“boutique countries” (like Switzerland and Singapore) that score very high in wealth and living standards but
aren’t large enough to become one of the biggest empires.
Throughout History Wealth Was Gained by Either Making It, Taking It
from Others, or Finding It in the Ground
Let’s start with the big-picture basics. Throughout recorded history various forms of groups of people (e.g., tribes,
kingdoms, countries) have gained wealth and power by building it themselves, taking it from others, or finding it
in the ground. When they gathered more wealth and power than any other group, they became the world’s leading
power, which allowed them to determine the world order. When they lost that wealth and power, which they all
did, the world order changed in very big ways. That changed all aspects of life in profound ways. In this chapter
we will describe how throughout time the same basic forces have ebbed and flowed in basically the same sorts of
ways to cause these ups and downs in empires.
Human productivity is the most important force in causing the world’s total wealth, power, and living standards to
rise over time. Productivity—i.e., the output per person, driven by learning, building, and inventiveness—has
steadily improved over time because learning is gained more than lost. However, it has risen at different rates for
different people, though always for the same reasons—because of the quality of people’s education, inventiveness,
work ethic, and economic systems to turn ideas into output. These reasons are important for policy makers to
understand in order to achieve the best possible outcomes for their countries, and for investors and companies to
understand in order to determine where the best long-term investments are.
But while significant, these learnings and productivity improvements are evolutionary, so they are not what cause
big shifts in who has what wealth and power. They are caused by a number of forces, most importantly money and
credit cycles. I have identified 17 important forces in total that have explained almost all of these movements
throughout time, which we will delve into in a moment. These big forces generally transpire in classic cycles that
are mutually reinforcing in ways that tend to create a single very big cycle of ups and downs. This big archetypical
cycle governs the rising and declining of empires and influences everything about them, including their currencies
and markets (which I’m especially interested in). As with the archetypical debt cycle, which I outlined in
Principles for Navigating Big Debt Crises, this big cycle represents the archetypical one that we can compare
others to, including the one that we are now in. I believe that we need to understand this archetypical cycle in order
to put where we are in perspective and attempt to squint into the future.
Of the 17 forces, the debt cycle, the money and credit cycle, the wealth gap cycle, and the global geopolitical cycle
are most important to understand in order to put where we are in perspective. For reasons explained in this book, I
believe that 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. This big wealth and power shift is not obvious because most
people don’t have the patterns of history in their minds to see this one as “another one of those.” So in this first
chapter, I will describe in a very brief way how I see the archetypical mechanics behind rises and declines of
empires and their markets working. Then we will delve into the various factors happening in the various past
cases.
To See the Big Picture, You Can’t Focus on the Details
While I will attempt to paint this big sweeping picture accurately, I can’t paint it in a precise way, and, in order for
you to see it and understand it, you can’t try to do so in a precise way. That is because we are looking at evolution
over long time frames. To see it, you will have to let go of the details. Of course, when the details are important,
which they often are, I will go from the very big, imprecise picture to a more detailed one.
Looking at what happened in the past from this very big-picture perspective will radically alter how you see things.
For example, because the span of time covered is so large, many of the most fundamental things that we take for
granted and many of the terms we use to describe them did not exist over the full period of time. As a result, I will
be imprecise in my wording so that I can convey the big picture without getting tripped up on what might seem to
be big things but, in the scope of what we are looking at, are relative details.