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(dramatic music)

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- [Ray Dalio] The changing world order.

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The times ahead will
be radically different

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from those that we've
experienced in our lifetimes,

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though similar to many times before.

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How do I know that?

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Because they always have been.

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Over my roughly 50 years of
global macroeconomic investing,

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I've learned the hard way

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that the most important
events that surprised me,

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did so because they never
happened in my lifetime.

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These painful surprises led me to study

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the last 500 years of history
for similar situations

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where I saw that they had indeed
happened many times before

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with the ups and the downs of the Dutch,

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British,

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and US empires.

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And every time they did,

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it was a sign of the changing world order.

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This study taught me valuable lessons

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that I'm going to pass along to you here

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in a distilled form.

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You can find the comprehensive
version in my book,

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Principles for Dealing with
the Changing World Order.

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Let me begin with a story
that brought me to this point,

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about how I learned to
anticipate the future

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by studying the past.

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In 1971, when I was a young clerk

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on the floor of the New
York Stock Exchange,

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the United States ran out of money

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and defaulted on its debts.

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That's right. The US ran out of money.

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How?

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Well, back then gold was the money

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used in transactions between countries.

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Paper money, like the dollar,
was like checks in a checkbook

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in that it had no value

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other than it could be exchanged for gold,

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which was the real money.

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At the time, the United
States was spending

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a lot more money than it was earning

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by writing a lot more of
these paper money checks

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than it had gold in the
bank to exchange for them.

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As people turned these checks
into the bank for gold money,

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the amount of gold in the
US started to dwindle.

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It soon became obvious

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that the US couldn't keep its promises

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for all the existing paper money,

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so people holding dollars
rushed to exchange them

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before the gold ran out.

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Recognizing that the US

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was going to run out of real money,

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on Sunday evening, August 15th,

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President Nixon went on
television to tell the world

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that the US was breaking its promise

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to let people exchange
their dollars for gold.

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Of course, he didn't say it that way.

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He said it more diplomatically,

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without making it clear

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that the United States was defaulting.

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- [President Nixon] The
strength of a nation's currency

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is based on the strength
of that nation's economy.

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And the American economy is by far

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the strongest in the world.

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Accordingly, I have directed
the secretary of the treasury

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to take the action necessary

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to defend the dollar
against the speculators.

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I have directed Secretary
Connally to suspend temporarily

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the convertibility of the dollar into gold

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or other reserve assets,

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except in amounts and conditions

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determined to be in the
interest of monetary stability

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and in the best interest
of the United States.

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- [Ray] I watched in awe

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realizing that money as we
understood it was ending.

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What a crisis!

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I expected the stock market
to plunge the next day,

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so I got on the exchange
floor early to prepare.

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When the opening bell rang,
pandemonium broke out,

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but not the kind I expected.

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The market was up - way up -

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and went on to rise nearly 25%.

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That surprised me

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because I never experienced a
currency devaluation before.

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When I dug into history,

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I discovered that the exact
same thing happened in 1933

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and had the exact same effect.

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Then, paper dollars were
also linked to gold,

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which the US was running out of

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because it was spending
more paper money checks

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than it had gold to exchange for them.

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And President Roosevelt
announced on the radio

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that he would break the country's promise

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to exchange dollars for gold.

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- [President Roosevelt] It
was then that I issued the

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proclamation providing for
the national bank holiday.

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And this was the first step

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in the government's reconstruction

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of our financial and economic fabrics.

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The second step, last
Thursday, was the legislation

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promptly and patriotically
passed by the Congress

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confirming my proclamation
and broadening my powers

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so that it became possible

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in view of the requirement of time

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to extend the holiday and
lift the ban of that holiday

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gradually in the days to come.

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This law also gave authority

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to develop a program...

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- [Ray] In both cases,
breaking the link to gold

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allowed the US to continue
spending more than it earned

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simply by printing more paper dollars.

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Since there was an increase
in the number of dollars

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without an increase in
the country's wealth,

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the value of each dollar fell.

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As these new dollars entered the market

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without a corresponding
increase in productivity,

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they went to buy lots of
stocks, gold and commodities,

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and hence caused their prices to rise.

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As I studied more history,

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I saw that the exact same thing happened

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many, many times before.

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I saw that since the beginning of time,

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when governments spent much
more than they took in taxes

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and conditions got bad,

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they ran out of money
and they needed more.

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So, they printed more, a lot more,

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which made its value fall

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and made the prices of most everything,

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including stocks, gold
and commodities rise.

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That's when I first
learned the principle that

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when central banks print a lot
of money to relieve a crisis,

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buy stocks, gold and commodities

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because their value will rise

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and the value of paper money will fall.

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This printing of money is
also what happened in 2008

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to relieve the
mortgage-driven debt crisis,

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and in 2020 to relieve the
pandemic-driven economic crisis.

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And it almost certainly
will happen in the future.

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So, I suggest that you keep
this principle in mind.

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These experiences gave me
another principle, which is,

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to understand what is coming at you,

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you need to understand
what happened before you.

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That principle led me to study

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how the roaring twenties bubble

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turned into the 1930s depression,

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which gave me the lessons

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that allowed me to anticipate

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and profit from the 2007 bubble

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turning into the 2008 bust.

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All these experiences led me to develop

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an almost instinctual urge

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to look to the past for similar situations

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to learn how to handle the future well.

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Changing orders.

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(man whistles)

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(machine beeping)

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Over the last few years,

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three big things that hadn't
happened in my lifetime

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prompted me to do this study.

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First, countries didn't have enough money

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to pay their debts,

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even after lowering
interest rates to zero.

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So their central banks
began printing lots of money

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to do so.

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Second, big internal conflicts emerged

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due to growing gaps in wealth and values.

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This showed up in political populism

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and polarization between the left,

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who want to redistribute wealth,

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and the right, who want to
defend those holding the wealth.

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And third, increasing external conflict

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between a rising great power
and the leading great power,

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as is now happening with
China and the United States.

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So, I looked back.

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I saw that all these had happened
together before many times

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and nearly always led to changing
domestic and world orders.

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The last time this sequence
happened was from 1930 to 1945.

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What exactly is an order? You might ask.

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It's a governing system for
people dealing with each other.

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There are internal orders for
governing within countries,

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typically laid out in constitutions.

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And there is a world order for
governing between countries,

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typically laid out in treaties.

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Internal orders change at
different times than world orders,

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though whether within
or between countries,

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these orders typically change after wars.

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Civil wars within countries,

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international wars between countries.

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They happen when revolutionary new forces

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defeat weak old orders.

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For example, the US internal order

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was laid out in the constitution in 1789

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after the American Revolution,

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and it is still operating today,

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even after the American Civil War.

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Russia got rid of its old
order and established a new one

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with the Russian revolution in 1917,

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which ended in 1991 with a
relatively bloodless revolution.

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China began its current
internal order in 1949

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when the Chinese Communist
Party won the civil war.

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You get the idea.

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The current world order

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commonly called the American world order,

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formed after the allied
victory in World War II

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when the US emerged as
the dominant world power.

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It was set out in agreements and treaties

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for how global governance
and monetary systems work.

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In 1944, the new world monetary system

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was laid out in the
Bretton Woods Agreement

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and established the dollar

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as the world's leading reserve currency.

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A reserve currency is a currency

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that is commonly accepted
around the world,

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and having one is a key factor

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in a country becoming the
richest and most powerful empire.

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With a new dominant power and
monetary system established,

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a new world order begins.

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These changes take place in a
timeless and universal cycle

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that I call the big cycle.

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I'll start with a quick overview,

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then give you a more complete version

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and then direct you to
my book if you want more.

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As I studied the 10 most powerful empires

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over the last 500 years

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and the last three reserve currencies,

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it took me through the rise and decline

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of the Dutch empire and the guilder,

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the British empire and the pound,

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the rise and early decline

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in the United States
empire and the dollar,

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and the decline and rise
of the Chinese empire

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and its currencies,

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as well as the rise and
decline of the Spanish, German,

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French, Indian, Japanese,
Russian, and Ottoman empires,

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along with their significant conflicts

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as measured in this chart.

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To understand China's patterns better,

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I also studied the rise and fall

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of Chinese dynasties and their
monies back to the year 600.

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Because looking at all
these measures at once

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can be confusing,

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I'll focus on the four
most important ones,

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the Dutch, British, US and Chinese.

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You'll quickly notice the pattern.

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Now let's simplify the form a bit.

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As you can see, they transpired
in overlapping cycles

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that lasted about 250 years

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with 10 to 20 year transition
periods between them.

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Typically, these two transitions

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have been periods of great conflict

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because leading powers don't
decline without a fight.

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So, how am I measuring an empire's power?

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In this study, I used eight metrics.

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Each country's measure of total power

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is derived by averaging them together.

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They are education,

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inventiveness and technology development,

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competitiveness in global
markets, economic output,

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share of world trade, military strength,

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the power of their financial
center for capital markets

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and the strength of their
currency as a reserve currency.

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Because these powers are measurable,

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we can see how strong each
country is now, was in the past,

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00:14:02,820 --> 00:14:05,203
and whether they're rising or declining.

265
00:14:06,560 --> 00:14:10,330
By examining the sequences
from many countries,

266
00:14:10,330 --> 00:14:13,403
we can see how a typical cycle transpires.

267
00:14:15,200 --> 00:14:17,700
And because the wiggles can be confusing,

268
00:14:17,700 --> 00:14:19,470
we can simplify it a bit

269
00:14:19,470 --> 00:14:23,280
to focus on the pattern of
cause-effect relationships

270
00:14:23,280 --> 00:14:26,743
that drive the rise and
decline of a typical empire.

271
00:14:27,800 --> 00:14:31,640
As you can see, better
education typically leads

272
00:14:31,640 --> 00:14:35,350
to increased innovation
and technology development,

273
00:14:35,350 --> 00:14:39,060
and with a lag, the
establishment of the currency

274
00:14:39,060 --> 00:14:41,410
as a reserve currency.

275
00:14:41,410 --> 00:14:43,840
You can also see that these forces

276
00:14:43,840 --> 00:14:46,170
then declined in a similar order,

277
00:14:46,170 --> 00:14:48,253
reinforcing each other's decline.

278
00:14:49,150 --> 00:14:51,930
Let's now look at the
typical sequence of events

279
00:14:51,930 --> 00:14:53,640
going on inside a country

280
00:14:53,640 --> 00:14:56,990
that produces these rises and declines.

281
00:14:56,990 --> 00:15:00,850
In a nutshell, the big
cycle typically begins

282
00:15:00,850 --> 00:15:03,710
after a major conflict, often a war,

283
00:15:03,710 --> 00:15:08,690
establishes the new leading
power and the new world order.

284
00:15:08,690 --> 00:15:11,520
Because no one wants to
challenge this power,

285
00:15:11,520 --> 00:15:15,400
a period of peace and
prosperity typically follows.

286
00:15:15,400 --> 00:15:18,290
As people get used to
this peace and prosperity,

287
00:15:18,290 --> 00:15:21,490
they increasingly bet on it continuing.

288
00:15:21,490 --> 00:15:23,570
They borrow money to do that,

289
00:15:23,570 --> 00:15:26,710
which eventually leads
to a financial bubble.

290
00:15:26,710 --> 00:15:28,930
The empire's share of trade grows.

291
00:15:28,930 --> 00:15:32,760
And when most transactions
are conducted in its currency,

292
00:15:32,760 --> 00:15:35,350
it becomes a reserve currency,

293
00:15:35,350 --> 00:15:37,163
which leads to even more borrowing.

294
00:15:38,170 --> 00:15:41,200
At the same time, this
increased prosperity

295
00:15:41,200 --> 00:15:43,760
distributes wealth unevenly.

296
00:15:43,760 --> 00:15:45,930
So the wealth gap typically grows

297
00:15:45,930 --> 00:15:49,343
between the rich "haves"
and the poor "have-nots".

298
00:15:50,360 --> 00:15:52,980
Eventually, the financial bubble bursts,

299
00:15:52,980 --> 00:15:55,223
which leads to the printing of money,

300
00:15:56,680 --> 00:15:59,040
an increased internal conflict

301
00:15:59,040 --> 00:16:00,640
between the rich and the poor,

302
00:16:00,640 --> 00:16:03,270
which leads to some form of revolution

303
00:16:03,270 --> 00:16:05,230
to redistribute wealth.

304
00:16:05,230 --> 00:16:09,080
This can happen peacefully
or as a civil war.

305
00:16:09,080 --> 00:16:13,080
While the empire struggles
with this internal conflict,

306
00:16:13,080 --> 00:16:15,720
its power diminishes relative to

307
00:16:15,720 --> 00:16:18,870
external rival powers on the rise.

308
00:16:18,870 --> 00:16:20,670
When a new rising power

309
00:16:20,670 --> 00:16:23,760
gets strong enough to compete
with the dominant power

310
00:16:23,760 --> 00:16:26,280
that is having domestic breakdowns,

311
00:16:26,280 --> 00:16:31,280
external conflicts, most
typically wars, take place.

312
00:16:31,580 --> 00:16:34,400
Out of these internal and external wars

313
00:16:34,400 --> 00:16:37,870
come new winners and losers.

314
00:16:37,870 --> 00:16:42,570
Then the winners get together
to create the new world order.

315
00:16:42,570 --> 00:16:44,563
And the cycle begins again.

316
00:16:45,540 --> 00:16:46,760
As I looked back,

317
00:16:46,760 --> 00:16:49,700
I saw that these cause
and effect relationships

318
00:16:49,700 --> 00:16:52,600
drove the cycles of rises and declines

319
00:16:52,600 --> 00:16:55,050
all the way back to the Roman empire.

320
00:16:55,050 --> 00:16:58,650
I saw how the stories of
each one of these cycles

321
00:16:58,650 --> 00:17:03,240
blended together with others
before, during, and after

322
00:17:03,240 --> 00:17:08,060
in the same way as each individual
story blends with others

323
00:17:08,060 --> 00:17:11,540
to make the epic 500 year story

324
00:17:11,540 --> 00:17:14,260
that is our collective history.

325
00:17:14,260 --> 00:17:16,273
And like human life cycles,

326
00:17:17,210 --> 00:17:20,960
no two are exactly the
same, but most are similar.

327
00:17:20,960 --> 00:17:24,800
They're driven by logical
cause and effect relationships

328
00:17:24,800 --> 00:17:27,839
that progress through stages from birth

329
00:17:27,839 --> 00:17:29,849
to strength and maturity

330
00:17:29,850 --> 00:17:33,690
to weakness and inevitably decline.

331
00:17:33,690 --> 00:17:36,520
However, that's like saying
a person's life cycle

332
00:17:36,520 --> 00:17:38,740
takes 80 years on average

333
00:17:38,740 --> 00:17:42,050
without recognizing that
many are much shorter

334
00:17:42,050 --> 00:17:44,080
and many are longer.

335
00:17:44,080 --> 00:17:47,840
While age can be a good
indicator of future longevity,

336
00:17:47,840 --> 00:17:51,640
a better way is to look
at health indicators.

337
00:17:51,640 --> 00:17:56,150
One can do that with empires
and their vital signs too.

338
00:17:56,150 --> 00:17:59,950
I found that by watching the
indicators of power change,

339
00:17:59,950 --> 00:18:03,070
I was able to see what
stage a country was in,

340
00:18:03,070 --> 00:18:07,430
which helped me to anticipate
what was likely to come next.

341
00:18:07,430 --> 00:18:11,420
Now, I'll take you through
the big cycle in more detail.

342
00:18:11,420 --> 00:18:12,800
Give me 20 minutes

343
00:18:12,800 --> 00:18:16,340
and I'll give you the
last 500 years of history

344
00:18:16,340 --> 00:18:18,840
and show you the similar patterns across

345
00:18:18,840 --> 00:18:23,773
the Dutch, British, US
and Chinese empires.

346
00:18:25,310 --> 00:18:27,883
500 years of big cycles.

347
00:18:30,884 --> 00:18:33,634
(wind whooshing)

348
00:18:35,370 --> 00:18:37,770
I'm going to describe the typical cycle

349
00:18:37,770 --> 00:18:40,213
by dividing it into three phases.

350
00:18:41,060 --> 00:18:44,373
The rise, the top, and the decline.

351
00:18:45,610 --> 00:18:46,673
The rise.

352
00:18:47,850 --> 00:18:52,850
Successful new orders that rise,
both internal and external,

353
00:18:52,850 --> 00:18:57,040
are typically started by
powerful revolutionary leaders

354
00:18:57,040 --> 00:18:58,910
doing four things.

355
00:18:58,910 --> 00:19:00,690
First, they win power

356
00:19:00,690 --> 00:19:03,820
by gaining more support
than the opposition.

357
00:19:03,820 --> 00:19:06,140
Second, they consolidate power

358
00:19:06,140 --> 00:19:10,120
by converting, weakening, or
eliminating the opposition

359
00:19:10,120 --> 00:19:12,170
so they don't stand in their way.

360
00:19:12,170 --> 00:19:15,760
Third, they establish
systems and institutions

361
00:19:15,760 --> 00:19:17,500
that make the country work well.

362
00:19:17,500 --> 00:19:20,700
And fourth, they pick
their successors well,

363
00:19:20,700 --> 00:19:23,210
or create systems that do that,

364
00:19:23,210 --> 00:19:27,310
because a great empire
requires many great leaders

365
00:19:27,310 --> 00:19:29,610
over several generations.

366
00:19:29,610 --> 00:19:32,720
At this stage soon
after winning the fight,

367
00:19:32,720 --> 00:19:36,490
there was typically a period
of peace and growing prosperity

368
00:19:36,490 --> 00:19:39,250
because the leadership is clearly dominant

369
00:19:39,250 --> 00:19:42,880
and has broad support so
no one wants to fight it.

370
00:19:42,880 --> 00:19:45,740
During this phase,
leaders within the country

371
00:19:45,740 --> 00:19:47,950
have to design an excellent system

372
00:19:47,950 --> 00:19:50,570
to raise the country's wealth and power.

373
00:19:50,570 --> 00:19:52,440
First and foremost, to be great

374
00:19:52,440 --> 00:19:55,550
they must have strong education,

375
00:19:55,550 --> 00:19:58,400
which is not just teaching
knowledge and skills,

376
00:19:58,400 --> 00:20:03,400
but also strong character,
civility and work ethic.

377
00:20:03,850 --> 00:20:05,980
These are typically taught in the family,

378
00:20:05,980 --> 00:20:08,310
schools and religious institutions.

379
00:20:08,310 --> 00:20:11,530
That provides a healthy
respect for rules and laws,

380
00:20:11,530 --> 00:20:14,380
order within society, low corruption,

381
00:20:14,380 --> 00:20:18,130
and enables them to unite
behind a common purpose

382
00:20:18,130 --> 00:20:19,313
and work well together.

383
00:20:20,490 --> 00:20:21,710
As they do this,

384
00:20:21,710 --> 00:20:25,270
they increasingly shift from
producing basic products

385
00:20:25,270 --> 00:20:29,473
to innovating and
inventing new technologies.

386
00:20:31,700 --> 00:20:36,220
For example, the Dutch rose
to defeat the Habsburg empire

387
00:20:36,220 --> 00:20:38,590
and become superbly educated.

388
00:20:38,590 --> 00:20:42,340
They became so inventive that
they came up with a quarter

389
00:20:42,340 --> 00:20:44,680
of all major inventions in the world.

390
00:20:44,680 --> 00:20:48,280
The most important of which
was the invention of ships

391
00:20:48,280 --> 00:20:51,850
that could travel around the
world to collect great riches

392
00:20:51,850 --> 00:20:55,480
and the invention of
capitalism as we know it today

393
00:20:55,480 --> 00:20:57,580
to finance those voyages.

394
00:20:57,580 --> 00:21:01,010
They, like all leading empires,
enhanced their thinking

395
00:21:01,010 --> 00:21:04,460
by being open to the best
thinking in the world.

396
00:21:04,460 --> 00:21:05,480
As a result,

397
00:21:05,480 --> 00:21:08,480
the people in the country
become more productive

398
00:21:08,480 --> 00:21:11,610
and more competitive in world markets,

399
00:21:11,610 --> 00:21:15,830
which shows up in their
growing economic output

400
00:21:15,830 --> 00:21:19,370
and rising share of world trade.

401
00:21:19,370 --> 00:21:21,100
You can see this happening now

402
00:21:21,100 --> 00:21:24,200
as the US and China are roughly comparable

403
00:21:24,200 --> 00:21:26,790
in both their economic outputs

404
00:21:26,790 --> 00:21:28,623
and their shares of world trade.

405
00:21:30,470 --> 00:21:32,400
As countries trade more globally,

406
00:21:32,400 --> 00:21:34,450
they must protect their trade routes

407
00:21:34,450 --> 00:21:36,640
and their foreign interests from attack.

408
00:21:36,640 --> 00:21:40,410
So they develop great military strength.

409
00:21:40,410 --> 00:21:42,940
If done well, this virtuous cycle

410
00:21:42,940 --> 00:21:45,990
leads to strong income growth,

411
00:21:45,990 --> 00:21:48,710
which can be used to finance investments

412
00:21:48,710 --> 00:21:53,440
in education, infrastructure,
and research and development.

413
00:21:53,440 --> 00:21:57,900
They must also develop systems
to incentivize and empower

414
00:21:57,900 --> 00:22:02,410
those that have the ability
to make or take wealth.

415
00:22:02,410 --> 00:22:06,310
In all of these cases, the
most successful empires

416
00:22:06,310 --> 00:22:08,030
used a capitalist approach

417
00:22:10,670 --> 00:22:13,830
to develop productive entrepreneurs.

418
00:22:13,830 --> 00:22:17,490
Even China, which is run by
the Chinese Communist Party,

419
00:22:17,490 --> 00:22:21,104
used a form of this capitalist approach.

420
00:22:21,104 --> 00:22:24,521
(cash registers ringing)

421
00:22:27,170 --> 00:22:30,037
Deng Xiaoping, when
asked about this, said,

422
00:22:30,037 --> 00:22:33,087
"It doesn't matter if it's
a white cat or a black cat,

423
00:22:33,087 --> 00:22:35,600
"as long as it catches mice."

424
00:22:35,600 --> 00:22:38,387
And "it's glorious to be rich."

425
00:22:39,470 --> 00:22:43,560
To do this well, they must
develop their capital markets.

426
00:22:43,560 --> 00:22:48,400
Most importantly, their
lending, bond and stock markets.

427
00:22:48,400 --> 00:22:49,530
That allows people

428
00:22:49,530 --> 00:22:53,050
to convert their savings into investments,

429
00:22:53,050 --> 00:22:55,960
to fund invention and development

430
00:22:57,800 --> 00:22:59,860
and share in the successes

431
00:22:59,860 --> 00:23:02,163
of those who make great things happen.

432
00:23:03,230 --> 00:23:06,690
The Dutch created the first
publicly listed company,

433
00:23:06,690 --> 00:23:08,860
the Dutch East India Company,

434
00:23:08,860 --> 00:23:11,120
and the first stock market to fund it,

435
00:23:11,120 --> 00:23:13,840
which were integral parts of the system

436
00:23:13,840 --> 00:23:17,340
that produced massive wealth and power.

437
00:23:17,340 --> 00:23:20,960
As a natural consequence, the
greatest empires developed

438
00:23:20,960 --> 00:23:23,230
the world's leading financial centers

439
00:23:23,230 --> 00:23:26,383
for attracting and distributing
the world's capital.

440
00:23:27,470 --> 00:23:30,170
Amsterdam was the world's financial center

441
00:23:30,170 --> 00:23:31,863
when the Dutch were preeminent,

442
00:23:33,210 --> 00:23:35,860
London when the British were on top,

443
00:23:35,860 --> 00:23:37,610
New York is now,

444
00:23:37,610 --> 00:23:41,690
and China is quickly developing
its financial centers.

445
00:23:41,690 --> 00:23:45,690
Most importantly, the
capitalists, the governments

446
00:23:45,690 --> 00:23:48,660
and the military must work together.

447
00:23:48,660 --> 00:23:51,280
Not only did the Dutch work well together,

448
00:23:51,280 --> 00:23:53,320
they were one in the same.

449
00:23:53,320 --> 00:23:55,050
The Dutch East India Company

450
00:23:55,050 --> 00:23:58,180
was granted a trade
monopoly from the government

451
00:23:58,180 --> 00:24:01,560
and had its own officially
sanctioned military

452
00:24:01,560 --> 00:24:06,313
to go out into the global
markets to make and take wealth.

453
00:24:07,210 --> 00:24:10,890
The British followed with the
British East India Company

454
00:24:10,890 --> 00:24:12,920
and had a similar coordination

455
00:24:12,920 --> 00:24:17,230
of their government, business
and military operations.

456
00:24:17,230 --> 00:24:21,600
The US Military Industrial
Complex followed suit,

457
00:24:21,600 --> 00:24:23,913
as does the Chinese system today.

458
00:24:26,960 --> 00:24:28,070
As the country becomes

459
00:24:28,070 --> 00:24:30,830
the largest international trading empire,

460
00:24:30,830 --> 00:24:34,630
its transactions can be
paid with its currency,

461
00:24:34,630 --> 00:24:38,220
making it the preferred
global medium of exchange,

462
00:24:38,220 --> 00:24:40,210
and because their currency

463
00:24:40,210 --> 00:24:43,660
is so widely accepted and frequently used,

464
00:24:43,660 --> 00:24:46,263
people around the world
want to save in it,

465
00:24:47,240 --> 00:24:50,820
making it the preferred
store hold of wealth.

466
00:24:50,820 --> 00:24:55,230
And thus the world's
leading reserve currency.

467
00:24:55,230 --> 00:24:58,180
The guilder was the world's
main reserve currency

468
00:24:58,180 --> 00:25:00,270
when the Dutch led world trade.

469
00:25:00,270 --> 00:25:02,393
The pound was when the British led.

470
00:25:03,310 --> 00:25:05,873
And the dollar has been since the US led.

471
00:25:07,080 --> 00:25:10,490
Naturally, China's currency
is increasingly being used

472
00:25:10,490 --> 00:25:12,760
as a reserve currency.

473
00:25:12,760 --> 00:25:15,480
Having a reserve currency
enables the empire

474
00:25:15,480 --> 00:25:17,977
to borrow more than other countries.

475
00:25:19,630 --> 00:25:21,663
That advantage is huge.

476
00:25:22,810 --> 00:25:23,850
Think about it.

477
00:25:23,850 --> 00:25:27,040
People all over the
world are eager to save

478
00:25:27,040 --> 00:25:31,000
and hence lend back their
currency to the empire.

479
00:25:31,000 --> 00:25:34,570
Countries without a reserve
currency don't have that.

480
00:25:34,570 --> 00:25:37,680
And when the empire runs
out of its own money,

481
00:25:37,680 --> 00:25:40,313
remember the United States in 1971,

482
00:25:41,410 --> 00:25:43,680
they can always print more.

483
00:25:43,680 --> 00:25:45,620
The exorbitant privilege

484
00:25:45,620 --> 00:25:48,950
afforded by the empire's reserve currency

485
00:25:48,950 --> 00:25:51,400
leads borrowing to increase

486
00:25:51,400 --> 00:25:54,670
and the beginning of a financial bubble.

487
00:25:54,670 --> 00:25:57,850
This series of cause and
effect relationships,

488
00:25:57,850 --> 00:26:00,200
leading to mutually supportive

489
00:26:00,200 --> 00:26:03,250
financial, political and military powers,

490
00:26:03,250 --> 00:26:06,800
bolstered by the borrowing
power of a reserve currency,

491
00:26:06,800 --> 00:26:10,790
have gone together since
history began to be recorded.

492
00:26:10,790 --> 00:26:14,480
All the empires that became
the most powerful in the world

493
00:26:14,480 --> 00:26:17,173
followed this path to the top.

494
00:26:27,630 --> 00:26:29,290
While in the top phase,

495
00:26:29,290 --> 00:26:31,740
most of these strengths are sustained,

496
00:26:31,740 --> 00:26:34,620
embedded within the
fruits of their success

497
00:26:34,620 --> 00:26:37,050
are the seeds of their decline.

498
00:26:37,050 --> 00:26:38,140
As a rule,

499
00:26:38,140 --> 00:26:41,423
as people in these rich and
powerful countries earn more,

500
00:26:42,490 --> 00:26:45,600
that makes them more
expensive and less competitive

501
00:26:45,600 --> 00:26:47,547
relative to people in other countries

502
00:26:47,547 --> 00:26:49,653
who are willing to work for less.

503
00:26:50,580 --> 00:26:54,280
At the same time, people in
other countries naturally copy

504
00:26:54,280 --> 00:26:57,360
the methods and technologies
of the leading power,

505
00:26:57,360 --> 00:27:00,993
which further reduces the
leading power's competitiveness.

506
00:27:01,880 --> 00:27:04,480
For example, British ship builders

507
00:27:04,480 --> 00:27:08,320
had less expensive workers
than Dutch ship builders.

508
00:27:08,320 --> 00:27:12,860
So, they hired Dutch designers
to design better ships

509
00:27:12,860 --> 00:27:16,260
that were built by less
expensive British workers,

510
00:27:16,260 --> 00:27:18,210
making them more competitive,

511
00:27:18,210 --> 00:27:22,490
which led the British to rise
and the Dutch to decline.

512
00:27:22,490 --> 00:27:24,700
Also, as people become richer,

513
00:27:24,700 --> 00:27:27,220
they tend not to work as hard.

514
00:27:27,220 --> 00:27:28,910
They enjoy more leisure,

515
00:27:28,910 --> 00:27:32,020
pursue the finer and less
productive things in life,

516
00:27:32,020 --> 00:27:34,423
and at the extreme, become decadent.

517
00:27:35,550 --> 00:27:38,600
Values change from
generation to generation

518
00:27:38,600 --> 00:27:40,280
during the rise to the top

519
00:27:40,280 --> 00:27:43,360
from those who had to fight
to achieve wealth and power

520
00:27:43,360 --> 00:27:45,387
to those who inherited it.

521
00:27:45,387 --> 00:27:46,660
(boy groans)
(boy blows raspberry)

522
00:27:46,660 --> 00:27:49,660
They're less battle
heartened, steeped in luxuries

523
00:27:49,660 --> 00:27:51,900
and accustomed to the easy life,

524
00:27:51,900 --> 00:27:54,970
which makes them more
vulnerable to challenges.

525
00:27:54,970 --> 00:27:57,580
The golden era of the Dutch empire

526
00:28:00,621 --> 00:28:02,710
(glasses clink)

527
00:28:02,710 --> 00:28:05,550
and the Victorian era
of the British empire

528
00:28:08,083 --> 00:28:11,230
(glasses clink)

529
00:28:11,230 --> 00:28:14,453
were such high prosperity
periods like this.

530
00:28:15,390 --> 00:28:17,640
As people get used to doing well,

531
00:28:17,640 --> 00:28:21,460
they increasingly bet on
the good times continuing

532
00:28:21,460 --> 00:28:23,320
and borrow money to do that,

533
00:28:23,320 --> 00:28:25,933
which grows into the financial bubbles.

534
00:28:27,180 --> 00:28:30,410
Naturally, the financial
gains come unevenly.

535
00:28:30,410 --> 00:28:32,123
So, the wealth gap grows.

536
00:28:33,000 --> 00:28:35,270
Wealth gaps are self-reinforcing

537
00:28:35,270 --> 00:28:38,400
because rich people use
their greater resources

538
00:28:38,400 --> 00:28:40,680
to reinforce their powers.

539
00:28:40,680 --> 00:28:44,460
For example, they give greater
privileges to their children,

540
00:28:44,460 --> 00:28:46,010
like better education,

541
00:28:46,010 --> 00:28:49,233
and they influence the political
system to their advantage.

542
00:28:50,220 --> 00:28:53,780
This causes the gaps in values, politics,

543
00:28:53,780 --> 00:28:56,240
and opportunities to grow between

544
00:28:56,240 --> 00:28:59,223
the rich "haves" and the poor "have-nots".

545
00:29:00,910 --> 00:29:04,620
Those who are less well-off
feel the system is unfair,

546
00:29:04,620 --> 00:29:06,800
so resentments grow.

547
00:29:06,800 --> 00:29:08,700
But as long as the living standards

548
00:29:08,700 --> 00:29:10,980
of most people are still rising,

549
00:29:10,980 --> 00:29:14,960
these gaps in resentments
don't boil over into conflict.

550
00:29:14,960 --> 00:29:17,020
Having the world's reserve currency

551
00:29:17,020 --> 00:29:20,290
inevitably leads to borrowing excessively

552
00:29:20,290 --> 00:29:23,110
and contributes to the country building up

553
00:29:23,110 --> 00:29:26,030
large debts with foreign lenders.

554
00:29:26,030 --> 00:29:29,870
While this boosts spending
power over the short term,

555
00:29:29,870 --> 00:29:32,750
it weakens the country's financial health

556
00:29:32,750 --> 00:29:36,340
and weakens the currency
over the long-term.

557
00:29:36,340 --> 00:29:39,860
In other words, when borrowing
and spending are strong,

558
00:29:39,860 --> 00:29:42,670
the empire appears very strong,

559
00:29:42,670 --> 00:29:45,453
but its finances are
in fact being weakened.

560
00:29:46,870 --> 00:29:49,160
The borrowing sustains the country's power

561
00:29:49,160 --> 00:29:50,800
beyond its fundamentals

562
00:29:50,800 --> 00:29:53,940
by financing both
domestic over consumption

563
00:29:54,930 --> 00:29:57,420
and international military conflicts

564
00:29:57,420 --> 00:30:00,420
required to maintain the empire.

565
00:30:00,420 --> 00:30:04,340
Inevitably, the cost of maintaining
and defending the empire

566
00:30:04,340 --> 00:30:06,780
becomes greater than the
revenue it brings in.

567
00:30:06,780 --> 00:30:10,270
So having an empire becomes unprofitable.

568
00:30:10,270 --> 00:30:14,200
For example, the Dutch empire
overextended around the world

569
00:30:14,200 --> 00:30:17,780
and fought war after
increasingly expensive war

570
00:30:17,780 --> 00:30:20,370
with the British and other European powers

571
00:30:20,370 --> 00:30:23,100
to protect its territory and trade routes.

572
00:30:23,100 --> 00:30:26,890
The British empire similarly
became massive, bureaucratic,

573
00:30:26,890 --> 00:30:31,020
and lost its competitive
advantages as rival powers,

574
00:30:31,020 --> 00:30:33,580
particularly Germany, soared,

575
00:30:33,580 --> 00:30:37,000
leading to an increasingly
expensive arms race

576
00:30:37,000 --> 00:30:38,533
and world war.

577
00:30:39,680 --> 00:30:42,630
The US has spent about
eight trillion dollars

578
00:30:42,630 --> 00:30:46,513
on foreign wars and their
consequences since September 11th,

579
00:30:47,570 --> 00:30:51,100
and trillions more for
other military operations

580
00:30:51,100 --> 00:30:55,540
and for supporting military
bases in 70 countries,

581
00:30:55,540 --> 00:30:57,590
and it still isn't spending enough

582
00:30:57,590 --> 00:31:00,500
to support its military
competition with China

583
00:31:00,500 --> 00:31:02,063
in the area around China.

584
00:31:03,400 --> 00:31:05,570
In this cycle, the richer countries

585
00:31:05,570 --> 00:31:07,330
eventually get deeper into debt

586
00:31:07,330 --> 00:31:10,300
by borrowing from poor
countries that save more.

587
00:31:10,300 --> 00:31:13,880
It's one of the early signs
of a wealth and power shift.

588
00:31:13,880 --> 00:31:16,870
This started in the
United States in the 1980s

589
00:31:16,870 --> 00:31:21,190
when it had a per capita income
40 times that of China's,

590
00:31:21,190 --> 00:31:23,420
and started borrowing from Chinese

591
00:31:23,420 --> 00:31:25,130
who wanted to save in dollars

592
00:31:25,130 --> 00:31:29,290
because the dollar was the
world's reserve currency.

593
00:31:29,290 --> 00:31:31,770
Similarly, the British
borrowed a lot of money

594
00:31:31,770 --> 00:31:34,520
from its much poorer colonies

595
00:31:34,520 --> 00:31:36,763
and the Dutch did the same at their top.

596
00:31:37,800 --> 00:31:40,730
If the empire begins to
run out of new lenders,

597
00:31:40,730 --> 00:31:42,160
those holding their currency

598
00:31:42,160 --> 00:31:45,530
begin to look to sell and get out

599
00:31:45,530 --> 00:31:50,530
rather than to buy,
save, lend, and get in,

600
00:31:55,800 --> 00:31:58,963
and the strength of the
empire begins to decline.

601
00:32:00,210 --> 00:32:01,203
The decline.

602
00:32:02,160 --> 00:32:05,560
The decline comes from
internal economic weakness

603
00:32:05,560 --> 00:32:07,620
together with internal fighting

604
00:32:07,620 --> 00:32:11,410
or costly external fighting or both.

605
00:32:11,410 --> 00:32:14,400
Typically, the decline comes gradually

606
00:32:14,400 --> 00:32:15,653
and then very suddenly.

607
00:32:16,860 --> 00:32:19,330
When debts become very large,

608
00:32:19,330 --> 00:32:22,110
and there is an economic downturn,

609
00:32:22,110 --> 00:32:24,760
and the empire can no
longer borrow the money

610
00:32:24,760 --> 00:32:27,300
necessary to repay its debts,

611
00:32:27,300 --> 00:32:29,093
the financial bubble bursts.

612
00:32:30,130 --> 00:32:32,700
This creates great domestic hardships

613
00:32:32,700 --> 00:32:34,990
and forces the country to choose between

614
00:32:34,990 --> 00:32:39,150
defaulting on its debts or
printing a lot of new money.

615
00:32:39,150 --> 00:32:41,823
It always chooses to
print a lot of new money.

616
00:32:42,700 --> 00:32:46,273
At first gradually, and
eventually massively.

617
00:32:48,560 --> 00:32:52,410
That devalues the currency
and raises inflation.

618
00:32:52,410 --> 00:32:55,080
For the Dutch, this was
the financial crisis

619
00:32:55,080 --> 00:32:57,510
brought about by financial excesses

620
00:32:57,510 --> 00:33:00,670
and paying for the Fourth Anglo-Dutch War.

621
00:33:00,670 --> 00:33:02,240
Similarly, for the British,

622
00:33:02,240 --> 00:33:04,550
it was paying for its financial excesses

623
00:33:04,550 --> 00:33:07,093
and its debts from the two world wars.

624
00:33:07,930 --> 00:33:10,730
And for the US, it's been three cycles

625
00:33:10,730 --> 00:33:14,460
of debt, finance, booms,
and busts since the nineties

626
00:33:14,460 --> 00:33:17,240
with the central bank
stepping in each time

627
00:33:17,240 --> 00:33:18,433
with stronger measures.

628
00:33:21,900 --> 00:33:24,630
When the government has
problems funding itself,

629
00:33:24,630 --> 00:33:27,710
when there are bad economic conditions

630
00:33:27,710 --> 00:33:31,130
and living standards for
most people are declining,

631
00:33:31,130 --> 00:33:36,130
and there are large wealth,
values, and political gaps,

632
00:33:36,630 --> 00:33:39,880
internal conflict between
the rich and the poor,

633
00:33:39,880 --> 00:33:43,750
as well as different ethnic,
religious, and racial groups

634
00:33:43,750 --> 00:33:45,350
greatly increases.

635
00:33:45,350 --> 00:33:47,960
This leads to political extremism

636
00:33:47,960 --> 00:33:52,020
that shows up as populism
of the left or the right.

637
00:33:52,020 --> 00:33:55,060
Those of the left seek to
redistribute the wealth

638
00:33:55,060 --> 00:33:57,680
while those of the right
seek to maintain the wealth

639
00:33:57,680 --> 00:33:59,480
in the hands of the rich.

640
00:33:59,480 --> 00:34:03,470
Typically during such times,
taxes on the rich rise

641
00:34:03,470 --> 00:34:06,090
and when the rich fear
their wealth and wellbeing

642
00:34:06,090 --> 00:34:07,800
will be taken away,

643
00:34:07,800 --> 00:34:11,010
they move to places,
assets, and currencies

644
00:34:11,010 --> 00:34:12,610
they feel safer in.

645
00:34:12,610 --> 00:34:15,870
These outflows reduce
the empire's tax revenue,

646
00:34:15,870 --> 00:34:19,000
which leads to a classic,
self-reinforcing,

647
00:34:19,000 --> 00:34:20,453
hollowing out process.

648
00:34:21,949 --> 00:34:24,649
When the flight of wealth gets bad enough,

649
00:34:24,650 --> 00:34:26,460
governments outlaw it.

650
00:34:26,460 --> 00:34:29,710
Those seeking to get out begin to panic.

651
00:34:29,710 --> 00:34:33,260
These turbulent conditions
undermine productivity,

652
00:34:33,260 --> 00:34:36,600
which shrinks the economic
pie and causes more conflict

653
00:34:36,600 --> 00:34:40,070
about how to divide the
shrinking resources.

654
00:34:40,070 --> 00:34:42,330
Populist leaders emerge from both sides

655
00:34:42,330 --> 00:34:45,620
and pledge to take control
and bring about order.

656
00:34:45,620 --> 00:34:48,100
That's when democracy is most challenged,

657
00:34:48,100 --> 00:34:50,679
because it fails to control the anarchy,

658
00:34:50,679 --> 00:34:53,769
and it is when the move to
a strong populist leader

659
00:34:53,770 --> 00:34:57,250
who will bring order to
the chaos is most likely.

660
00:34:57,250 --> 00:34:59,700
As conflict within the country escalates,

661
00:34:59,700 --> 00:35:03,610
it leads to some form of
revolution or civil war

662
00:35:03,610 --> 00:35:07,253
to redistribute wealth and
force the necessary big changes.

663
00:35:08,830 --> 00:35:12,253
This can be peaceful and
maintain the existing order,

664
00:35:13,560 --> 00:35:17,127
but it's more often violent
and changes the order.

665
00:35:18,440 --> 00:35:21,910
For example, the Roosevelt
revolution to redistribute wealth

666
00:35:21,910 --> 00:35:23,540
was relatively peaceful

667
00:35:23,540 --> 00:35:26,810
and maintained the
existing internal order,

668
00:35:26,810 --> 00:35:30,930
while the French revolution,
the Russian revolution,

669
00:35:30,930 --> 00:35:33,990
and the Chinese revolution
were much more violent

670
00:35:34,950 --> 00:35:37,093
and led to new internal orders.

671
00:35:37,940 --> 00:35:40,890
This internal conflict
makes the empire weak

672
00:35:40,890 --> 00:35:44,220
and vulnerable to rising external rivals

673
00:35:44,220 --> 00:35:46,690
who, seeing this domestic weakness,

674
00:35:46,690 --> 00:35:48,713
are more inclined to mount a challenge.

675
00:35:49,800 --> 00:35:53,760
This raises the risk of
great international conflict,

676
00:35:53,760 --> 00:35:57,890
especially if the rival has
built up a comparable military.

677
00:35:57,890 --> 00:36:00,890
Defending one's self and
one's empire against rivals

678
00:36:00,890 --> 00:36:05,050
requires great military
spending, which has to occur

679
00:36:05,050 --> 00:36:08,580
as domestic economic
conditions are deteriorating

680
00:36:08,580 --> 00:36:11,230
and the empire can least afford it.

681
00:36:11,230 --> 00:36:13,410
Since there is no viable system

682
00:36:13,410 --> 00:36:16,780
for peacefully adjudicating
international disputes,

683
00:36:16,780 --> 00:36:18,990
these conflicts are typically resolved

684
00:36:18,990 --> 00:36:20,283
through tests of power.

685
00:36:22,510 --> 00:36:24,540
As bolder challenges are made,

686
00:36:24,540 --> 00:36:27,550
the leading empire is faced
with the difficult choice

687
00:36:27,550 --> 00:36:30,230
of fighting or retreating.

688
00:36:30,230 --> 00:36:32,930
Fighting and losing is the worst outcome,

689
00:36:32,930 --> 00:36:37,230
but retreating is bad too as
it cedes progress to the rival

690
00:36:37,230 --> 00:36:39,250
and signals that the empire is weak

691
00:36:39,250 --> 00:36:43,180
to those countries that are
considering which side to be on.

692
00:36:43,180 --> 00:36:44,970
Poor economic conditions

693
00:36:44,970 --> 00:36:47,800
cause more fighting for wealth and power,

694
00:36:47,800 --> 00:36:50,453
which inevitably leads
to some kind of war.

695
00:36:51,300 --> 00:36:54,150
Wars are terribly costly.

696
00:36:54,150 --> 00:36:57,330
At the same time, they
produce the tectonic shifts

697
00:36:57,330 --> 00:36:59,840
that realign the new orders

698
00:36:59,840 --> 00:37:03,800
to the new realities of
wealth and power in the world.

699
00:37:03,800 --> 00:37:06,300
When those holding the
reserve currency and debt

700
00:37:06,300 --> 00:37:09,680
of the declining empire
lose faith and sell them,

701
00:37:09,680 --> 00:37:12,740
that marks the end of its big cycle.

702
00:37:12,740 --> 00:37:17,530
Of the roughly 750 currencies
that existed since 1700,

703
00:37:17,530 --> 00:37:20,310
less than 20% now exist,

704
00:37:20,310 --> 00:37:23,160
and all of them have been devalued.

705
00:37:23,160 --> 00:37:25,680
For the Dutch, this
happened after their defeat

706
00:37:25,680 --> 00:37:28,010
in the Fourth Anglo-Dutch War,

707
00:37:28,010 --> 00:37:30,010
when they weren't able to repay

708
00:37:30,010 --> 00:37:33,210
the massive debts they built up during it.

709
00:37:33,210 --> 00:37:35,940
This led to a run on the bank of Amsterdam

710
00:37:37,330 --> 00:37:39,370
and a desperate sell off,

711
00:37:39,370 --> 00:37:41,713
forcing massive money printing,

712
00:37:43,770 --> 00:37:45,560
which devalued the currency

713
00:37:46,510 --> 00:37:49,793
and the empire into irrelevance.

714
00:37:50,720 --> 00:37:53,413
For the British, this
happened after World War II,

715
00:37:54,800 --> 00:37:56,860
when despite their victory,

716
00:37:56,860 --> 00:37:59,610
they could not repay the
massive debts they borrowed

717
00:37:59,610 --> 00:38:01,180
to fund their war effort.

718
00:38:01,180 --> 00:38:06,050
This led to a series of
money printing, devaluations,

719
00:38:06,050 --> 00:38:08,670
and selloffs in the British pound

720
00:38:08,670 --> 00:38:11,710
as the US and the dollar emerged dominant

721
00:38:11,710 --> 00:38:14,750
and created a new world order.

722
00:38:14,750 --> 00:38:16,250
At the time of this recording,

723
00:38:16,250 --> 00:38:19,580
the United States hasn't
yet reached this point.

724
00:38:19,580 --> 00:38:23,110
While it has massive debt,
spends more than it earns

725
00:38:23,110 --> 00:38:25,620
and funds this deficit with more borrowing

726
00:38:25,620 --> 00:38:28,490
and printing huge amounts of new money,

727
00:38:28,490 --> 00:38:30,950
the big sell off in
dollars and dollar debt

728
00:38:30,950 --> 00:38:32,530
hasn't yet begun.

729
00:38:32,530 --> 00:38:36,000
And while there are great
internal and external conflicts

730
00:38:36,000 --> 00:38:38,240
occurring for all the classic reasons,

731
00:38:38,240 --> 00:38:41,350
they've not yet crossed
the line to become wars.

732
00:38:41,350 --> 00:38:43,500
Eventually out of these conflicts,

733
00:38:43,500 --> 00:38:45,700
whether they're violent or not,

734
00:38:45,700 --> 00:38:47,740
come new winners who get together

735
00:38:47,740 --> 00:38:51,670
and restructure the losers'
debts and political systems

736
00:38:51,670 --> 00:38:54,670
and establish the new world order.

737
00:38:54,670 --> 00:38:58,470
Then the old cycle and empire ends

738
00:38:58,470 --> 00:39:00,580
and the new one begins

739
00:39:00,580 --> 00:39:02,920
and they do it all over again.

740
00:39:02,920 --> 00:39:05,010
That's a lot of detail I just threw at you

741
00:39:05,010 --> 00:39:09,340
to paint a picture of how the
typical big cycle transpires.

742
00:39:09,340 --> 00:39:13,160
Of course, not all of them
transpire exactly this way,

743
00:39:13,160 --> 00:39:16,130
but most largely do, so much so

744
00:39:16,130 --> 00:39:19,380
that it seems like the
stories of rises and declines

745
00:39:19,380 --> 00:39:21,330
stay essentially the same

746
00:39:21,330 --> 00:39:23,040
and the only things that change

747
00:39:23,040 --> 00:39:25,170
are the clothes the characters wear

748
00:39:25,170 --> 00:39:27,283
and the technologies they use.

749
00:39:28,650 --> 00:39:30,283
So, where are we heading?

750
00:39:39,107 --> 00:39:40,024
The future.

751
00:39:48,540 --> 00:39:50,890
Most empires have their time in the sun

752
00:39:50,890 --> 00:39:52,503
and inevitably decline.

753
00:39:55,660 --> 00:39:57,470
Reversing a decline is difficult

754
00:39:57,470 --> 00:39:59,560
because that requires undoing a lot

755
00:39:59,560 --> 00:40:02,860
that's already been
done, but it's possible.

756
00:40:02,860 --> 00:40:06,430
By looking at these indicators,
it's pretty easy to see

757
00:40:06,430 --> 00:40:09,760
which stage of the big
cycle an empire is in,

758
00:40:09,760 --> 00:40:11,110
how fit it is,

759
00:40:11,110 --> 00:40:14,973
and whether its condition
is improving or worsening,

760
00:40:16,910 --> 00:40:20,063
which can help one estimate
how many years it has left.

761
00:40:21,480 --> 00:40:23,970
Still, these estimates aren't precise

762
00:40:23,970 --> 00:40:25,760
and the cycle can be extended

763
00:40:25,760 --> 00:40:28,800
if those in charge pay
attention to their vital signs

764
00:40:28,800 --> 00:40:29,693
and improve them.

765
00:40:30,560 --> 00:40:34,660
For example, knowing that
a person is 60 years old,

766
00:40:34,660 --> 00:40:38,200
how fit they are,
whether they smoke or not

767
00:40:38,200 --> 00:40:40,800
and a few other basic vital signs,

768
00:40:40,800 --> 00:40:43,253
one can estimate the person's longevity.

769
00:40:44,560 --> 00:40:47,603
One can do that with empires
and their vital signs too.

770
00:40:48,850 --> 00:40:53,220
It won't be precise, but it
will be broadly indicative

771
00:40:53,220 --> 00:40:55,540
and give clear direction on steps to take

772
00:40:55,540 --> 00:40:57,023
to increase longevity.

773
00:40:58,280 --> 00:41:00,130
It's most often the case

774
00:41:00,130 --> 00:41:03,830
that a nation's greatest
war is with itself

775
00:41:03,830 --> 00:41:07,060
over whether or not it can
make the hard decisions

776
00:41:07,060 --> 00:41:09,243
needed to sustain success.

777
00:41:10,310 --> 00:41:12,200
As for what we need to do,

778
00:41:12,200 --> 00:41:14,640
it comes down to just two things -

779
00:41:14,640 --> 00:41:19,370
earn more than we spend,
and treat each other well.

780
00:41:19,370 --> 00:41:21,180
All other things I mentioned -

781
00:41:21,180 --> 00:41:23,740
strong education, inventiveness,

782
00:41:23,740 --> 00:41:26,420
being competitive and all the rest -

783
00:41:26,420 --> 00:41:29,003
are just ways of getting
at these two things.

784
00:41:29,920 --> 00:41:32,560
It's easy to measure if we're doing them.

785
00:41:32,560 --> 00:41:35,240
So like people who want to get fit,

786
00:41:35,240 --> 00:41:38,910
let's get on the program
and improve our vitals.

787
00:41:38,910 --> 00:41:42,643
Let's do that individually
and collectively.

788
00:41:45,560 --> 00:41:48,430
My goal for sharing this
picture of how the world works

789
00:41:48,430 --> 00:41:50,980
and a few principles
for dealing with it well

790
00:41:50,980 --> 00:41:53,700
is to help you recognize where we are

791
00:41:53,700 --> 00:41:55,910
and the challenges we face,

792
00:41:55,910 --> 00:41:58,530
and to make the wise decisions needed

793
00:41:58,530 --> 00:42:00,600
to navigate these times well.

794
00:42:06,940 --> 00:42:10,790
Since there is a lot more to
discuss and we are out of time,

795
00:42:10,790 --> 00:42:12,407
you can learn more in my book

796
00:42:12,407 --> 00:42:15,900
Principles for Dealing with
the Changing World Order.

797
00:42:15,900 --> 00:42:19,010
And I look forward to
continuing this conversation

798
00:42:19,010 --> 00:42:21,290
at economicprinciples.org

799
00:42:21,290 --> 00:42:23,420
and on social media.

800
00:42:23,420 --> 00:42:24,330
Thank you,

801
00:42:24,330 --> 00:42:27,473
and may the force of
evolution be with you.

802
00:42:32,799 --> 00:42:35,549
(dramatic music)