应对变化世界秩序的原则——图表与表格附录

Principles for Dealing with THE CHANGING WORLD ORDER

RAY DALIO

This PDF contains the charts and tables from the book for printing and easy reference.

© COPYRIGHT 2021

CHAPTER 1

THE BIG CYCLE IN A TINY NUTSHELL

GLOBAL REAL GDP PER CAPITA (LOG) 11

Inflection during the 10 Industrial Revolution Invention of capitalism (founding 9 of Dutch Stock Exchange) 8

7

1500 1600 1700 1800 1900 2000 Global real GDP is primarily a mix of European countries before 1870 due to limited reliable data coverage across other countries before that point

GLOBAL LIFE EXPECTANCY AT BIRTH 80 COVID-19 70 60

Third Plague Baby 50 Thirty Years’ War pandemic Boom 40 30 WWII 20 WWI, 1557 influenza Flu outbreak Spanish flu 10 pandemic & famine pandemic 0 1500 1600 1700 1800 1900 2000 Dashed line based on experience of Great Britain only

GLOBAL DEATHS BY CATEGORY (RATE PER 100K PEOPLE, 15YMA) Conflicts Natural Disasters Pandemics Famines 400 Thirty Years’ War, fall of Ming Dynasty, Spanish flu Indian famine

World 300 War II

World War I Series of Indian Indian 200 famines and Cocoliztli epidemics Chinese famines War of the China’s Spanish Napoleonic Great Leap Succession Wars Forward 100 COVID-19 HIV/ AIDS

1500 1600 1700 1800 1900 2000

ESTIMATED DEATHS FROM CONFLICT (MAJOR POWERS, %POPULATION, 15YMA) Internal Conflict External Conflict Total

0.5% WWII, Holocaust, communist revolutions

0.4%

0.3% WWI Collapse of Ming Dynasty, religious wars in Europe 0.2% Time of Chinese Troubles in European Napoleonic border Russia monarchic Wars wars, wars Ethnic wars religious Wars of Seven in China 0.1% wars in Religion in Years’ War Europe France in Europe

0.0% 1400 1500 1600 1700 1800 1900 2000 Based on deaths as a share of the population for the major powers and thus will differ from the estimate of global conflict deaths shown in the prior chart

RELATIVE STANDING OF GREAT EMPIRES Major Wars United States China United Kingdom Netherlands Spain Germany France India Japan Russia Ottoman Empire 1

Level Relative to Other Empires (1 = All-Time Max) United Kingdom United States

Netherlands China

1500 1600 1700 1800 1900 2000

THE ARCHETYPICAL RISE AND DECLINE BY DETERMINANT Education Innovation and Technology Competitiveness Military Trade Economic Output Financial Center Reserve FX Status 1

Level Relative to Peak (1 = Peak)

0 -120 -80 -40 0 40 80 120 Years (0 = Empire Peak)

THE TOP

THE RISE THE DECLINE

New Order New Order

1 Strong leadership 9 Less productive 13 Large debts 2 Inventiveness 10 Overextended 14 Printing money 3 Education 11 Losing competitiveness 15 Internal conflict 4 Strong culture 12 Wealth gaps 16 Loss of reserve 5 Good resource allocation currency 6 Good competitiveness 17 Weak leadership 7 Strong income growth 18 Civil war/revolution 8 Strong markets and financial centers

ROUGH QUANTITATIVE SCORING OF MEASURES BY STAGE IN CYCLE THE RISE THE TOP THE DECLINE Debt Burden (Big Economic Cycle) Internal Conflict (Internal Order Cycle)

Education

Innovation & Technology

Cost Competitiveness

Military Strength

Trade

Economic Output

Markets & Financial Center

Reserve Currency Status

Resource-Allocation Effi- ciency

Infrastructure & Investment

Character/Civility/ Determination

Governance/Rule of Law

Gaps in Wealth, Opportunity & Values

Dark green = gauge is strong/good Dark red = gauge is weak/bad

Acts of nature, external order, and geology are not included in cycle analysis. Readings use proxies for determinants with limited history.

CHANGES TO THE WORLD ORDER (CONCEPTUAL EXAMPLE)

Netherlands United Kingdom United States

China Relative Power New New World World Order Order Time

End of the Old, End of the Old, Beginning of the New Beginning of the New (e.g., Dutch to British) (e.g., British to US) ■ Debt restructuring and debt ■ Debt restructuring and debt crisis crisis ■ Internal revolution (peaceful ■ Internal revolution (peaceful or violent) that leads to large or violent) that leads to large transfers of wealth from the transfers of wealth from the “haves” to the “have-nots” “haves” to the “have-nots” ■ External war ■ External war ■ Big currency breakdown ■ Big currency breakdown ■ New domestic and world ■ New domestic and world order order

CHAPTER 2

THE DETERMINANTS

How the Machine Works = (f)… Case Case Case Case Case Case Case Case Case Case 10, 1 2 3 4 5 6 7 8 9 Etc

Determinant 1 Effect Effect Effect Effect Effect Effect Effect Effect Effect Effect

Determinant 2 Effect Effect Effect Effect Effect Effect Effect Effect Effect Effect

Determinant 3 Effect Effect Effect Effect Effect Effect Effect Effect Effect Effect

Determinant 4 Effect Effect Effect Effect Effect Effect Effect Effect Effect Effect

Determinant 5 Effect Effect Effect Effect Effect Effect Effect Effect Effect Effect

Determinant 6 Effect Effect Effect Effect Effect Effect Effect Effect Effect Effect

Determinant 7 Effect Effect Effect Effect Effect Effect Effect Effect Effect Effect

Determinant 8 Effect Effect Effect Effect Effect Effect Effect Effect Effect Effect

Determinant 9 Effect Effect Effect Effect Effect Effect Effect Effect Effect Effect

Determinant 10 Effect Effect Effect Effect Effect Effect Effect Effect Effect Effect

Etc

THE THREE BIG CYCLES Healthy Big Debt/Money/Capital Markets/Economic Cycle Unhealthy

Order Big Cycle of Internal Order and Disorder Disorder

Peace Big Cycle of External Order and Disorder War

OTHER KEY DETERMINANTS (EIGHT KEY MEASURES OF POWER) High Education Low

High Innovation & Technology Low

Strong Cost Competitiveness Weak

Strong Military Strength Weak

Favorable Trade Unfavorable

High Economic Output Low

Strong Markets and Financial Center Weak

Strong Reserve Currency Status Weak

ADDITIONAL DETERMINANTS Favorable Geology Unfavorable

Efficient Resource-Allocation Efficiency Poor

Beneficial Acts of Nature Disruptive

High Infrastructure and Investment Low

Strong Character/Civility/Determination Weak

Strong Governance/Rule of Law Weak

Small Gaps in Wealth, Opportunity & Values Large

DYNAMICS TO PAY ATTENTION TO Country Self-Interest Individual

Important Desire to Gain Wealth and Power Not important

Extensive Learning from History Limited

Strong Multigenerational Psychological Cycle Decadent

Long-Term Time Frame of Decision Making Short-Term

Competent Leadership Weak

Open Openness to Global Thinking Closed

Productive Culture Unproductive

Cooperative Class Relationships Divisive

Moderate Political Left/Right Partisan

Cooperative Prisoner’s Dilemma At War

Win-Win Relationships Lose-Lose

Favorable Balance of Power Unfavorable

Peace Peace/War Cycle War

CHAPTER 2

DETERMINANTS ADDENDUM

THE UNIVERSE

ALL LIVING THINGS

HUMANKIND

EMPIRE

COUNTRY

STATE

TRIBE (i.e., community)

FAMILY

INDIVIDUAL

CHAPTER 3

THE BIG CYCLE OF MONEY, CREDIT, DEBT, AND ECONOMIC ACTIVITY

Type 2: Claims on Hard Money (e.g., Banknotes) Expands Credit, Compromises Credibility

Type 1: Hard Money Type 3: Fiat Money (e.g., Metal Coins) (e.g., USD Today) Maximizes Credibility, Maximizes Credit, Minimizes Credit Minimizes Credibility

CHAPTER 4

THE CHANGING VALUE OF MONEY

RESERVE CURRENCIES VS GOLD (SPOT FX) NLD GBR USA

100% War of 1812 Great Depression 80%

60% Napoleonic WWI Wars WWII 40% US Inflationary Dutch Empire ends/ ’70s collapse of Bank of Civil War Amsterdam 20%

0% 1600 1700 1800 1900 2000

SPOT FX VS GOLD USA GBR DEU FRA ITA JPN CHE ESP NLD CHN 40%

20%

0% (4) -20%

(1) (2) (3) -40% (5) -60%

(6) -80%

-100% 1860 1880 1900 1920 1940 1960 1980 2000 2020

FX TOTAL RETURN VS GOLD (LOG) USA GBR DEU FRA ITA JPN CHE ESP NLD 10,000

1,000

100

10

1 1850 1870 1890 1910 1930 1950 1970 1990 2010 2030

SPOT FX VS GOLD (1850–1913) USA GBR DEU FRA ITA JPN CHE ESP NLD 20% Broad stability

0% Fiscal crisis in Spain -20%

Falling silver -40% US Civil War prices produce Japanese devaluation -60%

1850 1860 1870 1880 1890 1900 1910

Due to a lack of data, several charts in this chapter do not show China.

SPOT FX VS GOLD (1913–1930) USA GBR DEU FRA ITA JPN CHE ESP NLD CHN 200%

Broad stability during 1920s 100%

0%

Post-WWI devaluations and German hyperinflation -100% 1913 1915 1917 1919 1921 1923 1925 1927 1929

SPOT FX VS GOLD (1930–1950) USA GBR DEU FRA ITA JPN CHE ESP NLD CHN 20%

0%

-20%

-40%

-60%

DEU FX restructured in 1948, -80% effectively confiscating nearly all financial wealth -100% 1930 1935 1940 1945 1950

SPOT FX VS GOLD (1966–1977) USA GBR DEU FRA ITA JPN CHE ESP NLD CHN 20%

0%

-20%

-40%

End of Bretton Woods -60%

-80%

-100% 1966 1968 1970 1972 1974 1976

SPOT FX VS GOLD REAL LONG RATES (1998–PRESENT) (1998–PRESENT) USA GBR DEU FRA ITA JPN CHE ESP NLD CHN 50% 6%

4% 0% 2%

0% -50%

-2%

CURRENCY AND GOLD REAL RETURNS OF MAJOR COUNTRIES SINCE 1850 (VS CPI, ANN) Real Returns (vs CPI), Ann 1850–Present 1850–1912 1912–Present Continuous Continuous Continuous Govt Bill Gold Govt Bill Gold Govt Bill Gold Country Investment Investment Investment

United Kingdom 1.4% 0.7% 3.1% -0.1% 0.5% 1.1%

United States 1.6% 0.3% 3.6% -1.0% 0.4% 1.0%

Germany -12.9% 2.0% 3.0% -0.9% -18.2% 3.1%

France -0.7% 0.6% 2.6% -0.3% -2.6% 1.1%

Italy -0.6% 0.3% 4.7% -0.5% -2.6% 0.5%

Japan -0.7% 1.0% 5.0% 0.4% -2.2% 1.2%

Switzerland 1.5% 0.0% 3.4% -0.5% 0.5% 0.3%

Spain 1.4% 1.1% 4.5% 0.1% 0.3% 1.5%

Netherlands 1.4% 0.5% 3.3% 0.0% 0.4% 0.7%

China — 3.3% — — — 3.3%

Average 1.2% 0.9% 3.6% -0.3% -0.1% 1.6%

Data for Switzerland is since 1851; data for Germany, Spain, and Italy is since 1870; data for Japan is since 1882; data for China is since 1926 (excluding 1948–50). Average return is un-rebalanced and doesn’t include China.

REAL RETURN OF GOLD (VS CPI, LOG) USA GBR DEU FRA ITA JPN CHE ESP NLD CHN 10,000

1,000

100

1860 1880 1900 1920 1940 1960 1980 2000 2020

REAL RETURN OF BILLS (VS CPI) USA GBR DEU FRA ITA JPN CHE ESP NLD 20

16

12

8

4

1850 1870 1890 1910 1930 1950 1970 1990 2010 2030

CHAPTER 5

THE BIG CYCLE OF INTERNAL ORDER AND DISORDER

THE TOP

CHN USA THE RISE THE DECLINE

3 4 THE TOP

2 5 THE RISE THE DECLINE

1 6

1 New internal order 3 Peace and prosperity 5 Bad financial and new leadership 4 Excesses and widening conditions and 2 Resource-allocation of wealth and other gaps intense conflicts systems and government 6 Civil wars and bureaucracies are revolutions built and refined

MAJOR CHINESE DYNASTIES AND THEIR STAGES (WITH INDICATIVE UPWARD EVOLUTION) Tang Song Yuan Ming Qing RC PRC Dynasty Dynasty Dynasty Dynasty Dynasty 3 2 3 4 5 2 5 1 3 6 1 2 4 6 1 4 5 2 3 6 3 4 5 1 2 6 1

600 800 1000 1200 1400 1600 1800 2000

MAJOR CHINESE DYNASTIES AND THEIR STAGES Tang Song Yuan Ming Qing RCPRC 1

(1 = All-Time Max) 1 2 1 6

1

600 800 1000 1200 1400 1600 1800 2000

GLOBAL RGDP PER CAPITA (2017 USD, LOG) Beginning Glorious Emergence 2008 of capitalism Revolution, French of German crisis (Amsterdam Great Revolution, Empire, 2nd Taj Industrial Digital Stock Mahal, Turkish collapse of Revolution Exchange) Revolution peak of War Dutch Rep Mughal Panic of 1873 COVID- 10 Empire South 19 Collapse Sea Bubble Revolutions Peak of of Ming of 1848 Dynasty, American Invention English American Empire of printing Civil War Taiping Revolution Rebellion, 9 press Deng (1440) 2nd Roaring Xiaoping Peak Opium ’20s reforms of Qing War Thirty 2nd Dynasty World Years’ Anglo- War II Dutch War Dutch War Seven 8 Revolt, Great war with Years’ War Depression Ottomans Collapse of Qing, WWI, and 7 1st Industrial Revolution post-war Meiji Restoration recession Napoleonic Wars 1500 1600 1700 1800 1900 2000 Global RGDP is primarily a mix of European countries before 1870 due to limited reliable data coverage across other countries before that point.

HISTORICAL LIKELIHOOD OF INTERNAL CONFLICT BASED ON SHARE OF ECONOMIC MEASURES WORSE THAN THRESHOLD (>1Z)

Likelihood of Conflict in Next 5 Years 40%

As you go from fewer problems with economic measures to 30% problems across all measures, the risk of conflict nearly triples 30%

17% 20% 12% 11% 10%

0% <40% 40–60% 60–80% >80% Share of Economic Measures Worse Than Threshold (>1z) 3

3 This chart is based on historical analysis of nine great powers (covering about 2,200 years of history in total). The likelihood of conflict is based on major cases of civil war, rebellion, and revolution but excludes peaceful revolutions that did not change the existing system. The analysis does not count the probability of conflict arising in a period when a country is already in the midst of internal conflict (and the five years following) to avoid counting periods in which economic conditions were bad because of the conflict itself.

CONFLICT COUNTRY BEGAN IN…

Dutch Revolt NLD 1566

English Civil War GBR 1642

Glorious Revolution GBR 1688

American Revolution USA 1775

French Revolution FRA 1789

Trienio Liberal ESP 1820 Cas- French Revolution of 1848 FRA 1848 es that created Meiji Restoration JPN 1868 changes to the Xinhai Revolution CHN 1911 system or regime Russian Revolution and Civil War RUS 1917

German Revolution/End of Monarchy DEU 1918

Rise of Hitler/Political Violence DEU 1929

Rise of Japanese Militarists JPN 1932

Spanish Civil War ESP 1936

Chinese Civil War CHN 1945

Jacobite Risings GBR 1745

Pugachev’s Rebellion RUS 1773

Dutch Patriot Revolt NLD 1781

White Lotus Rebellion CHN 1794

German Revolutions of 1848 DEU 1848

Taiping Rebellion CHN 1851 Cases that didn’t Panthay Rebellion CHN 1856 create changes US Civil War USA 1861 to the system or Muslim Rebellion CHN 1862 regime Paris Commune FRA 1871

Boxer Rebellion CHN 1899

1905 Russian Revolution RUS 1905

National Protection War CHN 1915

6 February 1934 Crisis FRA 1934

CHAPTER 6

THE BIG CYCLE OF EXTERNAL ORDER AND DISORDER

EST EUROPEAN DEATHS FROM CONFLICT (%POP, 15YR MOVING AVG) Internal Conflict External Conflict Total 0.4%

World Wars

Wars of Religion, 0.3% Thirty Years' War

Napoleonic 0.2% Wars

Enlightenment, Pax capitalism, Britannica, Industrial Second Renaissance, Revolution Industrial 0.1% Age of Revolution EU Exploration integr- ation

0.0% 1400 1500 1600 1700 1800 1900 2000

DEU EQUITY RETURNS (LOCAL FX, DEU PER CAPITA INCOME CUMULATIVE EXCESS) (2017 USD) 80% 8,500 Equities rise nearly 70% between Per capita income rises 22% January 1933 60% between 1933 and 1938 and 1938 7,500 40%

20% 6,500 0%

-20% 5,500 1933 1935 1937 1939 1933 1935 1937 1939

WARTIME ECONOMIC CONTROLS Import or Production Price/Wage Export Takeover of Rationing Controls Controls Restrictions Central Bank Allies United States Yes Yes Yes Yes Yes United Kingdom Yes Yes Yes Yes Partial Axis Germany Yes Yes Yes Yes Yes Japan Yes Yes Yes Yes Yes

REGULATIONS IMPACTING ASSETS Asset Asset Top Limits on Limits Market Price Ownership FX Marginal New on Corp Closures Controls Restrictions Controls Tax Rate Issuance Profits Allies United States No Yes Yes Yes 94% — Yes United Kingdom Yes Yes Yes Yes 98% Yes Yes Axis Germany Yes Yes Yes Yes 60% Yes Yes Japan Yes Yes Yes Yes 74% Yes Yes

EQUITY RETURN INDEX (USD) USA GBR DEU JPN 3.0 Equities in In contrast, both US and Germany UK equities rally almost perform well continuously after the as the Axis 1942 Battle of Midway powers until the end dominate from of the war... 1939 to 1942 2.0

Markets closed in Germany and Japan 1.0

...while the Japanese Massive declines war boom fades more when markets quickly, with strict reopen government controls keeping equity prices flat 0.0 1940 1942 1944 1946 1948 1950

CHAPTER 7

INVESTING IN LIGHT OF THE BIG CYCLE

THE BUILDING BLOCKS OF A WELL-DIVERSIFIED PORTFOLIO Individual Sectors USA Equities Credit Spreads J CHN PN USA EUR Rising Growth Assets Rising Inflation Assets

Falling Growth Assets Falling Inflation Assets

Risk Premiums & Discount Rates

A LOOK AT ASSET RETURNS ACROSS THE GREAT POWERS (Real Returns, 10-Year Window, Ann) UNITED STATES GREAT BRITAIN JAPAN GERMANY Equity Bond Cash Equity Bond Cash Equity Bond Cash Equity Bond Cash 1900–10 9% 0% 1% 3% 2% 2% 4% 1% 4% 3% 2% 1910–20 -2% -4% -3% -6% -7% -5% 1% -5% -4% -14% -10% -14% 1920–30 16% 7% 5% 10% 8% 7% -3% 12% 10% -24% -95% -86% 1930–40 0% 7% 3% 1% 5% 1% 6% 4% -1% 7% 11% 6%

A LOOK AT ASSET RETURNS ACROSS THE GREAT POWERS (Real Returns, 10-Year Window, Ann) FRANCE NETHERLANDS ITALY Equity Bond Cash Equity Bond Cash Equity Bond Cash 1900–10 1% 3% 2% 5% 1% 1% 3% 4% 1910–20 -7% -8% -6% 1% -6% -3% -9% -8% -6% 1920–30 -2% -1% -4% 1% 11% 6% -6% -5% -1%

RUSSIA CHINA AUSTRIA-HUNGARY Equity Bond Cash Equity Bond Cash Equity Bond Cash

1900–10 -2% 3% 4% 7% 6% 3% 4% 3% 2%

1910–20 -100% -100% -36% 3% 1% 4% -9% -10% -8%

1920–30 9% 6% 1% -6% -44% -44%

1930–40 2% -7% -6%

1940–50 -100% -100% -73%

1950–60

1960–70

1970–80

1980–90

1990–00

2000–10 15% -2% 4% 1%

2010–20 7% 4% 1% 2% 2% 0% 4

SHARE OF PORTFOLIOS LOSING X% OVER 5 YEARS BY COUNTRY (60/40 PORTFOLIO, REAL RETURNS) -90% or worse -50% or worse -25% or worse -10% or worse 100%

80%

60%

40%

20%

0% 1900 1920 1940 1960 1980 2000 2020

4 For China and Russia, bond data pre-1950 is modeled using hard currency bond returns held as though hedged back to local currency by a domestic investor; stocks and bonds modeled as full default at time of revolution. Annualized returns assume a full 10-year period even if markets closed during the decade.

WORST INVESTOR EXPERIENCES (ACROSS MAJOR COUNTRIES) Major Cases of 60/40 Real Returns Below -40% over a 20-Year Window Worst 20yr Country 20yr Window Return Detail (Real, Cumul) The Russian Civil War ended with communist rule, Russia 1900–1918 -100% debt repudiation, and the destruction of financial markets. Asset markets closed during WWII and were de- China 1930–1950 -100% stroyed when communist rule took hold in the late 1940s. Weimar Republic hyperinflation led to a collapse in Germany 1903–1923 -100% assets following WWI. Japanese markets and currency collapsed as Japan 1928–1948 -96% markets reopened post-WWII and inflation soared. Similar to Weimar Germany (though less infamous); Austria 1903–1923 -95% hyperinflation led to poor asset returns post-WWI. The Great Depression, followed by WWII and France 1930–1950 -93% German occupation, led to poor returns and high inflation. Similar to those of other Axis powers, Italian markets Italy 1928–1948 -87% collapsed as WWII concluded. Post-WWI, Italy suffered from economic depression Italy 1907–1927 -84% and high inflation, helping lead to Mussolini’s rise. The early 20th century saw WWI, followed by France’s France 1906–1926 -75% inflationary currency crisis in the early 1920s. Italy endured a series of recessions, high Italy 1960–1980 -72% unemployment rate and inflation, and currency declines in the 1960–70s. Post-independence, a series of major droughts India 1955–1975 -66% caused weak Indian economic growth and high inflation. The post-Franco transition to democracy coupled Spain 1962–1982 -59% with the inflationary 1970s strained Spain’s economy. The Great Depression followed by the devastation of Germany 1929–1949 -50% WWII led to a terrible period for German assets. Like other European nations, the 1960–70s saw weak- France 1961–1981 -48% er growth, currency declines, and high inflation. The early 20th century saw World War I, followed by UK 1901–1921 -46% the depression of 1920–21. 5

5 Cases of poor asset returns in smaller countries such as Belgium, Greece, New Zealand, Norway, Sweden, Switzerland, and across the emerg- ing world are excluded from this table. Note that for conciseness the worst 20-year window is shown for each country/time period (i.e., including Germany in 1903–23 precludes including Germany from 1915–35). For our 60/40 portfolios, we assumed monthly rebalancing across the 20-year window.

PERIODS OF WEALTH CONFISCATION 1900 1920 1940 1960 1980 2000

UK

USA Yes Yes

China Yes Yes

Germany Yes

France

Russia Yes Yes Yes

Austria-Hungary

Italy Yes

Netherlands

Japan Yes

PERIODS OF STRICT/RISING CAPITAL CONTROLS 1900 1920 1940 1960 1980 2000

UK Yes Yes Yes Yes

USA Yes Yes

China Yes Yes Yes

Germany Yes Yes Yes Yes

France Yes Yes

Russia Yes Yes Yes Yes Yes Yes

Austria-Hungary Yes

Italy Yes

Netherlands Yes

Japan Yes Yes 6

6 While this diagram is not exhaustive, I include instances where I could find clear evidence of each occurring in the 20-year period. For this analysis, wealth confiscation was defined as extensive seizure of private assets, including large-scale forced, non-economic sales by a government (or revolutionaries in the case of revolution). Relevant capital controls were defined as meaningful restrictions on investors moving their money to and from other countries and assets (although this does not include targeted measures directed only at single countries, such as sanctions).

STOCK MARKET CLOSURES ACROSS MAJOR ECONOMIES Share of Global GDP Count 50% 7 World War II 6 40% World War I Fall of USSR, reopening of China's 5 equity markets 30% 4

20% 3 9/11 2 10% 1

0% 0 1900 1920 1940 1960 1980 2000 2020

Austria-Hungary 0% 2%

IMPACT OF TAXES ON ROLLING 20-YEAR S&P TOTAL RETURNS Post-Tax Post-Tax Pre-Tax (401[k]) (Brokerage) Avg Ann Total Return 9.5% 8.2% 7.9% Avg Drag from Taxes (Ann Total Return) -1.3% -1.6% Avg Drag from Taxes (% of Total Returns) -14% -17% Avg Ann Real Return 6.2% 4.9% 4.6% Avg Drag from Taxes (Ann Real Return) -1.2% -1.6% Avg Drag from Taxes (% of Real Returns) -20% -26% 7

USA FINANCIAL ASSETS SHARE OF TOTAL ASSETS 65% 1929 stock Dot-com market bubble bubble 60% FDR Nifty Fifty 55% Housing bubble 50% WWII 1970s Volcker tightening/ 45% devaluation Reagan Revolution WWI 40% 1900 1920 1940 1960 1980 2000 2020

7 Tax impact for 401(k) method applies a 26 percent income tax rate (effective average federal tax rate for top quintile from the Congressional Budget Office as of 2017) at the conclusion of each 20-year investment period (i.e., tax-free investment growth). Tax impact for brokerage method separately taxes dividends (at the same 26 percent income tax rate) and capital gains, paying taxes on all capital gains (at a 20 percent rate) from both principal and dividend reinvestment at the conclusion of each 20-year investment period and netting losses against any gains.

REAL RETURN OF BILLS (VS CPI) USA GBR DEU FRA ITA JPN CHE ESP NLD 300%

200%

100%

0%

-100%

1900 1920 1940 1960 1980 2000 2020

GOLD RETURNS DURING 60/40 DRAWDOWNS Gold Returns (in Global FX) Global 60/40 Drawdowns 200%

150%

100%

50%

0%

-50% 1900 1920 1940 1960 1980 2000 2020

REAL BOND YIELD NOMINAL BOND YIELD USA EUR JPN 8% 16% 6% 12% 4% Near 2% lowest 8% ever

0% 4% Near lowest ever -2% 0%

REAL CASH RATE NOMINAL CASH RATE USA EUR JPN 18% 8% 15%

4% 12%

NOMINAL PAYBACK REAL PAYBACK PERIOD (YEARS) PERIOD (YEARS) Bonds Cash 100 200

80 160

60 120

40 80

CHAPTER 8

THE LAST 500 YEARS IN A TINY NUTSHELL

Sweden Russia

Habsburg England Low Countries German Poland-Lithuania (non-Habsburg) Holy Roman Empire Habsburg Central France Europe Venice Papal Genoa States Portugal Habsburg Spain Ottoman Empire

Habsburg Italy

Ming China

Fragmented smaller states

BOOK/MANUSCRIPT PRODUCTION IN MAJOR EUROPEAN COUNTRIES (MLN) 600

500

400 Hundreds of millions of texts produced in each of the subsequent centuries 300

200 Printing press 100

SILVER PRODUCTION UK CONSUMER FROM MEXICO AND PRICE INDEX PERU (METRIC TON) 8,000 1.0

Spanish 0.8 6,000 Price Revolution 0.6 4,000 0.4 2,000 0.2

0.0 0 1300 1400 1500 1600 1700 1520 1600 1680 1760

ROUGH COUNT OF TRIBUTARY AREAS (BASED ON TRIBUTARY VOYAGES OVER 30YR WINDOW) 10 Treasure voyages and early Ming expansion 8

6 Ming-Qing transition

4

2

1360 1416 1472 1528 1584 1640 1696 1752 1808 1864

CHAPTER 9

THE BIG CYCLE RISE AND DECLINE OF THE DUTCH EMPIRE AND THE GUILDER

THE NETHERLANDSINDEX OF KEY DETERMINANTS

Major Wars Education Innovation and Technology Competitiveness Military Trade Economic Output Financial Center Reserve FX Status 1

Level Relative to Own History (1 = Max)

1500 1600 1700 1800 1900 2000

DUTCH ARC 1550–1850 Major Wars Netherlands Habsburg Spain United Kingdom

Rising Inequality 0.7

Level Relative to Other Empires (1 = Max) Economic (3) Prosperity & Economic Reserve FX (4) Problems 0.6 Run on Bank of Amsterdam New Order (2) Global Empire & (5) Dutch Military Strength independence New Order 0.5 Congress of Innovation External Conflict Vienna Ships & first 4th Anglo- global Dutch War (6) (1) 0.4 corporation

Dutch Rebellion 0.3 & Eighty Thirty Year of War of the Years’ War Years’ Disaster Spanish Napoleonic War (1672) Succession Wars 0.2 1550 1600 1650 1700 1750 1800 1850

HABSBURG SPAIN’S ARC IN THE 1500S AND 1600S Major Wars Spain Netherlands

Economic Problems 0.7 Global Multiple sovereign defaults Empire

Level Relative to Other Empires (1 = Max) (4) (3) (5) 0.6 Innovation Ships & Weak New Order Age of Internal Leadership Peace of Exploration Conflict Philip II & III Westphalia 0.5 New Start of External Dutch Conflict (6) Order Union Revolt (2) 0.4 of Spain & Holy Roman Empire 0.3 (1)

Habsburgs Conquest Spanish Thirty Catalan & Habsburg 0.2 inherit in the Armada Years’ Portuguese rule over Spain Americas defeated War rebellion Spain ends 0.1 1500 1540 1580 1620 1660 1700

SHARE OF MAJOR INVENTIONS EMPIRE SIZE (TRAILING 30 YEARS) (% WORLD, EST) 12% 16% 10%

12% 8%

6% 8% 4% 4% 2%

SHARE OF GLOBAL OUTPUT 7%

6%

5%

4%

3%

2% 1400 1500 1600 1700 1800 1900

SPANISH MARAVEDI COIN (GRAMS OF SILVER, INDEXED) 120

100

80

60 Spanish coin devalued massively during the 17th century 40

1500 1550 1600 1650 1700 1750 1800

NLD UNIVERSITIES FOUNDED NLD BOOKS PUBLISHED (% WLD) (% WLD) 8% 12%

10% 6% 8%

4% 6%

4% 2% 2%

NLD SHARE OF MAJOR NLD EXPORTS INVENTIONS (OVER 30 YEARS) (% WLD) 30% 40%

20% 30%

20% 10% 10%

MAJOR INVENTIONS (PER MLN POPULATION) NLD GBR FRA 9 Unprecedented 8 innovation during Dutch 7 Golden Age UK innovation rises 6 with Industrial Revolution 5 4 3 France lags 2 1 0 1500 1600 1700 1800 1900

REAL GDP PER CAPITA (2017 USD) EUR NLD GBR ESP DEU FRA 8,000 German catch-up British 4,000 Dutch industrialization outperformance

2,000

Spanish decline 1,000 1400 1500 1600 1700 1800 1900

DUTCH EAST INDIA CO DIVIDENDS (%GDP) 0.8%

0.6%

0.4%

0.2%

0.0% 1625 1675 1725 1775

GRAMS OF FINE SILVER PER GUILDER 20

18 Limited debasement after the founding of 15 the Bank of Amsterdam 13

10

8

1550 1600 1650 1700 1750 1800

DUTCH STANDING RELATIVE TO OTHER GREAT POWERS (EST) Major Wars Netherlands Key Events

Dutch Golden Age 0.8 The Dutch The Dutch lose defeat to the British 0.7 (C) (D) the British 0.6 (E) 0.5 (B) (F) 0.4 (A) 0.3

France takes control 0.2 of the Netherlands 0.1 0.0 1500 1550 1600 1650 1700 1750 1800 1850 1900 1950 2000 (A) The Dutch declare independence from Spain (B) Dutch East India Co, Bank of Amsterdam, and stock exchange founded (C) First and Second Anglo-Dutch Wars (D) Seven Years’ War and Shadow Banking Crisis of 1763 (E) Fourth Anglo-Dutch War, run on the Bank of Amsterdam (F) Dutch East India Co nationalized, downfall of the Dutch Empire

BANK OF AMSTERDAM ACCOUNTS AT BANK HOLDINGS (%GDP) OF AMSTERDAM Deposits Gold and Silver 8%

3,000 6%

2,000 4%

1,000 2%

DUTCH EAST INDIA COMPANY BALANCE SHEET (%GDP) Assets Debt Equity 30% Dutch East India Company effectively wiped out in the Fourth Anglo-Dutch War 20%

10%

0%

-10% 1600 1625 1650 1675 1700 1725 1750 1775 8

DUTCH EAST INDIA COMPANY PROFIT & LOSS (GUILDER, MLN) 10

5

0

-5

-10

-15 1750 1760 1770 1780 1790 1800

8 This chart only shows the financial results from the Dutch East India Company reported in patria, i.e., the Netherlands. It does not include the parts of the revenue and debt from its operations in Asia but does include its revenue from goods it sourced in Asia and sold in Europe.

BANK OF AMSTERDAM HOLDINGS (%GDP) Gold and Silver 7%

6%

5%

4%

3% As deposit holders exchange their guilder for gold and silver, the Bank of Amsterdam 2% loses its holdings in precious metals 1%

0% 1700 1725 1750 1775 1800

BANK OF AMSTERDAM LOANS OUTSTANDING (GUILDER, MLN) Govt City Chamber Dutch East India Company 14

12 Bank of Amsterdam starts to print 10 to save Dutch East India Company 8

6

4

2

1775 1780 1785 1790

DUTCH GUILDER vs Gold vs GBP 1.10

1.00

(A) (B) 0.90 (C)

0.80 (D)

0.70 1775 1780 1785 1790 1795 1800 (A) Guilder stable through most of the decline era (B) Fourth Anglo-Dutch War leads to money printing and initial pressure on the guilder (run on the Bank of Amsterdam) (C) Short period of stabilization as investors seek safe havens at the start of the French Revolution (D) The French overthrow the Dutch; accounts at the bank basically wiped out 9

BANK OF AMSTERDAM VALUE OF THE RESERVE RATIO DUTCH GUILDER (PRECIOUS METAL TO vs Gold vs Silver vs GBP MONETARY LIABILITIES) 1.6 100% 1.4 1.2 80% 1.0 60% 0.8 Stable during Golden Age 0.6 After the Fourth 40% 0.4 Anglo-Dutch War, there is a sharp decline in the 20% 0.2 ratio of precious metal to deposits (as depositors flee) 0.0 0% 1600 1650 1700 1750 1800 1600 1650 1700 1750 1800

9 To fully represent the likely economics of a deposit holder at the Bank of Amsterdam, we assumed depositors each received their pro-rated share of precious metal still in the bank’s vaults when it closed (that was roughly 20 percent of the fully backed amount, thus the approximately 80 percent total devaluation).

DUTCH EIC TOTAL RETURNS BY YEAR OF INITIAL INVESTMENT (100 = STARTING WEALTH, 50YR INTERVALS, LOG) 1610 1660 1710 1760 10,000 Returns go from incredible to devastating

1,000

100

10 1600 1625 1650 1675 1700 1725 1750 1775 1800

TOTAL EQUITY RETURNS (INDEXED) Dutch East India Company GOVERNMENT BOND YIELDS British East India Company NLD GBR 9%

1,000 7%

5% 100

3%

DUTCH BOND PRICES (TERM ANNUITIES)

Start of various wars in 1672

Rebound after the wars end, Series of Fourth Anglo- military Dutch War but fall with the and conquest Glorious Revolution losses against by France the French

1600 1650 1700 1750 1800

CHAPTER 10

THE BIG CYCLE RISE AND DECLINE OF THE BRITISH EMPIRE AND THE POUND

CHANGES TO THE WORLD ORDER (CONCEPTUAL EXAMPLE)

Netherlands United Kingdom United States

China Relative Power New New World World Order Order Time

UNITED KINGDOMINDEX OF KEY DETERMINANTS

Major Wars Education Innovation and Technology Competitiveness Military Trade Economic Output Financial Center Reserve FX Status 1

Level Relative to Own History (1 = Max)

1550 1600 1650 1700 1750 1800 1850 1900 1950 2000

UK ARC 1600–PRESENT Major Wars United Kingdom Netherlands United States

New UK-led Order External Congress of Vienna (4) Conflict & High 0.8

Level Relative to Other Empires (1 = Max) Indebtedness Global (3) Empire & 0.7 Internal Conflict & Reserve FX (5) Emergence of Better Innovation Government 0.6 Industrial Inequality Glorious Revolution (2) Revolution & Losing New Order New Order Innovative US-led 0.5 Peace of Edge Western Westphalia Innovation (6) Block Financial innovations, 0.4 (1) competition with the Dutch 0.3

0.2 Napoleonic WWI & English Civil War wars Victorian Era WWII Suez crisis 0.1 1600 1650 1700 1750 1800 1850 1900 1950 2000

GBR GOVT REVENUE (%GDP) 14%

12% Massive expansion of fiscal state 10%

8%

6%

4%

2%

0% 1500 1550 1600 1650 1700 1750 1800

MAJOR INVENTIONS SHARE OF (PER MLN POPULATION) MAJOR INVENTIONS NLD GBR FRA 70%

8 60%

50% 6 40%

4 30%

20% 2 10%

REAL GDP PER CAPITA (2017 USD) EUR NLD GBR ESP DEU FRA 8,000 German catch-up British 4,000 Dutch industrialization outperformance

2,000

Spanish decline 1,000 1400 1500 1600 1700 1800 1900

FRENCH UNIVERSITIES LITERACY RATE (% POP) FOUNDED (%WLD, 30YR AVG) FRA GBR 50% 90% 80% 40% 70%

FRENCH INFLATION (5-YEAR AVG) 90%

70%

50%

30%

10%

-10% 1700 1720 1740 1760 1780 1800 1820

FRENCH CURRENCY VS GOLD (INDEXED, LOG) 1,000%

100%

Currency collapse accelerates from 10% 1792 to 1796 1%

.1%

.01% 1750 1770 1790 1810 1830 1850 1870

GBR EMPIRE SIZE (% WORLD, EST) 25%

20%

15%

10%

5%

0% 1600 1650 1700 1750 1800 1850 1900 1950 2000

GBR SHARE OF WORLD EXPORTS (% TOTAL) 50%

40%

30%

20%

Between 1850 and 1914, about 60% of world trade 10% denominated in pound sterling 0% 1700 1800 1900 2000

INTERNATIONAL INVESTMENTS (% DEV WLD GDP) GBR NLD FRA DEU USA 70%

60%

50%

40%

30%

20%

10%

0% 1825 1835 1845 1855 1865 1875 1885 1895 1905

SHARE OF GLOBAL DEBT SHARE OF GLOBAL IN GBP (EST) TRANSACTIONS IN GBP (EST) 80% 60%

50% 60% 40%

40% 30%

20% 20% 10%

0% 0% 1700 1800 1900 2000 1700 1800 1900 2000

INVENTIONS GDP (% OF GLOBAL INVENTIONS) (% OF GLOBAL GDP) USA GBR DEU 50% 30% Rise of the US 40% Steady UK decline

UK declines as US and Germany catch up 30% 20%

20%

10% 10% 1870 1890 1910 1870 1890 1910 10

GBR GDP share includes income of countries controlled by the British Empire.

UK WEALTH GAP (TOP 1% WEALTH SHARE) 75%

70%

65%

60%

55% 1800 1820 1840 1860 1880 1900 1920

PUBLIC EDUCATION EXPENDITURE (%GDP) DEU GBR FRA 3% Germany outspends both Britain and France to develop its education system 2%

1%

0% 1870 1913

SHARE OF WORLD PATENT APPLICATIONS % OF NOBEL PRIZES WON DEU GBR FROM 1900 TO 1913 30% 25% German patent applications become a significant share of the world’s total and 25% 20% overtake Britain 20% 15% 15% 10% 10%

5% 5%

0% 0% 1870 1880 1890 1900 1910 DEU GBR USA

RELATIVE SHARES OF WORLD MANUFACTURING OUTPUT DEU GBR FRA 26% German manufacturing goes from less than a half of Britain's in 1860... …to around 75% by 1900 22%

18%

14%

10%

6%

2% 1860 1880 1900

WARSHIP TONNAGE SHARE OF GLOBAL MILITARY (THOUSAND TONS) SPENDING (EST, 10YR AVG) GBR DEU 3,000 Competition between 20% Germany and Britain leads to a ramp-up in military armament by both countries 2,000 15%

1,000 10%

DEU REAL GDP PER CAPITA JPN REAL GDP PER CAPITA

160% 160%

120% 120%

80% 80%

DEU Spot FX vs USD (Indexed to 1935) DEU Black Market Spot FX vs USD JPN SPOT FX VS USD (Indexed to 1935) (INDEXED TO 1935) 100 100 June 1948: FX replaced, with financial asset 80 80 holders facing -90% haircut 60 60

40 40

20 20

GBP SHARE GBP SHARE OF GBP SHARE OF GLOBAL GLOBAL RESERVES OF GLOBAL TRANSACTIONS (EX-GOLD, EST) DEBT (EST) (EST) 100% 70% 50% WWII 60% 80% 40% 50% 60% 40% 30%

40% 30% 20% 20% 20% 10% 10%

11 This chart shows the official exchange rate between dollars and deutschemarks as well as an unofficial (black market) rate that was based on actual transactions between New York and Germany during that time period. The unofficial rate shows that the true value of the deutschemark was col- lapsing during the period.

USD/GBP (INV) GBR FX VS GOLD (£/OZ, INV) 0.15 2 Second devaluation (1967): UK gives 4 up defending 6 the peg 0.25 8 10 12 First devaluation 0.35 14 (1946–49): Convertibility crisis 16 when the UK removes 18 capital controls 0.45 20 1900 1935 1970 1900 1935 1970

USD/GBP (INV) GBR REAL FX VS TWI 0.15 20%

10% 0.25

0%

0.35 -10%

-20% 0.45 1930 1940 1950 1960 1930 1940 1950 1960

GBR CURRENT ACCOUNT (%GDP) 15%

10%

5%

0%

-5%

-10%

-15% 1930 1940 1950 1960

GBR CURRENT GBR GOLD ACCOUNT (%GDP) RESERVES (OZ, MLN) 3% 90 Deterioration of the current account, connected 80 to EUR recession 2% 70 1% 60 0% 50 -1% Gold reserves fall over the 40 decade, -2% accelerating 30 in 1967 -3% 20 60 62 64 66 68 70 60 62 64 66 68 70

GBR SHORT RATES (DIFF TO USA) GBR REAL FX VS TWI 5% 10% Sharp rate hikes amid currency 8% 4% defense 6%

USD/GBP (INV) 0.25

0.30

0.35

0.40

0.45 60 62 64 66 68 70

AVERAGE SHARE OF POUNDS IN CENTRAL BANK RESERVES (%TOTAL) All Countries Sterling Agreement Countries 70% 20% 60%

15% 50%

40% 10% 30%

THE EUROZONE COMPARED TO THE US AND CHINA EUR USA CHN

Empire Score (0 to 1)* 0.55 0.87 0.75

GDP Per Capita (2017 USD, PPP Adj) 41,504 60,236 16,411

GDP (%WLD, PPP Adj) 13% 17% 23%

Population (%WLD) 4% 4% 18%

Exports (%WLD) 12% 11% 15%

Military Spending (%WLD) 9% 28% 19%

College Grads (%WLD) 13% 20% 22%

Patents (%WLD) 11% 17% 41%

Nobel Prizes (%WLD) 11% 32% 2%

Equity Mkt Cap (%WLD) 8% 55% 10%

Intl Transactions in Currency (%WLD) 28% 55% 2%

Official Reserves Held in Currency (%WLD) 21% 62% 2%

*Europe Empire Arc treats major Eurozone countries as single unit for purposes of comparison.

GDP PER CAPITA GDP PER CAPITA (2010 USD) (2010 USD, INDEXED TO 2007) DEU FRA ITA ESP GRC 50,000 130%

40,000 110%

30,000 90%

CHAPTER 11

THE BIG CYCLE RISE AND DECLINE OF THE UNITED STATES AND THE DOLLAR

UNITED STATESINDEX OF KEY DETERMINANTS

Major Wars Education Innovation and Technology Competitiveness Military Trade Economic Output Financial Center Reserve FX Status 1

Level Relative to Own History (1 = Max)

1700 1800 1900 2000

US ARC 1750–PRESENT Major Wars United States United Kingdom China

Military Strength Global Empire 1.0 & Reserve FX

Level Relative to Other Empires (1 = Max) (3) (4) New Order Innovation (5) 0.8 Digital Internal US-led Conflict Western Bloc Revolution Strong Leadership Founding Fathers 0.6 (2) Rising Innovation Inequality Civil 2nd Industrial & High War Revolution Indebtedness 0.4 New Order (1)

Mexican- 0.2 American American Louisiana War Gilded Age & Revolution Purchase Progressive Era WWI WWII Cold War 0.0 1750 1800 1850 1900 1950 2000

SPOT FX RATE VS USD (INDEXED) GBR FRA DEU

Devaluation against the dollar during World War I 110

100

90

1910 1911 1912 1913 1914 1915 1916 1917 1918 1919

RELATIVE STANDING OF GREAT EMPIRES USA CHN GBR RUS

Level Relative to Other Empires (1 = All-Time Max)

0 1940 1960 1980 2000 2020

NUCLEAR WEAPONS STOCKPILE (# WARHEADS, LOG) USA GBR CHN IND RUS FRA 100,000

10,000

1,000

100

10

1945 1965 1985 2005

USA Long Rates USA Core Inflation USA Short Rates USA Headline Inflation 20% 20%

16% 16%

12% 12%

8% 8%

4% 4%

0% 0%

EXPORTS OF GOODS AND SERVICES MINUS IMPORTS OF GOODS AND SERVICES (REAL, USD BLN, 12MMA) USA CHN 1,200 Country gets richer

600

0

-600

Country gets poorer -1,200 1990 2000 2010 2020

PRIVATE SECTOR NON-FIN DEBT (%GDP, 6MMA) 180% When the cycle When the cycle changes changes 140%

New 100% World Order

60%

20% 1900 1920 1940 1960 1980 2000 2020

USA Interest Rates USA Monetary Base (%GDP) 20% 29% New World Order 16% 24% When the 12% When the cycle cycle 19% changes changes 8% 14% 4% 9% 0% 4% 1900 1920 1940 1960 1980 2000 2020

USA INCOME SHARES USA WEALTH SHARES Top 10% Bottom 90% Top 0.1% Bottom 90% 80% 50%

70% 40%

60% 30% 50% 20% 40%

30% 10%

20% 0% 1920 1970 2020 1920 1970 2020

IDEOLOGICAL POSITIONS OF THE MAJOR PARTIES House Republican Senate Republican House Democrat Senate Democrat 0% 60%

More 50% -10% conservative 40% -20% Greatest 30% gap -30% 20%

SHARE OF CONGRESSIONAL MEMBERS’ VOTES CAST ALONG PARTY LINES 100%

90%

80%

70%

60% 1790 1830 1870 1910 1950 1990 2030

This chart shows the average predictiveness of a given member’s left/right ideology in determining their vote across chambers for each congressional session as measured by NOMINATE, an academic model of ideological preference.

UNITED STATES USA Unemployment Rate USA CB Balance Sheet (%GDP) 30% 40%

30% 20%

20%

10% 10%

EUROPE EUR Unemployment Rate EUR CB Balance Sheet (%GDP) 14% 70%

12% 60%

10% 50%

8% 40%

6% 30%

4% 20%

2% 75 10%

10%

EUROPE EUR Unemployment Rate EUR CB Balance Sheet (%GDP) 14% 70%

12% 60%

10% 50%

8% 40%

6% 30%

4% 20%

2% 10%

UNITED KINGDOM GBR Unemployment Rate GBR CB Balance Sheet (%GDP) 25% 50%

20% 40%

15% 30%

10% 20%

5% 10%

JAPAN JPN Unemployment Rate JPN CB Balance Sheet (%GDP) 8%

120% 6%

80% 4%

40% 2%

5% 10%

JAPAN JPN Unemployment Rate JPN CB Balance Sheet (%GDP) 8%

120% 6%

80% 4%

40% 2%

POLITICAL SPECTRUM 50 YEARS AGO

POLITICAL SPECTRUM 2021

Shading indicates degree of polarization.

CHAPTER 12

THE BIG CYCLE RISE OF CHINA AND THE RENMINBI

RELATIVE STANDING OF GREAT EMPIRES Major Wars United States China United Kingdom Netherlands Spain Germany France India Japan Russia Ottoman Empire 1

Level Relative to Other Empires (1 = All-Time Max)

1500 1600 1700 1800 1900 2000

CHINAINDEX OF KEY DETERMINANTS

Major Wars Education Innovation and Technology Competitiveness Military Trade Economic Output Financial Center Reserve FX Status 1

Level Relative to Own History (1 = Max)

1800 1850 1900 1950 2000

Major Wars Rough Estimate of China’s Relative Standing vs Great Powers

Tang Song Yuan Ming Qing RC PRC 1

Level Relative to Other Empires Dynasty Dynasty Dynasty Dynasty Dynasty

(1 = All-Time Max)

600 800 1000 1200 1400 1600 1800 2000

TRANSITIONS ACROSS DIFFERENT TYPES OF MONEY IN CHINESE HISTORY

Type 1

Type 2

Type 3

Tang Northern Southern Yuan Ming Early- Late Rep of People’s 618– Song Song 1279– 1368– Mid Qing China Rep of 907 960– 1127– 1368 1644 Qing ~1800– 1911– China 1127 1279 1644– 1911 1949 1949– 1800 Pres

CHINESE INFLATION (Y/Y) 30% Hyperinflation 20%

10%

0%

Inflation pre-1926 quoted in silver terms, post-1926 in RMB -10%

I produced this diagram working with Professor Jiaming Zhu.

CNY VS USD (INV) GOLD PRICE (IN CNY, INV) 0 0

2 4,000

4 8,000 Up = stronger Up = stronger RMB 6 RMB 12,000 8

10 16,000 1920 1970 2020 1920 1970 2020

CHINA'S DEVELOPMENT SINCE 1949 AND 1978

1949 1978 2018 ∆ Since 1949 ∆ Since 1978

RGDP Per Capita* 348 609 15,243 44x 25x

Share of World GDP 2% 2% 22% 12x 11x

Population Below the — 96% 1% at least -96% -96% Poverty Line ($1.90/Day)** Life Expectancy 41 66 77 +36 Yrs +11 Yrs Infant Mortality Rate 200 53 7 -96% -86% (per 1,000 Births)

Urbanization 18% 18% 59% +41% +41%

Literacy 47% 66% 97% +50% +31%

Avg Yrs of Education 1.7 4.4 7.9 +6.2 Yrs +3.5 Yrs

*USD 2017, PPP-adjusted **The World Bank only has poverty data back to 1981

UNITED STATES CHINA Change Change 1980 Today Change 1980 Today Change (%) (%)

Average Years 11.9 13.6 +1.7 +14% 4.6 7.9 +3.3 +72% of Schooling

Govt Spending on Education 5.30% 5.50% 0.20% +4% 1.90% 5.20% 3.30% +174% (% of GDP) Est Population w/ Tertiary Education 25 60 +35 +140% 3 120 +117 +3,900% (Mln) Population w/ Tertiary Education 17% 28% 11% +68% 1% 12% 11% +2,272% (% Working-Age Pop) Population w/ Tertiary Education 35% 15% -20% -57% 4% 31% +27% +590% (% World)

STEM Majors (Mln) 3 8 +5 +141% 1 21 +21 +4,120%

STEM Majors (% World) 29% 11% -18% -62% 5% 31% +26% +535%

CHAPTER 13

US-CHINA RELATIONS AND WARS

SHARE OF CENTRAL BANK RESERVES BY CURRENCY USD 51%

EUR 20%

Gold 12%

JPY 6%

GBP 5%

CNY 2%

Based on data through 2019

CHAPTER 14

THE FUTURE

GLOBAL POPULATION (MLN)

8,000 8,000

6,000 6,000

4,000 4,000

2,000 2,000

GLOBAL POPULATION GROWTH (10YR CHG, EST) 25% 25% Baby Boom 20% 20%

Collapse 15% WWII 15% Thirty of Ming Years’ Dynasty Industrial 10% War Revolution WWI Baby Boom 10% 5%

GLOBAL LIFE EXPECTANCY AT BIRTH 80 80 COVID-19 COVID-19 HIV/AIDS 70 epidemic 70

Baby 60 60 Thirty Boom Years’ Third Plague 50 Baby 50 War pandemic Boom 40 40 WWII WWII 30 30 Flu WWI, WWI, 1557 influenza outbreak Spanish flu 20 Spanish flu 20 pandemic & famine pandemic pandemic 10 10 1500 1600 1700 1800 1900 2000 1900 1925 1950 1975 2000 2025 14

GLOBAL RGDP GLOBAL RGDP PER CAPITA (LOG) PER CAPITA (2017 USD) 11 40,000

14 Importantly, a number of the charts shown on these pages rely on the record from fewer countries further in the past, due to limited reliable data history. Life expectancy prior to the 1800s is solely based on Great Britain (marked by the dotted line). Global RGDP is primarily a mix of European countries before 1870. And there are not good records of total wealth prior to the 1900s, so I can’t show you the picture before then.

GLOBAL REAL WEALTH PER CAPITA (ROUGH ESTIMATE, 2017 USD, LOG) 100,000 2008 financial crisis Digital Revolution COVID-19 Peak of American Dot-com Empire bubble Collapse of Qing, 10,000 WWI, Russian Roaring Deng Revolution, and ’20s WWII Xiaoping Great Leap reforms Spanish flu Forward, PRC famines Great founded Depression 1,000 1900 1920 1940 1960 1980 2000 2020

GLOBAL RGDP PER CAPITA DRAWDOWNS 0% 0%

2008 -5% financial -4% crisis WWI COVID-19 -10% Panic WWI of 1819 -8% Great -20% Depression 2008 Anglo-French crisis -12% War WWII 10% Great WWII Dutch Revolt COVID-19 Depression against Spain -25% -16% 1500 1600 1700 1800 1900 2000 1900 1920 1940 1960 1980 2000 2020

GLOBAL REAL WEALTH PER CAPITA DRAWDOWNS 0%

-10% 1970s stagflation 2008 financial crisis -20%

Great Depression -30% WWII Collapse of Qing, WWI, Russian Revolution, and Spanish flu -40% 1900 1920 1940 1960 1980 2000 2020

GLOBAL DEATHS BY CATEGORY (RATE PER 100K PEOPLE, 15YMA) Famines Natural Disasters Pandemics 300 Spanish flu

250

Indian 200 famine

Cocoliztli epidemics Series of Indian 150 famines Indian and Chinese famines China’s Great Leap Forward 100

Russian COVID-19 famine HIV/ 50 French AIDS famine

1500 1600 1700 1800 1900 2000

ESTIMATED DEATHS FROM CONFLICT (MAJOR POWERS, %POP, 15YMA) Internal Conflict External Conflict Total

0.5% WWII, Holocaust, communist revolutions

0.4%

0.3% WWI

Collapse of Ming Dynasty, Time of religious wars in Europe 0.2% Troubles in Russia Napoleonic Chinese European Wars border monarchic wars, Wars of Ethnic wars Religion in wars in China 0.1% religious Seven wars in France Years’ War Europe in Europe

0.0% 1400 1500 1600 1700 1800 1900 2000

CURRENT INNOVATION AND TECHNOLOGY SCORE 2.5 2.0 1.5 1.0 0.5 0.0 -0.5 -1.0 -1.5 USA CHN EUR JPN DEU NLD GBR FRA RUS ESP IND 15

Arrows denote the 20-year change in the gauge.

DEBT BURDEN (UP = WORSE FINANCIAL POSITION)

1

0

-1

-2 USA ESP GBR FRA JPN EUR IND CHN NLD RUS DEU

RESERVE CURRENCY STATUS 60%

50%

40%

30%

20%

10%

0% USA EUR JPN GBR CHN RUS IND 16

16 Individual European countries are not shown on the reserve currency status gauge due to the European Monetary Union (all these countries use the euro)—so only the Europe aggregate is shown. The measure shows an average of what share of global transactions, debts, and official central bank reserve holdings are denominated in each country’s currency.

RELATIVE INTERNAL CONFLICT GAUGE Z-SCORE FOR MAJOR POWERS TODAY (UP = MORE CONFLICT) 2.5 2.0 1.5 1.0 0.5 0.0 -0.5 -1.0 -1.5 NLD JPN DEU CHN FRA GBR ESP RUS USA

USA INTERNAL CONFLICT GAUGE Z-SCORE (UP = MORE CONFLICT) 3

2

1

0

-1

1780 1810 1840 1870 1900 1930 1960 1990 2020

USA INTERNAL CONFLICT GAUGE BREAKDOWN Internal Strife Political Conflict 5 3

LATEST INTERCOUNTRY CONFLICT Z-SCORE (UP = MORE CONFLICT)

0.8

0.4

0.0

-0.4

-0.8 USA GBR GBR USA USA CHN CHN USA USA JPN DEU JPN GBR DEU JPN GBR RUS CHN

USA-CHINA CONFLICT GAUGE Z-SCORE 0.8

0.4

0.0

-0.4

-0.8

1970 1980 1990 2000 2010 2020

CURRENT MILITARY STRENGTH (UP = STRONGER) 2

1

0

-1

-2

USA CHN RUS EUR IND JPN FRA GBR DEU ESP NLD

GLOBAL DEATHS BY CATEGORY (RATE PER 100K PEOPLE) Famines Natural Disasters Pandemics 1,400

Spanish flu 1,200

Indian 1,000 famine

800

Cocoliztli epidemics 600

Series of Indian Indian and famines China’s Chinese Great Leap 400 famines Forward Russian French famine famine COVID-19 200

HIV/ AIDS 0 1500 1600 1700 1800 1900 2000

GLOBAL TEMPERATURE Global Land and Ocean Temperature VS 1961–1990 AVG Anomalies (ºC) (ºC, SINCE 0 CE) Carbon Dioxide Concentration (PPM) 1.0 1.2 430

0.5 0.8 390 Medieval Warm Period 0.4 0.0 350

0.0 -0.5 310

NUMBER OF NATURAL CATASTROPHIC EVENTS

200

150

100

50

1970 1980 1990 2000 2010 2020

TOTAL LOSSES FROM CATASTROPHES SINCE 1970 (2020 USD, BLN) Annual 5yr Average 350

300

200

150

Hurricanes 100 Japan, NZ Harvey, Hurricane earthquake Irma, 50 Katrina Maria 1970 1980 1990 2000 2010 2020

CLIMATE CHANGE VULNERABILITY (UP = MORE VULNERABLE) 2.5 2.0 1.5 1.0 0.5 0.0 -0.5 -1.0 -1.5 DEU FRA EUR GBR KOR MEX SGP SAF TLD IDR NLD CAN USA JPN AUS BRZ CHN SAR MAL PHP ESP RUS ITA TUR IND

CURRENT READINGS ACROSS MAJOR POWERS (Z-Score and 20-Year Change Denoted by Arrows) GAUGE USA CHN EUR DEU QUALITY

EMPIRE SCORE (0–1) 0.87 0.75 0.55 0.37

Debt Burden Good -1.8 0.3 -0.3 1.6 (Big Economic Cycle) Expected Growth Good -0.7 0.4 -1.0 -1.0 (Big Economic Cycle) Internal Conflict Good -2.0 0.2 0.4 0.7 (Internal Order; low is bad)

Education Good 2.0 1.6 0.3 -0.2

Innovation & Technology Good 2.0 1.5 0.4 -0.1

Cost Competitiveness Good -0.4 1.2 -0.6 -0.6

Military Strength Good 1.9 1.0 0.3 -0.6

Trade Good 1.1 1.8 1.3 0.6

Economic Output Good 1.7 1.8 0.6 -0.1

Markets & Financial Center Good 2.6 0.5 0.4 -0.2

Reserve Currency Status (0–1) Good 0.55 0.04 0.23

Geology Good 1.4 0.9 -0.4 -0.7

Resource-Allocation Efficiency OK 1.3 0.0 -0.8 0.6

Acts of Nature OK -0.2 -0.1 0.0 1.1

Infrastructure & Investment Good 0.7 2.7 0.2 -0.3

Character/Civility/Determination OK 1.1 1.5 -1.0 -0.5

Governance/Rule of Law Good 0.7 -0.7 -0.4 0.7

Gaps in Wealth, Opportunity OK -1.6 -0.4 0.3 0.7 & Values

GAUGE JPN IND GBR FRA QUALITY

EMPIRE SCORE (0–1) 0.30 0.27 0.27 0.25

Debt Burden Good -0.4 0.1 -1.6 -0.8 (Big Economic Cycle) Expected Growth Good -1.1 1.1 -0.8 -0.9 (Big Economic Cycle) Internal Conflict Good 1.1 -0.3 -0.1 (Internal Order; low is bad)

Education Good 0.2 -1.2 -0.2 -0.5

Innovation & Technology Good 0.2 -1.2 -0.3 -0.5

Cost Competitiveness Good -0.3 2.4 -0.3 -0.6

Military Strength Good -0.1 0.2 -0.3 -0.3

Trade Good -0.5 -0.8 -0.6 -0.5

Economic Output Good -0.3 -0.2 -0.3 -0.5

Markets & Financial Center Good 0.1 -0.8 0.0 -0.3

Reserve Currency Status (0–1) Good 0.07 0.0 0.07

Geology Good -1.1 0.3 -0.9 -0.5

Resource-Allocation Efficiency OK 0.1 0.2 0.3 -1.3

Acts of Nature OK 1.5 -2.4 0.4 0.0

Infrastructure & Investment Good -0.2 -0.3 -0.6 -0.2

Character/Civility/Determination OK 0.5 1.3 -0.4 -1.5

Governance/Rule of Law Good 0.8 -1.1 1.2 0.3

Gaps in Wealth, Opportunity OK 0.9 -1.8 -0.2 1.1 & Values

GAUGE NLD RUS ESP QUALITY

EMPIRE SCORE (0–1) 0.25 0.23 0.20

Debt Burden Good 0.8 1.0 -1.7 (Big Economic Cycle) Expected Growth Good -0.8 -0.2 -1.1 (Big Economic Cycle) Internal Conflict Good 1.2 -0.5 -0.4 (Internal Order; low is bad)

Education Good -0.7 -0.5 -0.9

Innovation & Technology Good -0.3 -0.7 -1.0

Cost Competitiveness Good -0.8 0.7 -0.6

Military Strength Good -1.9 0.4 -0.8

Trade Good -0.6 -0.9 -0.9

Economic Output Good -0.3 -1.4 -0.9

Markets & Financial Center Good -0.5 -1.1 -0.6

Reserve Currency Status (0–1) Good 0.0

Geology Good -0.5 1.9 -0.6

Resource-Allocation Efficiency OK -0.1 1.3 -1.6

Acts of Nature OK 0.5 -0.1 -0.7

Infrastructure & Investment Good -0.4 -1.0 -0.6

Character/Civility/Determination OK -0.3 0.1 -1.0

Governance/Rule of Law Good 1.0 -1.9 -0.7

Gaps in Wealth, Opportunity OK 0.6 0.4 & Values

IND IDR CHN TUR MEX SAF COL PLD RUS TLD SWE CHI HUN KOR SGP BRZ AUS 100 CZK CHE USA CAN NLD THE CHANGING WORLD ORDER

BEL GBR ARG PRT FRA NOR DEU JPN ESP ITA REAL GDP GROWTH ESTIMATE (NEXT 10 YEARS, ANN)

GRC

-2% -1% 0% 1% 2% 3% 4% 5% 6% 7%

APPENDIX

COMPUTER ANALYSIS OF THE CONDITIONS OF, AND PROSPECTS FOR, THE WORLD’S LEADING COUNTRIES

UNITED STATES—KEY DRIVERS OF OUR COUNTRY POWER SCORE

Overall Empire Score (0–1) Level: 0.87 Rank: 1

The Big Cycles Level Z-Score Rank Trajectory

Economic/Financial Position Unfavorable -1.7 10 Debt Burden High Debt -1.8 11 Expected Growth 1.1% -0.7 4 Internal Order High Risk -1.8 11 Wealth/Opportunity/Values Gap Large -1.6 9 Internal Conflict Very High -2.0 10 External Order At Risk

Eight Key Measures of Power

Markets & Financial Center Very Strong 2.6 1 Innovation & Technology Very Strong 2.0 1 Education Very Strong 2.0 1 Military Strength Very Strong 1.9 1 Reserve Currency Status Very Strong 1.7 1 Economic Output Very Strong 1.7 2 Trade Strong 1.1 3 Cost Competitiveness Average -0.4 6

Additional Measures of Power

Geology Strong 1.4 2 Resource-Allocation Efficiency Strong 1.3 2 Infrastructure & Investment Strong 0.7 2 Character/Determination/Civility Strong 1.1 3 Governance/Rule of Law Strong 0.7 5 Acts of Nature Average -0.2 9

Getting better Getting worse Flat

CHINA—KEY DRIVERS OF OUR COUNTRY POWER SCORE

Overall Empire Score (0–1) Level: 0.75 Rank: 2

The Big Cycles Level Z-Score Rank Trajectory

Somewhat Economic/Financial Position 0.4 3 Favorable Debt Burden Low Debt 0.3 4 Expected Growth 4.3% 0.4 2 Internal Order Moderate Risk -0.1 7 Wealth/Opportunity/Values Gap Relatively Large -0.4 8 Internal Conflict Average 0.2 5 External Order At Risk

Eight Key Measures of Power

Trade Very Strong 1.8 1 Economic Output Very Strong 1.8 1 Education Strong 1.6 2 Innovation & Technology Strong 1.5 2 Cost Competitiveness Strong 1.2 2 Military Strength Strong 1.0 2 Markets & Financial Center Average 0.4 2 Reserve Currency Status Weak -0.7 5

Additional Measures of Power

Infrastructure & Investment Very Strong 2.7 1 Character/Determination/Civility Strong 1.5 1 Geology Strong 0.9 3 Resource-Allocation Efficiency Average 0.0 7 Governance/Rule of Law Weak -0.7 8 Acts of Nature Average -0.1 8

Getting better Getting worse Flat

EUROZONE—KEY DRIVERS OF OUR COUNTRY POWER SCORE

Overall Empire Score (0–1) Level: 0.55 Rank: 3

The Big Cycles Level Z-Score Rank Trajectory

Moderately Economic/Financial Position -0.9 6 Unfavorable Moderately Debt Burden -0.3 6 High Debt Expected Growth 0.3% -1.0 8 Internal Order Low Risk 0.3 5 Wealth/Opportunity/Values Gap Typical 0.3 6 Internal Conflict Average 0.4 4 External Order

Eight Key Measures of Power

Trade Strong 1.3 2 Reserve Currency Status Average 0.1 2 Economic Output Strong 0.6 3 Markets & Financial Center Average 0.4 3 Innovation & Technology Average 0.4 3 Education Average 0.3 3 Military Strength Average 0.3 4 Cost Competitiveness Weak -0.6 8

Additional Measures of Power

Infrastructure & Investment Average 0.2 3 Geology Average -0.4 5 Governance/Rule of Law Average -0.4 7 Resource-Allocation Efficiency Weak -0.8 9 Character/Determination/Civility Weak -1.0 10 Acts of Nature Average 0.0 5

Getting better Getting worse Flat

GERMANY—KEY DRIVERS OF OUR COUNTRY POWER SCORE

Overall Empire Score (0–1) Level: 0.37 Rank: 4

The Big Cycles Level Z-Score Rank Trajectory

Somewhat Economic/Financial Position 0.4 4 Favorable Debt Burden Low Debt 1.6 1 Expected Growth 0.3% -1.0 9 Internal Order Low Risk 0.7 3 Wealth/Opportunity/Values Gap Narrow 0.7 3 Internal Conflict Low 0.7 3 External Order

Eight Key Measures of Power

Trade Strong 0.6 4 Economic Output Average -0.1 4 Innovation & Technology Average -0.1 5 Education Average -0.2 5 Markets & Financial Center Average -0.2 6 Military Strength Weak -0.6 9 Cost Competitiveness Weak -0.6 10 Reserve Currency Status

Additional Measures of Power

Resource-Allocation Efficiency Strong 0.6 3 Governance/Rule of Law Strong 0.7 4 Infrastructure & Investment Average -0.3 7 Character/Determination/Civility Average -0.5 8 Geology Weak -0.7 9 Acts of Nature Strong 1.1 2

Getting better Getting worse Flat

JAPAN—KEY DRIVERS OF OUR COUNTRY POWER SCORE

Overall Empire Score (0–1) Level: 0.30 Rank: 5

The Big Cycles Level Z-Score Rank Trajectory

Economic/Financial Position Unfavorable -1.1 7 Moderately Debt Burden -0.4 7 High Debt Expected Growth 0.0% -1.1 11 Internal Order Low Risk 1.0 1 Wealth/Opportunity/Values Gap Narrow 0.9 2 Internal Conflict Low 1.1 2 External Order

Eight Key Measures of Power

Reserve Currency Status Weak -0.5 3 Education Average 0.2 4 Innovation & Technology Average 0.2 4 Markets & Financial Center Average 0.1 4 Cost Competitiveness Average -0.3 4 Trade Average -0.5 5 Military Strength Average -0.1 6 Economic Output Average -0.3 7

Additional Measures of Power

Governance/Rule of Law Strong 0.8 3 Character/Determination/Civility Average 0.5 4 Infrastructure & Investment Average -0.2 4 Resource-Allocation Efficiency Average 0.1 6 Geology Weak -1.1 11 Acts of Nature Strong 1.5 1

Getting better Getting worse Flat

INDIA—KEY DRIVERS OF OUR COUNTRY POWER SCORE

Overall Empire Score (0–1) Level: 0.27 Rank: 6

The Big Cycles Level Z-Score Rank Trajectory Highly Economic/Financial Position 0.8 1 Favorable Moderately Low Debt Burden 0.1 5 Debt Expected Growth 6.3% 1.1 1 Internal Order High Risk -1.8 10 Wealth/Opportunity/Values Gap Large -1.8 10 Internal Conflict Very Low External Order

Eight Key Measures of Power

Cost Competitiveness Very Strong 2.4 1 Military Strength Average 0.2 5 Economic Output Average -0.2 5 Reserve Currency Status Weak -0.8 6 Trade Weak -0.8 9

Markets & Financial Center Weak -0.8 10

Innovation & Technology Weak -1.2 11 Education Weak -1.2 11

Additional Measures of Power

Character/Determination/Civility Strong 1.3 2 Geology Average 0.3 4 Resource-Allocation Efficiency Average 0.2 5 Infrastructure & Investment Average -0.3 6 Governance/Rule of Law Weak -1.1 10 Acts of Nature Very Weak -2.4 11

Getting better Getting worse Flat

UNITED KINGDOM—KEY DRIVERS OF OUR COUNTRY POWER SCORE

Overall Empire Score (0–1) Level: 0.27 Rank: 7

The Big Cycles Level Z-Score Rank Trajectory

Economic/Financial Position Unfavorable -1.7 9 Debt Burden High Debt -1.6 9 Expected Growth 0.9% -0.8 6 Internal Order Moderate Risk -0.2 8 Wealth/Opportunity/Values Gap Relatively Large -0.2 7 Internal Conflict Average -0.3 7 External Order

Eight Key Measures of Power

Reserve Currency Status Weak -0.6 4 Markets & Financial Center Average 0.0 5 Cost Competitiveness Average -0.3 5 Education Average -0.2 6 Economic Output Average -0.3 6 Innovation & Technology Average -0.3 7 Trade Weak -0.6 7 Military Strength Average -0.3 8

Additional Measures of Power

Governance/Rule of Law Strong 1.2 1 Resource-Allocation Efficiency Average 0.3 4 Character/Determination/Civility Average -0.4 7 Infrastructure & Investment Weak -0.6 10 Geology Weak -0.9 10 Acts of Nature Average 0.4 4

Getting better Getting worse Flat

FRANCE—KEY DRIVERS OF OUR COUNTRY POWER SCORE

Overall Empire Score (0–1) Level: 0.25 Rank: 8

The Big Cycles Level Z-Score Rank Trajectory

Economic/Financial Position Unfavorable -1.2 8 Moderately Debt Burden -0.8 8 High Debt Expected Growth 0.4% -0.9 7 Internal Order Low Risk 0.5 4 Wealth/Opportunity/Values Gap Narrow 1.1 1 Internal Conflict Average -0.1 6 External Order

Eight Key Measures of Power

Trade Average -0.5 6 Military Strength Average -0.3 7 Markets & Financial Center Average -0.3 7 Education Average -0.5 7 Innovation & Technology Average -0.5 8 Economic Output Weak -0.5 9 Cost Competitiveness Weak -0.6 9 Reserve Currency Status

Additional Measures of Power

Infrastructure & Investment Average -0.2 5 Governance/Rule of Law Average 0.3 6 Geology Average -0.5 7 Resource-Allocation Efficiency Weak -1.3 10 Character/Determination/Civility Weak -1.5 11 Acts of Nature Average 0.0 6

Getting better Getting worse Flat

NETHERLANDS—KEY DRIVERS OF OUR COUNTRY POWER SCORE

Overall Empire Score (0–1) Level: 0.25 Rank: 9

The Big Cycles Level Z-Score Rank Trajectory Somewhat Economic/Financial Position 0.0 5 Favorable Debt Burden Low Debt 0.8 3 Expected Growth 1.0% -0.8 5 Internal Order Low Risk 0.9 2 Wealth/Opportunity/Values Gap Narrow 0.6 4 Internal Conflict Low 1.2 1 External Order

Eight Key Measures of Power

Innovation & Technology Average -0.3 6 Economic Output Average -0.3 8 Markets & Financial Center Weak -0.5 8 Trade Weak -0.6 8 Education Weak -0.7 9 Cost Competitiveness Weak -0.8 11 Military Strength Very Weak -1.9 11 Reserve Currency Status

Additional Measures of Power

Governance/Rule of Law Strong 1.0 2 Character/Determination/Civility Average -0.3 6 Geology Average -0.5 6 Resource-Allocation Efficiency Average -0.1 8 Infrastructure & Investment Average -0.4 8 Acts of Nature Average 0.5 3

Getting better Getting worse Flat

RUSSIA—KEY DRIVERS OF OUR COUNTRY POWER SCORE

Overall Empire Score (0–1) Level: 0.23 Rank: 10

The Big Cycles Level Z-Score Rank Trajectory Somewhat Economic/Financial Position 0.5 2 Favorable Debt Burden Low Debt 1.0 2 Expected Growth 2.5% -0.2 3 Internal Order Moderate Risk -0.5 9 Wealth/Opportunity/Values Gap Internal Conflict Average -0.5 9 External Order

Eight Key Measures of Power

Cost Competitiveness Strong 0.7 3 Military Strength Average 0.4 3 Reserve Currency Status Weak -0.8 6 Education Weak -0.5 8 Innovation & Technology Weak -0.7 9 Trade Weak -0.9 10 Markets & Financial Center Weak -1.1 11 Economic Output Weak -1.4 11

Additional Measures of Power

Geology Very Strong 1.9 1 Resource-Allocation Efficiency Strong 1.3 1 Character/Determination/Civility Average 0.1 5 Infrastructure & Investment Weak -1.0 11 Governance/Rule of Law Very Weak -1.9 11 Acts of Nature Average -0.1 7

Getting better Getting worse Flat

SPAIN—KEY DRIVERS OF OUR COUNTRY POWER SCORE

Overall Empire Score (0–1) Level: 0.20 Rank: 11

The Big Cycles Level Z-Score Rank Trajectory

Economic/Financial Position Unfavorable -1.9 11 Debt Burden High Debt -1.7 10 Expected Growth 0.0% -1.1 10 Internal Order Moderate Risk 0.0 6 Wealth/Opportunity/Values Gap Typical 0.4 5 Internal Conflict Average -0.4 8 External Order

Eight Key Measures of Power

Cost Competitiveness Weak -0.6 7 Markets & Financial Center Weak -0.6 9 Military Strength Weak -0.8 10 Economic Output Weak -0.9 10 Education Weak -0.9 10 Innovation & Technology Weak -1.0 10 Trade Weak -0.9 11 Reserve Currency Status

Additional Measures of Power

Geology Weak -0.6 8 Infrastructure & Investment Weak -0.6 9 Governance/Rule of Law Weak -0.7 9 Character/Determination/Civility Weak -1.0 9 Resource-Allocation Efficiency Weak -1.6 11 Acts of Nature Weak -0.7 10

Getting better Getting worse Flat