income earners, it was accompanied by a further widening of the wealth and values gap leading the “have-nots” to
become increasingly resentful of the “haves.” At the same time the political gap grew increasingly extreme with
intransigent capitalist Republicans on the one side and intransigent socialist Democrats on the other. This is
reflected in the two charts below. The first one shows how conservative Republicans in the Senate and House (via
the dashed and solid red lines) and how liberal Democrats in the Senate and House (via the dashed and solid blue
lines) have become relative to the past. Based on this measure they have become more extreme, and their
divergence has become larger than ever before. While I’m not sure that’s exactly right, I think it’s by and large
right.
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The next chart shows the percentage of votes along party lines. As shown approximately 95% of the votes in the
House and the Senate have been along ideological lines as of 2016, the highest level in over a century. It continues
to be reflected in the reduced willingness to cross party lines to compromise and reach agreements. In other words,
the political splits in the country have become deep and intransigent.
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At the same time, as the US dominance and relative wealth decline and rivalries are intensifying in the US under
Trump, this more populist and nationalist leader has taken a more aggressive negotiating posture concerning
economic and geopolitical disagreements a) with international rivals, particularly China and Iran, and b) with allies
such as Europe and Japan regarding trade and paying for military expenditures. The conflicts with China over
trade, technology, geopolitics, and capital are the most important and are intensifying. Economic sanctions such as
those that were used in the 1930-45 period are being used or put on the table for possible use.
Then, in March 2020 after the coronavirus pandemic came along and with it the isolation it necessitated, incomes,
employment, and economic activity plunged, the US central government took on a lot of debt to give people and
companies a lot of money, and the Federal Reserve printed a lot of money and bought a lot of debt. So did other
central banks. As a reflection of this the charts below show the unemployment rates and central bank balance
sheets of major countries for as far back as data is available. As shown, all the levels of central bank printing of
money and buying of financial assets are near or beyond the previous record amounts in the war years.

As history has shown and as explained in the appendix to Chapter 2, “The Changing Value of Money,” 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—much like Nixon’s August 1971 move, which led me to realize that it was
the same as Roosevelt’s March 1933 move, which was like Volcker’s August 1982 move, which was like Ben
Bernanke’s November 2008 move, which was like Mario Draghi’s July 2012 move, and has become standard
operating procedure by central banks that will persist until that approach no longer works.
That brings us up to now.

The Post-1945 Story in More Charts and Tables
What follows is a series of charts that show the most important financial and economic shifts over the period that
we just covered. They tell an interesting story of how things have changed. Before I show you them I’d like to
remind you of what the archetypical cycle looks like so you can keep it in mind while reviewing these charts.
As explained in Chapter 2, “The Big Cycle of Money, Credit, Debt, and Economic Activity,” for all countries—
like for all individuals, companies, nonprofit organizations, and local governments—the basic money equation is
reflected in a simple income statement of revenue and expenses and a simple balance sheet of assets and liabilities.
When one’s revenue, most importantly from what one sells, is greater than one’s expenditures, there is positive net
income, which leads one’s assets to rise relative to one’s liabilities (most importantly debt), which, all else being
equal, raises one’s net savings. When one’s income is less than one spends the reverse happens.
Exports are the main revenue source between countries. To convey the picture of export earnings, the chart below
shows the share of global export sales of the United States, Britain, the Soviet Union/Russia, and China from 1900
until the present. It shows which countries were and are the biggest export earners. As you can see, a) US exports
soared while British exports plunged in each of the two world wars (which made the US rich), b) British
exports fell from about 30% of the total in 1900 to less than 5% today (which made Britain a lot less rich),
while c) after World War II US exports were relatively steady between 20% and 25% until around 2000
when d) Chinese exports rose from around 5% to around 15% now (making China much richer), which is
now the largest in the world, and US exports fell to about 14% (making it a much less strong export-income
earner).
But exports are only half the net-income picture. It is export earnings minus import spending (i.e., the balance of
goods and services) that makes the net income of a country that comes from trading with foreigners. To convey
that picture for the US, the next chart shows US exports of goods and services minus US imports of goods and
services since 1900. As shown the US sold more than it bought until around 1970 and then started to buy more
than it sold.
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Naturally, if one buys more than one sells one has to finance the difference by some mix of drawing down one’s
savings and/or borrowing. One can think of a country’s savings as being its foreign-exchange reserves. The