yego.me
💡 Stop wasting time. Read Youtube instead of watch. Download Chrome Extension

Principles for Dealing with the Changing World Order (5-minute Version) by Ray Dalio


3m read
·Nov 8, 2024

I studied the 10 most powerful Empires over the last 500 years and the last three Reserve currencies. It took me through the rise and decline of the Dutch Empire and the Guilder, the British Empire and the Pound, the rise and early decline in the United States Empire in the Dollar, and the Decline and Rise of the Chinese Empire and its currencies. I also examined the rise and decline of the Spanish, German, French, Indian, Japanese, Russian, and Ottoman Empires, along with their significant conflicts, as measured in this chart. To understand China's patterns better, I also studied the rise and fall of Chinese dynasties and their monies back to the year 600.

Because looking at all these measures at once can be confusing, I'll focus on the four most important ones: the Dutch, British, U.S., and Chinese. You'll quickly notice the pattern. Now, let's simplify the form of it. As you can see, they transpired in overlapping cycles that lasted about 250 years, with 10 to 20-year transition periods between them. Typically, these transitions have been periods of great conflict because leading Powers don't decline without a fight.

So how am I measuring an Empire's power in this study? I used eight metrics. Each country's measure of total power is derived by averaging them together. They are education, inventiveness and Technology development, competitiveness in global markets, economic output, share of World Trade, military strength, the power of their financial center for Capital markets, and the strength of their currency as a reserve currency. Because these powers are measurable, we can see how strong each country is now, was in the past, and whether they're rising or declining.

By examining the sequences from many countries, we can see how a typical cycle transpires. Because the Wiggles can be confusing, we can simplify it a bit to focus on the pattern of cause-effect relationships that drive the rise and decline of a typical Empire. As you can see, better education typically leads to increased innovation and Technology development, and with a lag, the establishment of the currency as a reserve currency. You can also see that these forces then decline in a similar order, reinforcing each other's decline.

Let's now look at the typical sequence of events going on inside a country that produces these rises and declines. In a nutshell, the big cycle typically begins after a major conflict, often a war, establishes the new leading power and the New World Order. Because no one wants to challenge this power, a period of peace and prosperity typically follows. As people get used to this peace and prosperity, they increasingly bet on it continuing. They borrow money to do that, which eventually leads to a financial bubble.

The Empire's share of trade grows, and when most transactions are conducted in its currency, it becomes a reserve currency, which leads to even more. At the same time, this increased prosperity distributes wealth unevenly, so the wealth gap typically grows between the rich have and the poor have-nots. Eventually, the financial bubble bursts, which leads to the printing of money and increased internal conflict between the rich and the poor, which leads to some form of revolution to redistribute wealth. This can happen peacefully or as a civil war.

While the Empire struggles with this internal conflict, its power diminishes relative to external rival powers on the rise. When a new rising power gets strong enough to compete with the dominant power that is having domestic breakdowns, external conflicts, most typically wars, take place. Out of these internal and external wars come new winners and losers. The winners then get together to create the New World Order, and the cycle begins again.

More Articles

View All
Solving unit price problem
We’re told that Nieria earns $75 for four hours of tutoring. How much does Nieria earn for one hour of tutoring? Pause this video and see if you can figure that out. Well, the key here is $75 for four hours of tutoring. There’s a couple of ways you could…
Graphing logarithmic functions (example 1) | Algebra 2 | Khan Academy
We’re told the graph of y is equal to log base 2 of x is shown below, and I say graph y is equal to 2 log base 2 of negative x minus 3. So pause this video and have a go at it. The way to think about it is that this second equation that we want to graph i…
Black Market Demand for 'Red Ivory' Is Dooming This Rare Bird | Short Film Showcase
In the pristine rainforests of Borneo, there’s a hidden battle between groups of poachers and wildlife photographers. They both share the same mission: finding the helmeted hornbill, an iconic bird pushed to the very brink of extinction due to poaching. […
I FOUND THE BEST BANK ACCOUNTS OF 2020
What’s up you guys, it’s Graham here! So I think it’s finally time I give you an update on the best bank accounts of 2020 that will make you the most amount of money possible just for keeping your savings with them. Because, unfortunately, a lot has chan…
He Tastes Water Like Some Taste Wine. Meet a Water Sommelier | Short Film Showcase
People always think there is no value to water, and what motivates me is that I want to give whatever value as a water. So, McGee, I’m an advocate for water, our most important beverage on this planet. What a lot of people always say, “What? Are so many i…
Voyage Air Guitar on Good Morning America
There you go. Yeah, yeah, okay, and finally, this is for just finally. So check it out, so check it out. He’s got it at full size right now, but this is how it comes. This is a Voyager guitar; it’s foldable like this, but then it opens just like this. Ye…