explained, periods of peace and prosperity tend to cause big wealth gaps that lead to conflicts when prosperity
fades and there are other things to fight over.
As mentioned, these dynamics reflect human nature, which is why they are timeless and universal. What follows
are a few other important timeless and universal dynamics of human nature that drive the cycle.
3) The Dynamic of Favoring Short-Term Enjoyment over Long-Term Health
There is a strong pull in most people to favor short-term enjoyment over long-term well-being. That plays a big
role in driving these cycles. Favoring short-term enjoyments over long-term health naturally exaggerates the highs
and the lows of the cycle. That happens in many ways, most obviously by creating debt boom and bust cycles.
While most people and organizations favor short-term rewards over long-term health, which hurts them, this is
especially true for governments because of how the political dynamic works. More specifically a) politicians have
been and continue to be motivated to prioritize the near term over the long term, b) they don’t like to face
limitations and difficult financial trade-offs (e.g., to spend on the military for “defense” or to spend on social
programs), and c) it is politically threatening to take money away from people by taxing them. For those reasons it
is politically desirable to borrow and spend because a) that allows politicians to provide more without having to
raise taxes and b) lenders will readily make loans to the central government regardless of how much debt it has if it
has the printing press to assure repayment. As a result, governments progressively borrow and spend until they
can’t do that anymore at which time the process works in reverse. When they reach their debt limits, if money is
“hard” (i.e., they can’t print as much of it as they need), spending has to contract to the level of income, so budgets
need to be cut and/or taxes have to rise. This leads to political problems and a host of other problems. Most
importantly the place becomes less desirable to be in for those who are taxed and for those who rely on services
that have to be cut in the necessary cost-cutting. Those who have more money and more choices leave and that
produces a self-reinforcing hollowing out process in which tax revenues fall even as taxes are raised, and this self-
reinforcing downward spiral continues until there is a revolutionary restructuring. One can easily monitor this
process happening, and it’s valuable to do so.
The biggest difference in how this shortage of money plays out has to do with whether or not money can be printed
and used to fill the hole. In either case people suffer—they just suffer differently. When the money can’t be printed
to service the debt (e.g., the debt is denominated in a foreign currency), austerity and debt problems arise.
However, when the money can be printed to service the debt, more than enough money to service the debt will be
printed and the value of the money will go down. It is also a very “hidden tax” way of getting money so nobody
complains, which makes it much more politically palatable. Even in those places in which the money is hard they
will print money by abandoning the hard money in the ways comprehensively explained in Chapter 3. However, as
the saying goes, “there is no free lunch.” All else being equal, increases in the supply of debt and money devalue
debt and money. While there is a lot of talk now about how one can produce debt and money to spend more
without suffering adverse consequences, don’t believe it. Understand the mechanics of how that works, which are
covered in Chapters 2 and 3.
In any case when the time of paying back comes, people suffer, which intensifies the consequences of the already-
large wealth gaps, conflicts increase, and the cycle typically ends in some form of revolutionary restructuring.
Because the long term eventually becomes the present, the day of reckoning eventually comes and presents
everyone with a less favorable range of options. For example, as far as where things now stand, we in the United
States are facing circumstances that leave us with a less favorable range of options than we could have had if we
and those who made decisions before us had put long-term health ahead of short-term desires.
There is one more common important aspect of human nature that contributes to these cycles being more extreme
and painful than they need to be. That is…
4) The Failure to Learn from History
Most people are equipped with just the lessons they learned from the experiences they have had, which are very
different from the ones they will have; learning from one’s experiences is not adequate, and learning from history
is essential. As I explained earlier, because the big cycle lasts for as long as or longer than a lifetime, what people
will encounter will be new to them. In fact, because at the opposite ends of this long cycle the circumstances and