basic pay. (Location: 6,024)
  • reunification with Taiwan still remains the most consistently contentious issue between China and the US. (Location: 6,080)
  • Phase Two: Deng and His Successors Gain Strengths Through Economic Reforms and Opening Up Without Creating Threats to Other Countries (1978–2012) (Location: 6,085)
  • reform and opening up. (Location: 6,088)
  • In 1979, he established full diplomatic relations with the US. (Location: 6,091)
  • Lee Kuan Yew at my house, along with some other esteemed guests. We asked him to share his thoughts about leaders of the present and past. We were eager to get his perspective because he had known most of them over the last 50 years and was one of the greats himself. Without hesitating, he said that Deng was the greatest leader of the 20th century. Why? Because he was smart and wise and open-minded, he was extremely practical, and he delivered great results for his country of a billion people. (Location: 6,138)
  • a symbiotic relationship developed between China and the US in which the Chinese manufactured consumer goods in an extremely cost-effective way and loaned the US money to buy them. It was a hell of a “buy now, pay later” deal for the Americans, and the Chinese liked it because they built their savings in the world’s reserve currency. (Location: 6,165)
  • Phase Three: The Emergence of US-China Conflicts and the End of Globalization (2008–Present) (Location: 6,230)
  • Becoming a World Power (Location: 6,249)
  • In their view capitalism is a way of raising the living standards of most people and is not meant to serve capitalists. (Location: 6,283)
  • Basically China does not want to be contained and the United States (and some other countries) want to contain it. (Location: 6,294)
  • China has a great need for oil and other imports that currently come through a choke point at the Strait of Malacca. (Location: 6,301)
  • It has invested heavily in the developing world, most notably through the Belt and Road Initiative, (Location: 6,308)
  • Xi a) consolidated power around himself (Location: 6,314)
  • during periods of great crisis, more autocratic and less democratic leadership tends to be preferred. (Location: 6,323)
  • This picture, in which the average of something in China is below the average of the same thing in the United States but the total in China is greater than the total in the US, is because the average level of development in China is lower while the Chinese population is more than four times as large as the American population. (Location: 6,382)
  • this modern era for China has led to some of the most rapid improvements in basic living conditions in history as well as an obvious climb in the factors that create powerful empires. In all respects, China is now a major and expanding power. (Location: 6,441)
  • 11 If you haven’t read Sun Tzu’s The Art of War, I suggest you do to get the flavor of what I am referring to. (Location: 6,470)
  • excellent book The Chinese World Order: Traditional China’s Foreign Relations, the historian John Fairbank (Location: 6,472)


  • the United States appears to be in decline and China appears to be on the rise for the all the classic reasons. (Location: 6,520)
  • History has shown that all countries’ success depends on sustaining the strengthening forces without producing the excesses that lead to countries’ declines. The really successful countries have been able to do that in a big way for 200–300 years. No country has been able to do it forever. (Location: 6,543)
  • History has taught us that there are five major types of wars: 1) trade/economic wars, 2) technology wars, 3) geopolitical wars, 4) capital wars, and 5) military wars. To these I would add 6) culture wars and 7) the war with ourselves. (Location: 6,553)
  • THE TRADE/ECONOMIC WAR (Location: 6,564)
  • we haven’t seen the US-China trade war taken very far. (Location: 6,566)
  • there are three major economic criticisms the US has about China’s handling of its economy: (Location: 6,571)
    1. The Chinese government pursues a wide range of evolving interventionist policies (Location: 6,572)
    1. The Chinese offer significant government guidance, resources, and regulatory support to Chinese industries, (Location: 6,574)
    1. The Chinese are stealing intellectual property, (Location: 6,576)
  • When things are going well it is easy to keep the moral high ground. However, when the fighting gets tough, it becomes easier to justify doing that which was previously considered immoral (though rather than calling it immoral it is called moral). (Location: 6,583)
  • Classically, the most dangerous part of the trade/economic war comes when countries cut others off from essential imports. (Location: 6,596)
  • moves to cut off essential imports from either side would signal a major escalation that could lead to a much worse conflict. (Location: 6,602)
  • country’s evolving competitiveness. For these reasons both countries, especially China, are shifting to more domestic production and “decoupling.” (Location: 6,604)
  • THE TECHNOLOGY WAR (Location: 6,610)
  • whoever wins the technology war will probably also win the military wars and all the other wars. (Location: 6,611)
  • The United States appears now to have greater technology abilities overall, though it varies by type of technology and the US is losing its lead. (Location: 6,616)
  • China will probably advance its technologies, and the quality of decision making that is enabled by them, faster than the US will because big data + big AI + big computing = superior decision making. (Location: 6,627)
  • American leaders can’t admit that the competitiveness of US technology is slipping (Location: 6,650 Note:Need to work hard in my job to help American competitiveness. Work in bitcoin to prevent china from getting a reserve currency?)
  • there is a tech decoupling going on that is part of the greater decoupling of China and the US, (Location: 6,660)
  • If the United States shuts off Chinese access to essential technologies, that would signal a major step up in the risk of a shooting war. (Location: 6,668)
  • THE GEOPOLITICAL WAR (Location: 6,672)
  • Sovereignty, especially as it relates to the Chinese mainland, Taiwan, Hong Kong, and the East and South China Seas, is probably China’s biggest issue. (Location: 6,672)
  • China is now stronger militarily in that region of the world. (Location: 6,694)
  • China has a strong desire not to have a hot war with the US or to forcibly control other countries (Location: 6,705)
  • countries, in varying degrees, are wrestling with the question of whether it is better to be aligned with the United States or with China, (Location: 6,725)
  • Chinese influence over other countries has been expanding while US influence has been receding. (Location: 6,736)
  • THE CAPITAL WAR (Location: 6,759)
  • The goal in a capital war is to cut the enemy off from capital because no money = no power. (Location: 6,763)
  • The United States’ greatest power comes from having the world’s leading reserve currency, (Location: 6,767)
  • The United States is at risk of losing its reserve currency status. (Location: 6,769)
  • China’s central bank has created a digital currency, which will make China less exposed to US sanctions. (Location: 6,808)
  • Gold (12 percent) is a hard currency that is held because it has worked the best over the ages and because it is an effective diversifier to other assets held, particularly fiat currencies. While before 1971 gold was at the foundation of the world’s currency system, at this time it is a relatively dead asset since there are no significant international trade and capital transactions in it and it isn’t used to balance external accounts. It is also a market that is too small to become a high share of wealth at current prices. A move to gold from fiat-currency-based assets (i.e., credit assets), which would only come in the event of an abandonment of that system (which history shows could come), would lead to an explosion in gold’s price. (Location: 6,814 Note:Own gold as hedge and diversification)
  • The renminbi (2 percent) is the only fiat currency to be chosen as a reserve currency because of its fundamentals. (Location: 6,823)
  • So there are no attractive world reserve currencies to compete with the dollar. (Location: 6,831)
  • History has shown that whenever a) currencies are not desired and b) there are no other currencies that are attractive to go into, the currencies are still devalued and the capital finds its way into other investments (e.g., gold, commodities, stocks, property, etc.). As a result, there is no need to have a strong alternative currency for a devaluation of a currency to take place. (Location: 6,832)
  • THE MILITARY WAR (Location: 6,845)
  • It is impossible to visualize what the next major military war will be like, though it probably will be much worse than most people imagine. (Location: 6,847)
  • Some people imagine that China could achieve broad military superiority in five to 10 years. (Location: 6,860)
  • when countries have big internal disorder, it is an opportune moment for opposing countries to aggressively exploit their vulnerabilities. (Location: 6,868)
  • History has taught us that when there are leadership transitions and/or weak leadership at the same time that there is big internal conflict, the risk of the enemy making an offensive move should be considered elevated. (Location: 6,870)
  • Because time is on China’s side, if there is to be a war, it is in the interest of the Chinese to have it later (e.g., five to 10 years from now when it will likely be stronger and more self-sufficient) and in the interest of the US to have it sooner. (Location: 6,872)
  • THE CULTURE WAR (Location: 6,877)
  • How people are with each other is of paramount importance in determining how they will handle the circumstances that they jointly face, and the cultures that they have will be the biggest determinants of how they are with each other. (Location: 6,878)
  • Because Americans and the Chinese have different values and cultural norms that they will fight and die for, if we are going to get through our differences peacefully it is important that both sides understand what these are and how to deal with them well. (Location: 6,881)
  • Chinese culture compels its leaders and society to make most decisions from the top down, demanding high standards of civility, putting the collective interest ahead of individual interests, requiring each person to know their role and how to play it well, and having filial respect for those superior in the hierarchy. (Location: 6,883)
  • American culture compels its leaders to run the country from the bottom up, demanding high levels of personal freedom, favoring individualism over collectivism, admiring revolutionary thinking and behavior, and not respecting people for their positions as much as for the quality of their thinking. (Location: 6,886)
  • The main challenge the Chinese and Americans have with each other arises from some of them failing to understand and empathize with the other’s values and ways of doing things, and not allowing each other to do what they think is best. (Location: 6,894)
  • the Chinese government, being more paternal, regulates what types of video games children play and how many hours a day they can play them, (Location: 6,902)
  • What works best varies according to a) the circumstances and b) how people using these systems are with each other. No system will sustainably work well—in fact all will break down—if the individuals in it don’t respect it more than what they individually want and if the system is not flexible enough to bend with the times without breaking. (Location: 6,946)
  • When they are in a superior position, the Chinese tend to want a) the relative positions to be clear (i.e., the party in a subordinate position knows that it is in a subordinate position), b) the subordinate party to obey, and c) the subordinate party to know that, if it doesn’t do so, it will be punished. (Location: 6,963)
  • the Chinese and Americans have different values and will make different choices for themselves than the other would like. (Location: 6,971)
  • It is way beyond me, and frankly when I speak with world leaders I find it shocking how little they really understand what the others in this multidimensional chess game are really thinking. (Location: 6,985)
  • THE RISK OF UNNECESSARY WAR (Location: 6,987)
  • Our greatest war is with ourselves because we have the most control over how strong or weak we are. (Location: 7,006)



  • I have learned to look at the past 1) to determine what’s likely to happen and 2) to protect myself and others I am responsible for against the possibility I am wrong or missing something important. (Location: 7,072)
  • Dealing with the future is all about 1) perceiving and adapting to what is happening, even if it can’t be anticipated; 2) coming up with probabilities for what might happen; and 3) knowing enough about what might happen to protect oneself against the unacceptable, even if one can’t do that perfectly. (Location: 7,076)
  • In playing the game of life it pays to do one’s best to understand how the world works, imagine the full range of possibilities (including their risks and rewards), and know how to spread one’s bets around well. (Location: 7,085)
  • The most important things evolve in ways that are easy to see and extrapolate forward, (Location: 7,095)
  • while extrapolating the past is generally a reasonable thing to do, also be prepared to be surprised because the future will be much different than you expect it to be. (Location: 7,143)
  • identifying, understanding, and adapting to paradigm shifts is essential, even if one can’t anticipate them—though trying to anticipate them with good indicators that help is important too. (Location: 7,148)
  • in the markets and in life, to be successful one should bet on the upside that comes from a) evolution that leads to productivity improvements, but not so aggressively that b) cycles and bumps along the way knock you out of the game. (Location: 7,164)
  • five determinants that have had the biggest impacts in the past and that I believe will have the biggest impacts on what happens in the years ahead: innovation, the debt/money/capital market cycle, the internal order and disorder cycle, the external order and disorder cycle, and acts of nature. (Location: 7,174)
  • innovation and inventiveness are clearly the most powerful determinant of a country’s conditions. (Location: 7,180)
  • humanity’s evolution through its inventiveness is accelerating and that most people will benefit from it. (Location: 7,188)
  • promises that are denominated in the world’s reserve currencies, most importantly the dollar, are too large and growing too fast to be paid in hard money. (Location: 7,230)
  • the biggest risk in the long run is the “currency value of money” risk, which most people don’t pay enough attention to. (Location: 7,236)
  • Luo Guanzhong’s classic book Romance of the Three Kingdoms begins: “The empire long divided must unite and long united must divide. Thus it has ever been.” (Location: 7,274)
  • peace is profitable and war is costly. (Location: 7,277)
  • Internal conflict is especially high in the United States, which appears to be in Stage 5 of the cycle (when there are bad financial conditions and intense conflict), while China appears to be in Stage 3 (when there is peace and prosperity). (Location: 7,282)
  • power rules and tests of power are the ways one learns who rules. (Location: 7,288)
  • While I think that the odds of the US devolving into a Stage 6 (civil-war-type) dynamic within the next 10 years are only around 30 percent, that is a dangerously high risk that must be protected against (Location: 7,291)
  • There is also an exceptional amount of polarization in the US right now, (Location: 7,298)
  • While the United States looks like it is in the precarious Stage 5 of the cycle, it also has the longest-lasting and most widely admired internal order (its constitutional system). (Location: 7,310)
  • if one’s spending is greater than one’s earnings and one’s liabilities are greater than one’s assets, those circumstances can only be reversed by working harder or consuming less. The question is whether we Americans can face our challenges honestly and adapt and change to meet them. (Location: 7,329 Note:Biggest takeaway: we need to live below our means)
  • All empires decline and new ones rise to replace them. (Location: 7,342)
  • the United States and China are clearly in four types of war (trade/economic war, technology war, capital war, and geopolitical war), though not intensely but they are intensifying. (Location: 7,351)
  • these four types of wars precede military wars by about five to 10 years. (Location: 7,354)
  • the odds of a big military war in the next 10 years are about 50/50, (Location: 7,358)
  • the losers of really big wars are completely wiped out and the winners lose too, (Location: 7,370)
  • for the foreseeable future China and the US will be powerful enough to inflict unacceptable harm on each other the prospect of mutually assured destruction should prevent military war, (Location: 7,378)
  • as time passes the risks increase. (Location: 7,383)
  • This seems to me to be the only possible trigger for a military war between the two greatest powers in the next 10 years. (Location: 7,388)
  • the best way to fight a war is to get strong and show one’s opponent one’s strength so they don’t want to fight violently. (Location: 7,399)
  • Graham Allison explained in his excellent book, Destined for War, (Location: 7,403)
  • humanity and natural evolution together are doing great damage to the environment that will be very costly in both money and quality of life. (Location: 7,422)
  • Based on backtesting, these estimates would have predicted a country’s average growth rate over the next decade within 1 percent of the actual growth 59 percent of the time, and within 2 percent about 90 percent of the time, with a correlation to subsequent growth of 81 percent. (Location: 7,901)
  • THE NEXT 10 YEARS (Location: 7,911)
  • Over the next 10 years, the most important dynamics are the short-term debt/money/economy cycle (also called the business cycle), the internal political cycle, and the escalating conflicts/reducing interdependencies between the US and China. (Location: 7,914)
  • my guess is that the next downturn will come sooner than is typical. (Location: 7,927)
  • These things point toward the next big risk point being around five years from this writing, give or take a couple of years. (Location: 7,950)
  • Know all the possibilities, think about the worst-case scenarios, and then find ways to eliminate the intolerable ones. (Location: 7,964)
  • Identifying and eliminating the intolerable worst-case scenarios comes first. That’s because the most important thing in playing the game (of life or the markets) is to not get knocked out of it. (Location: 7,966)
  • After that painful loss I calculated what my basic needs would cost and worked toward having enough money stashed away so my worst-case scenario would be tolerable. As I built up from nothing, I remember regularly calculating how many weeks, then months, and then years my family and I would be fine if not another dime came in. I now have an “end of the world” portfolio that I know will keep us fine in the worst-case scenarios, and I build from there. (Location: 7,968)
  • Diversify. (Location: 7,975)
  • Triangulate among the smartest people possible. (Location: 7,983)
  • As a result, debt assets (especially cash) will probably perform poorly and debt liabilities will probably be good to have, especially if invested in profitable, disruptive technologies and solid investments that have higher returns than the cost of funding them. (Location: 8,079)


Source: Cory


Created: 2022-01-04-Tue
Updated: 2023-01-07-Sat