Transcription
I want to explain the big cycle just in, you know, very simple terms. Uh, the big cycle is like, uh, the period from one period of great change and turbulence in which various systems or orders are changed through fighting, typically. And then through that evolutionary process, there is a process that gets us to another period of breakdown.
The last big cycle began in 1945, at the end of World War II. In that world order, there are shorter-term cycles, like the economic and political cycles. The economic cycles have lasted for about six years from one recession to the next recession, and they transpire in a way where, you know, the economy is weak. Central banks put a lot of money and credit into it. Um, that causes markets to go up. There's a lot of spending. It gets too hot. Inflation rises. They tighten monetary policy, and that causes the economy to go down into recession. And since 1945, there have been 12 and a half of those.
And we sometimes don't pay as much attention to the big cycle when they reach excesses, such as debt excesses, because, um, debts rise relative to incomes like this. If you were to look at a chart of most countries, their debts keep rising relative to their incomes. But the incomes are needed to pay the debts. And so when you get to a point where, uh, the debts are high relative to the incomes and debt service is very expensive and starts to crowd out other spending, and, uh, investors do not want to hold the debt as much because the debt does not provide them the good returns, and they start to sell that debt, you begin to have a change in that big debt cycle.
And that big debt cycle typically corresponds with the big domestic political and social cycle because wealth and well-being matter to people. And when there's disruption to the wealth and well-being of that, then you have the political disruption, such as what we are experiencing now. And so there's more fighting over wealth and power and so on. And these things come together, then that creates the new conflicts, the new big conflicts, the changes and breaking down of the old orders, the old monetary orders, the old domestic political order, the geopolitical order, and such things to cause, um, seismic shifts.
These periods are periods of great risk. They're great risk for the markets. They're great risk for the society. It's very important that they're understood.