After 1945, foreign central banks had the option of holding interest-rate-paying debt or holding non-interest-rate-earning gold. However, because the US dollar was now the international currency of choice, the global economy was experiencing a severe shortage of dollars at the time. So, whatyou are now reading came about because of my need to understand important things that are now happening that hadn’t happened in my lifetime but have happened many times before that. Pick the one from each category that you believe works best for your nation’s values and ambitions and you have your preferred approach. Stepping back to look at all of this from the big-picture level, what I’m saying about the relationship between 1) the economic part (i.e., money, credit, debt, economic activity, and wealth) and 2) the political part (both within countries and between countries) of rises and declines looks like the picture shown below.

Perhaps the most interesting relationship to watch is between China and Russia. In the case of the British pound, other countries’ central banks continued to hold a sizable share of their reserves in pounds through the 1950s, and about half of all international trade was denominated in sterling in 1960. Hopefully the fear of that great war and the destruction it would produce, like the fear of mutually assured destruction, will prevent it. Because many other things (real estate, art, etc.) Under each of these categories there are many versions and applications. Nearer-term goals and ways for getting toward these goals are set out in nearer-term plans like the Made in China 2025 plan,5 Xi’s new China Standards 2035 plan, and the usual five-year plans.6. They’re most popularly called “the business cycle,” though I call them “the short-term debt cycle” to distinguish them from “the long-term debt cycle.” Over long periods of time these short-term debt cycles add up to long-term debt cycles that typically last about 50 to 75 years.2 Because they come along about once in a lifetime most people aren’t aware of them; as a result they typically take people by surprise, which hurts a lot of people. He was a “reformer,” so from 1978 until he died in 1997 Deng Xiaoping’s most important policies were conveyed in a single phrase: “reform” and “opening up.” Reform meant “market reforms” which meant using the market to help allocate resources and to help motivate people, and “opening up” meant interacting with the outside world to learn, improve, and trade. For example, to Americans 300 years is a very long time. Because it takes less time and money to copy than invent, all else being equal, emerging empires tend to gain on mature empires through copying.

One could argue that getting them militarily was more cost-effective than trying to produce goods to trade with others to earn income to buy what was needed. The archetype helps me see the cause-effect relationships that drive how these cases typically progress. Marx had disdain for theories that were not connected to reality and that didn’t produce good change. This study is the product of that exercise. A few years ago, renowned investor Ray Dalio began noticing a confluence of political and economic conditions he hadn’t encountered before in his fifty-year career. It conveys how powerful China was relative to other empires in the world over that time frame. But Mao was on his way to achieving his first goal of having China’s mainland free of foreigners, shifting wealth and power to the proletariat led by him, and establishing basic institutions to govern. Through my research I saw that there were many cases of the same type of thing happening (e.g., depressions) and that by studying them just like a doctor studies many cases of a particular type of disease, I could gain a deeper understanding of how they work.

At this time, China has the world’s largest reserves. China joined in 2001.

That is why Chinese leaders study history to learn lessons that help them plan for the future and deal with the cases at hand. And the whole society likes it because it leads asset prices and production to rise.

The US Federal Reserve allowed the creation of a lot more claims on gold (i.e., dollar-denominated money and credit) than could actually be converted into gold at that $35 price. As I explained in Chapter 2, “The Big Cycle of Money, Credit, Debt, and Economic Activity,” there are three basic types of monetary systems in which 1) money has intrinsic value (like gold, silver, and copper coins), which I call a Type 1 monetary system, 2) money is linked to assets that have intrinsic value, which is paper money that can be exchanged for gold or silver at a fixed price (a Type 2 monetary system) and 3) money that is not linked to anything, which is called a fiat monetary system (a Type 3 monetary system). That panic out of dollar debt also led interest rates to rise and drove the gold price from the $35 that it was fixed at in 1944 and officially stayed at until 1971 to a then-peak of $670 in 1980. In China, which was still a world away but impacted, there was the same dynamic—a stock market bubble led by rubber production stocks (which was China’s equivalent of America’s railroad stock bubbles that contributed to panics there throughout the 19th century) that burst and led to a crash in 1910, which some have described as a factor in a debt/money/economic downswing that contributed to the end of Imperial China. These moves lead to cyclical rises and declines in the amounts and prices of money and credit, and of goods, services, and financial assets. When they are taken to excess, which they always are, the excesses lead to 2) depressing periods of destruction and restructuring, in which the country’s fundamental weaknesses of a) high levels of indebtedness, b) large wealth, values, and political gaps, c) different factions of people unable to work well together, d) poor education and poor infrastructure, and e) the struggle to maintain an overextended empire under the challenge of emerging powerful 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. At the same time the gaining of these strengths tends to sow the seeds of the cyclical decline that one should watch out for, which shows up in the form of…, The internal wars and challenges in both China and the US are more important and bigger than external wars and challenges. Though a bit of an oversimplification, it’s accurate to say that this was a period in which workers in other countries (especially those in China) and machines replaced middle-class workers in the United States.

The information provided herein is not intended to provide a sufficient basis on which to make an investment decision and investment decisions should not be based on simulated, hypothetical or illustrative information that have inherent limitations. [13]From US News & World Report: https://www.usnews.com/education/best-global-universities/rankings. Along the way up there are short-term debt and economic cycles that we call recessions and expansions.

Throughout all this time, inclusive of all of these swings, the amount of dollar-denominated money, credit, and debt in the world and the amounts of other non-debt liabilities (such as pensions and healthcare) continued to rise in relation to incomes, especially in the US because of the Federal Reserve’s unique ability to support this debt growth. It shows the average of each of these measures of strength, with most of the weight on the most recent three reserve countries (the US, the UK, and the Dutch).1. Typically leading up to a country losing its reserve currency position 1) there is an already established loss of economic and political primacy to a rising rival that creates a vulnerability (e.g., the Dutch falling behind the UK or the UK falling behind the US) and 2) there are large and growing debts that are monetized by the central bank printing money and buying government debt, leading to 3) a weakening of the currency in a self-reinforcing run from the currency that can’t be stopped because the fiscal and balance of payments deficits are too great for cutbacks to close. Throughout the 1960s, the UK was forced to defend the peg to the dollar by selling about half of its FX reserve holdings and keeping rates higher than the rest of the developed world—even though the UK economy was underperforming. Those responsible for preparing this report receive compensation based upon various factors, including, among other things, the quality of their work and firm revenues. This debt management and restructuring process lasted until 1991, when it was completed through the Brady Bond agreement, named after Nicholas Brady who was the US Secretary of Treasury at the time. That is a whole other interesting story that we won’t get into now. Because the interest rate was far above the inflation rate debtors had to pay much more in debt service at the same time as their incomes and assets fell in value. As I studied history, I saw that this confluence of events was typical of periods that existed as roughly 10- to 20-year transition phases between big economic and political cycles that occurred over many years (e.g., 50-100 years). The main thing to know is that the United States has by far the greatest arsenal of sanctions. I started to look a bit more carefully around 500-600 BC, so that I could start around the time of Confucius and Confucianism, and Lao Tzu and Taoism, which has shaped how the Chinese are with each other and with others. Or, if they were American, they would typically pay in dollars and the seller would turn that money in to its country’s central bank for its local currency and that central bank would turn its surplus of dollars in for gold, so gold would leave the US central bank reserve account and go into the other central bank account. When this becomes extreme so that the money and credit system breaks down and debts have been devalued and/or defaulted on, necessity generally compels governments to go back to some form of hard currency to rebuild people’s faith in the value of money as a storehold of wealth so that credit growth can resume. Through my experiences and by getting to know some of China’s top leaders, in addition to learning about Chinese economics and markets, I learned a lot about Chinese culture, how it operates today, and how it has evolved over thousands of years: from notions of how family members and others should behave with each other to Confucian thinking and neo-Confucian thinking, and through various dynasties and modern leaders to the lessons these events provide about how leaders should lead and how followers should follow.

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