Dalio's "Typical Cycle" and the Rise and Fall of Nations

What do you think? Post Comments Below!

The Fall of Rome. After the Dark Ages and the Industrial Revolution, the  Brits took up the mantle of empire  and after that, the Americans. Is China next?

Bloomberg Link

"Bridgewater Associates: The Really Big Picture
June 2011
"Once a year we review a whole bunch of tables and charts of market and economic drivers that go back a hundred years or more to reflect on the really big picture. Though the picture changes slowly because we are only adding one new dot (i.e., year) to the tables and charts, we find each year’s viewing helpful because it reminds us of the really big changes and forces behind them that we tend to lose sight of when we view the stats up close. We go through the first part of these reflections today and will follow with more." - Ray Dalio; Report courtesy of Bridgewater Associates." (download)

I found the five stages of the "typical cycle" to be particularly eye-opening. It makes all the daily breaking news cycle in politics which I follow seem really small in comparison. But the typical cycle also validates everything I know about  history and international relations. It really gives me a new, more philosophical way of looking a daily market fluctuations. 

I found myself thinking if only President Obama and Congress on one side of the Atlantic and Chancellor Merkel and the ECB on the other could find some way to bring down debt enough so that income could outpace debt and productivity could outpace income - but even as I thought that I knew such a feat would be very difficult, or nigh impossible. 

The last time the U.S. was in such a slump, the productivity of WWII spurred help catapult us back on our feet just as the last great power - Great Britain - faded. I find it hard to see the U.S. meeting the UK's fate at the end of WWII - at very least the UK had the cushion of the Marshall Plan to reduce the ratio of its debt to its GDP. 

What will be the cushion for the U.S. if it falls? Is there anyway the U.S. can right itself without a war? Is the solution similar to what the Bridgewater Daily Observations prescribed for Europe - allowing certain "too-big-to-fail" banks to fail in order to have enough to save the system? - a solution I agree with by the way. 


I also doubt the rise of China and India will occur as soon as some think, because their purchasing power parity (PPP) is so low as compared to the U.S. Also China's housing market is showing signs of stress, like the U.S. in 2007.

Anyway these are topics whole theses could be written on.


- Ryu