Why do Economic and Geopolitical Cycles Matter?


Bill’s Blog | December 2, 2021

The world and the universe all function in precise cycles. The sun rises every morning in the East and sets in the West every 24 hours. Stars, moons and planets follow exact cycles in their movements, and there are thousands of examples of cycles in nature. As I write this blog, several critical cycles emerge simultaneously in the economic and geopolitical world. But, you may think, “so what?” So, I will briefly discuss several cycles that will impact your and my life, whether you know about them or not—cycles matter, especially when making significant financial or life decisions. In my course, Wealth Foundations Series, I cover many of the big cycles more in-depth. But, today, I want you to be aware and possibly be open to learning about cycles, as I have for well over a decade. So why do cycles matter?

If you are about to purchase a home at the peak of the housing cycle (approximately 18 to 20 years), this decision may have profound financial implications. In the early 1980s in North America, the housing market had doubled in value with the raging inflation of the 1970s. Paul Volcker, the head of the Federal Reserve in the USA, raised the interest rate to 18% to combat inflation, and our Central Bank in Canada followed suit; our rates peaked at 22%. The result was millions of people lost their homes as they could not afford their mortgage payments upon renewal, and their values crashed. However, once the market bottomed, we saw the housing market appreciate until the late 1990s, and another correction happened. In Canada, our current housing market has gone up for 21 years without any sizable correction or crash. This cycle is vital for you to understand before you purchase a home, especially if the housing market is in an extreme overvaluation as it is today. 

I also have learned that extreme monetary and fiscal policies can manipulate many economic cycles. For example, you can extend cycles longer than average with massive money printing (tens of trillions) and ultra-low interest rates. As a result, we have seen several cycles break their typical time frames. For example, we have the longest stock market bull run in history. Likewise, short-term debt cycles have extended beyond average. As many people know, the housing market is in extreme overvaluations in many cities and regions, both in the USA and Canada. This reality should be a warning to buyers and sellers.

Financial cycles are not like the earth rotating the sun every 365 days or the tide coming in and out twice a day. But, many astute investment experts recognize them and adjust their decisions based on them. For example, billionaire Hedge Fund Manager Ray Dalio carefully follows debt and economic cycles. Last week in my blog, I provided you guidance regarding silver as a possible excellent asset to own in this decade. Why? Because we are in an extended commodity bull run, and the cycle is in your favour. Also, many investors and large fund companies have not picked up on this yet, which is the best time to buy. There will come a day when I will exit my silver investments (at least most of them), and so should you. Remember, nothing goes up forever, cycles start and end, and there is a time to buy an asset and sell it. 

Another interesting cycle playing out is the 500 years east/west geopolitical cycle. Let me explain. For about 500 years, western nations have dominated the world, starting in Europe (Portugal, Spain, France, Britain and crossing the great pond in the mid 20th century to the USA. For those paying attention, the USA is losing its superpower status with unsustainable record debt, corruption in government and business, failed foreign policies, warmongering for decades and oppressing weaker nations. Many nations are pushing back and separating themselves from the USA and its hegemony. China and Russia are rising in the East as challengers to the USA. This cycle has played out dozens of times in history, and almost in all cases, ends in a major military confrontation between the dominant power and the rising new power. In light of the three countries’ military weapons, let all hope it does not end in war.

The last cycle I will discuss is called the saeculum, an ancient cycle our forefathers observed and recorded for millennia. The cycle plays out roughly between 80 to 100 years or the span of the length of a long human life. The cycle contains four periods of roughly 20 to 25 years. “Together, the four turnings of the saeculum comprise history’s seasonal rhythm of growth, maturation, entropy, and destruction.” This quote comes directly from Strauss and Howe’s best-selling book written in 1997, “The Fourth Turning.” I recommend reading this book to fully understand this cycle, as we are actually in the fourth turning. The authors use the USA’s history as a nation and how precisely the cycle has played out several times now.  

The United States came into existence as a new Nation forged in a crisis, the American Revolution. The colonies wanted to be free from the oppressive British monarchy, and it was a very dark period with years of turmoil and war (1773-1794). The last fourth turning occurred between 1929 and 1946 in the USA. Before that dark period, the US experienced the autumn period, which comes with the decay of healthy social morals, extreme self-centeredness, and the party was on (the roaring 20’s). People, businesses and institutions were borrowing money (leverage) that drove the stock markets into extreme bubbles. Debt drove the economy. The party was on, and they thought it would never end. Call it God’s doing or cycles, the great humbling would start on October 29, 1929 (the stock market crash), and continued with one major crisis after another until 1945, when WW2 completed the cycle. This period contained an ecological crisis (the “dust bowl” drought swept the Canadian prairies and the USA midwest). Global geopolitical upheaval became the norm, and some of the most brutal and oppressive leaders in history came on the scene (Hilter, Stalin, Mao). Over 100 million people perished during their reigns of terror. There were pandemics, social unrest, high unemployment, and massive debt defaults during this period.

Howe and Strauss describe the transition from the third turning to the fourth turning as sudden, shocking as most people do not understand history or cycles. The authors predicted the fourth turning would start around 2005 and continue for 20 to 25 years and remember, the book came out in 1997. The 2007-2009 great financial crisis (worst downturn since the Great Depression). Governments and central banks have been out of control in their debt creation and spending for 13 years (they told us these were temporary measures), and sadly the many in society has followed suit with taking on excessive debts. In addition, many people are awakening to the corruption and ineffectiveness of governments and systems we once trusted. These, too, are signs of the fourth turning!

In summary, we are seeing many cycles playing out. Unfortunately, the current period we are experiencing is becoming more and more turbulent as history is once again repeating. The fourth turning is underway with economic, social, disease outbreaks, military, and political distress. So what is one to do? Here are a few positive suggestions to help you through this decade.

  • Make sure you have a sound financial plan that includes adequate insurances like life, critical illness and if you travel, ensure you have proper coverage. Our world is in an increasingly unstable period.
  • Cash is king in a crisis, and ensure you build up cash for an emergency—best 3 to 6 months of living expenses.
  • With ragging inflation, work on a debt reduction or elimination plan. Unfortunately, interest rates will go up at some point soon.
  • Make sure your financial advisor is knowledgeable and aware of cycles, trends and provides hedging strategies and proper diversification.
  • We live in the Fraser Valley, experiencing another 500-year flood event. My heart goes out to those who have lost everything in SW, BC. We had two power outages in the last week. The question is, are you prepared for another crisis?
  • It would be best to be prepared for such a crisis beforehand. Build up 3 to 6 months of essentials, foods, medicines, water supply, heat, backup power, lighting, heat source, plant a garden, etc. Become resilient. Preparation is not being fearful but is being wise.
  • Ensure you have a solid social network of a few close friends, family, faith community or association. It would be best if you stayed mentally and emotionally healthy. Having a few good friends and talking with regularly, and sharing your burdens goes a long way. Make sure the conversation goes two ways, and show care and concern for others as this creates healthy relationships.
  • If you would like to learn more about cycles, please consider taking my course, the Wealth Foundations Series, as I go more into detail and cover other critical cycles: On sale right now for $249 CA. https://fivefoldfinancial.ca/wealth-courses/ 

Taking the course is a great way to start the New Year by learning the foundation principles and disciplines that help you create wealth that lasts a lifetime. 

If you ever need sound counsel financially or a second opinion, please reach out to me and visit my website to learn about my many services: fivefoldfinancial.ca 

All the best,

Bill Westmacott, Owner

Fivefold Financial


Financial Education & Honest Solutions Create Success

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