The next chart, which I showed you in earlier chapters, shows China’s relative powers. The differences in this
chart and the previous one are due to the fact that the first one shows the absolute level of power while the second
one shows the relative level of power.
Since different countries are typically in different stages of the cycle and since they take wealth and global political
power from each other, some countries are rising while others are declining, so the whole is less volatile than any
one country. In other words, the differences have had a diversification effect that has made the whole world’s
evolution smoother than any of the individual countries’ evolutions. That is reflected in actual global real GDP,
which I showed you in Chapter 1 and is shown in the following chart. The chart is not a figurative representation.
It is literally the best estimates we have of real GDP per capita. Embedded in this chart are the rises and falls of
major empires (particularly the Dutch, British, and the Ming and Qing dynasties in China), numerous wars, and
numerous booms and busts. They don’t show up because they diversify each other and because they are small
relative to the big trends, even though they are huge from the perspective of the people living through them.
To reiterate, the figurative pictures of the archetypical six-stage cycle I just painted are simplified versions of what
really happens. I simplified them to provide clarity. I find that too often in order to be precise people show so many

details that one can’t see the essence of the big picture, and I don’t want to do that. I wanted to show you a
simplified version that conveys the essence of the stages and then descend down into the details. While the cycle
by and large progresses as I described, it doesn’t always progress exactly as I described. For example, like the
stages of disease (let’s say Stage 3 cancer), being in one stage doesn’t mean that the progression to the next stage is
inevitable. But it does tell us a lot that is very valuable. As with a disease a) certain symptoms are clearly exhibited
that allow one to identify which stage in the cycle one is in, and b) being in that stage signifies the risks and ways
of treating the situation that are essential to know are different from those that exist at different stages. For
example, being in Stage 5 means that certain conditions exist that make it less likely, though not impossible, that
the cycle won’t progress to Stage 6 than if it was in Stage 4 with those conditions existing. By having clear and
objective markers to identify at what stage each country (or state or city) is in, and by having an understanding of
the cause/effect relationships that produce change, one can better know the range of possibilities and position
oneself accordingly, though one can never get them exactly right.
As an example, we made an index of the number of economic “red flags” that have existed at different times in
history, including measures of high inequality, high debt and deficits, inflation, and bad growth, to show how
indicative they are of subsequent civil wars and revolutions. The following chart shows the estimated likelihood of
a civil-war-type conflict based on the number of red flags. Based on what we have seen in the past, we estimate
that when there are 60-80% of the red flags present, there is around a 1-in-6 chance of severe internal conflict.
When lots of these conditions are in place (greater than 80%) there is around a 1-in-3 chance of a civil war or
revolution—so still not probable but too probable for comfort. The US is in the 60-80% bucket today. In the
concluding chapter of this book I will much more comprehensively pass along the indicators and what they show.
Right now, I just want to convey the concept.
4
I know that this model of mine is starting to get pretty complicated for the brain to process (though it’s not
complicated for a computer to process), so I will describe just the highlights of each stage and just the most
important factors. While I won’t take you through all 108 factors (i.e.,18x6) in these stages and their various
configurations, below I will outline the forces and milestones to pay most attention to in each stage, with a special
emphasis on the current state of disorder in the United States and how things are progressing.
Delving into the Six Stages of the Cycle with a Particular Focus on the US
Now
We will now delve into what the archetypical six stages look like in greater detail so we can identify them easily
when we see them and so we can better imagine what might come next.
Because these circumstances transpire in repeating cycles (e.g., Stage 5 precedes Stage 6, which precedes Stage 1),
we can start our examination at any stage and follow the sequence from there. Since the United States now appears
to be in Stage 5, let’s start there.
Stage 5: When There Are Bad Financial Conditions and Intense Conflict
The most important influence that transpires in a big cycle is that of debt, money, and economic activity. Because I
covered that cycle comprehensively in Chapters 2 and 3, I won’t explain it here in detail. But to understand Stage