Editor's Note: This article points out that the current global tariff issue is merely a surface phenomenon, with a deeper systemic collapse of monetary, political, and geopolitical orders. Global debt imbalances, domestic class divisions, international hegemony decline, frequent natural disasters, and technological changes are collectively driving the world to a turning point in the grand cycle. Understanding the interaction of these forces is more critical than focusing on short-term news.
Following is the original content (slightly edited for readability):
Currently, everyone's attention is focused on the announced tariffs, which indeed have a huge impact on the market and economy, which is understandable. However, at the same time, people rarely pay attention to the fundamental reasons behind these tariffs and the truly significant issues that may bring even greater impacts.
Don't misunderstand me, I'm not saying these tariffs are unimportant. They are indeed significant events, and we all know that President Trump drove these tariff policies. However, most people overlook the deeper background that led to his election and prompted these measures.
More importantly, people barely realize that a more profound force is driving all changes, including tariffs - the comprehensive collapse of the monetary system, political order, and geopolitical landscape. Such a systemic breakdown might occur only once in a lifetime, but it has indeed happened multiple times in history, always emerging under similar, unsustainable conditions.
More specifically:
1. The current monetary and economic order is disintegrating because the existing debt scale is too large, the speed of new debt is too fast, and the current capital markets and economic system depend on this unsustainable massive debt.
The root of this unsustainable debt lies in two huge imbalances: on one side are debtors - countries like the United States, with an excessive debt burden, continuously borrowing to maintain consumption beyond their capabilities; on the other side are creditors - countries like China, already holding too many debt assets while depending on exports to these debt countries to maintain their own economy. Various pressures are pushing these imbalances to be corrected in some way, and the correction process will fundamentally change the monetary order.
For instance, in a de-globalized world with massive trade and capital imbalances, and mutual distrust among major countries - the United States fears other countries cutting off its needed supplies, while China fears the US defaulting on or delaying debt - this is itself a contradiction. Both parties are in a "state of war," and self-sufficiency becomes the most critical thing. Those familiar with history know that such backgrounds repeatedly lead to problems similar to our current situation.
Therefore, the old monetary/economic order - where countries like China manufacture at low costs, export to the US, and use the proceeds to buy US debt; while the US borrows to purchase goods from these countries and accumulates massive debt - this model must change. This obviously unsustainable pattern further weakened US manufacturing, hollowed out middle-class jobs, and created high dependence on a country the US increasingly sees as an enemy. In the de-globalization era, this highly interconnected trade and capital imbalance structure must be reduced in some way.
Simultaneously, the US government's debt level and its continuously expanding speed are clearly unsustainable. (See the analysis in my new book 'How Nations Go Bankrupt: The Grand Cycle'.) It's evident that to resolve these imbalances and over-expansion, the current monetary order must undergo significant, dramatic transformation, and we are in the early stages of this process. Its impact on capital markets will be enormous, which will bring profound economic consequences that I will explore in detail at another time.
2. Meanwhile, the domestic political order is disintegrating due to massive gaps in education levels, opportunities, productivity, income and wealth, and values, as well as the existing political system's inability to solve these issues.
This situation is particularly evident in the "life-or-death" struggle between left and right-wing populist forces, who are competing for power and national direction. This situation is causing the democratic system itself to disintegrate, as democracy requires compromise and adherence to the rule of law, and history has long shown that these mechanisms often fail during periods like our current one.
History also shows that when democratic and legal institutional barriers are removed, strong authoritarian leaders will emerge. Clearly, this unstable political situation will also be influenced by other forces I mentioned, such as stock market and economic problems often breeding political and geopolitical turbulence.
3. The international geopolitical order is disintegrating because the era of a dominant power (the US) setting rules that other countries follow has ended. The past multilateral, cooperative world order led by the US is being replaced by a new order of unilateralism and might-makes-right. In this new order, the US remains the world's most powerful country, but it is shifting to an "America First" unilateral strategy. We can already see this transformation through US-led trade wars, geopolitical conflicts, technology wars, and even military conflicts in some regions.
4. Simultaneously, natural factors (such as drought, floods, pandemics) are becoming increasingly disruptive.
5. Technological leaps, especially artificial intelligence development, will profoundly affect all aspects of life, including monetary, debt, and economic orders, political orders, international orders (by influencing economic and military interactions between countries), and the costs of addressing natural disasters.
The changes in these forces and how they interact are the true focus we should pay attention to.
Therefore, I strongly recommend not being distracted by eye-catching but superficial news like "tariffs" while overlooking these five deep forces and their relationships - these are the real drivers of "overall grand cycle" changes. If you are distracted by these surface phenomena, you will:
(1) Fail to see the operating mechanisms of these major forces behind the news events.
(2) Be unable to deeply consider how these surface events might, in turn, influence these major forces.
(3) Be unable to continuously focus on this "overall grand cycle" and its operating logic, which actually could tell you what is likely to happen in the future.
I also suggest carefully considering the key interrelationships between these forces. For example, think about how Trump's actions on tariffs might affect:
1. Monetary/market and economic order: It will cause disruption to this order;
2. Domestic political order: This might also bring turbulence, as it could weaken his domestic support base;
3. International geopolitical order: It will bring impacts on many obvious levels, including financial, economic, political, and geopolitical;
4. Climate issues: It will somewhat weaken the global capacity to effectively address climate change;
5. Technological development: It might have some positive impacts for the US, such as encouraging more technology production to return to the US, but could also bring negative effects like disrupting capital markets supporting technological development, and countless other chain reactions.
When thinking about these issues, remember: What is happening now is just a contemporary manifestation of countless historical cycles. I encourage you to study how policymakers responded in similar historical contexts, thereby establishing a list of policies they might adopt, such as:
·Suspending debt interest payments to "hostile" countries,
·Establishing capital controls to prevent capital outflow,
·Imposing special tax categories, etc.
Many policies once unimaginable may now become reality. Therefore, we also need to learn the operational mechanisms of these policies.
Historically, the collapse of monetary order, political order, and geopolitical order often manifests in the form of economic depression, civil war, and world wars, and after these conflicts, new monetary and political orders are gradually established, redefining the interaction patterns within and between nations—until they disintegrate again. This recurring cycle is the key issue we most need to profoundly understand.
In my book "Principles for Dealing with the Changing World Order," I provide a detailed description of these contents, dividing the "total big cycle" into six clear stages, demonstrating how an old order transitions to a new one. All of this is explained very systematically and clearly, enabling you to easily compare the current situation with the usual historical evolution, thereby determining the stage we are currently in and what is most likely to happen next.
When I wrote that book and other works, I hoped (and still do):
1. To help policymakers understand these deep-seated forces and make better responses accordingly, thus formulating more effective policies and bringing better outcomes;
2. To help individuals who cannot change policies alone but can collectively influence direction to better cope with these trends and strive for better results for themselves and those they care about;
3. To encourage intelligent people with different perspectives to engage in open, rational, and in-depth dialogue with me, so we can work together to find the truth and consider how we should respond.
The views expressed in this article represent personal opinions only.
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