Chapter 5
The Big Cycles of the United States and the Dollar, Part 1
Published 07/17/20
This is Part 1 of a two-part chapter on the US Empire and its path along the archetypical big cycle of dominant
powers. It covers the period up through World War II. In Part 2, we will cover from the beginning of the new world
order right up to this moment. It will be out on Tuesday, July 21.
To remind you, I did this study so that I could understand how we got to where we are and how to deal with the
situations we are facing, but I am no great historian. I’m just a guy with a compulsion to understand how these
things work and to bet on what will happen, who has access to great research assistants, fabulous data, incredibly
informed experts, lots of insightful written research, and my own experiences. I’m using all of this to try to figure
out what’s true and what to do about it. I am not ideological. I am mechanical. I look at reality as a perpetual-
motion machine with cause/effect relationships driving developments through time. I am sharing this information
with you to take or leave as you like and to have you point out any inaccuracies you think might exist as we try to
figure out together what’s true and what to do about it.
This chapter is a continuation of the last chapter in which we started to look at each of the leading reserve currency
empires over the last 500 years, starting with the Dutch and British empires. We first saw the Dutch and then the
British rise to become the richest and most powerful reserve currency empire and then decline into relative
insignificance in cycles that were driven by timeless and universal cause/effect relationships. We ended with the
British Empire declining in the first half of the 20th century. That brought us up to World War II, after which the
British Empire was replaced by the US Empire. In this chapter we will examine the US and in the next we will
examine China—now the two leading world powers—to see how they are progressing along the path of the
archetypical cycle. That will complete our examination of the rises and declines of the leading empires over the
last 500 years. We will then make one more quick review of the past before trying to squint into the future.
As we move closer to the present, I will increasingly shift from describing each country’s story individually
to weaving the most relevant countries’ stories together chronologically so you can better see the
interactions, and I will do it in greater detail. I will start in 1930 and bring the story up to the present for
both the US and China, and then I will focus more closely on US-China interactions, which are the most
important ones today. While telling the story this way will make it a bit more complicated, it will help you
see how what is happening now is similar to what happened in the past because the most important forces
and cause/effect relationships behind them are essentially the same. As we delve into the particulars of the last
90 years, it is easy to lose sight of the big arcs, most importantly the three big cycles—i.e., the long-term
debt/monetary cycle, the wealth and political gap cycle, and the global geopolitical cycle—as well as the eight
major types of power and the 17 major drivers behind them. I will try to keep it simple, emphasizing just the
most important developments in just the most influential countries, but if you find that the story starts
getting more complicated than you’d like, remember that you can just read the text in bold in order to get
the main points without complication.
World affairs and history are complicated because there is a lot going on both within and between relevant
countries. Understanding just the most important relevant issues of just the most important countries is challenging
because one has to see all of these perspectives accurately and simultaneously. All countries are living out their
own stories that transpire on a daily basis, and these stories are woven together to make up the world story. But
typically, at any one time, there are only a few leading countries and a limited number of major themes that make
up the major story of the changing world order. Since the end of World War I, the most relevant stories have been
those of Great Britain, the United States, Germany, Japan, the Soviet Union, and China. I’m not saying that these
are the only countries that matter because that isn’t true. But I am saying that the story of the changing world order
since World War I can be pretty well told by understanding the main developments within and between these
countries. In this chapter I will attempt to briefly tell the stories of these countries and their most important
interactions. This is the highlights version of the more complete version of the stories that I will pass to you in Part
2 of this book.