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Chapter 8: Forget Economic Cycles, This Economy Is Evolving


Do you know that old expression "You can't see the forest for the trees?"

While most economists and financial analysts cling to the idea of market cycles to explain the recent upheaval, our longer view of economic change shows us that the overall world economy is actually evolving. This bigger view is key to the success of our analysis. Without it, we could not see the fundamental trends driving the economy. All the best financial and economic analysis in the world is not going to help a bit if you get the bigger picture wrong. Countless investors, businesses, families, and leaders are doing that right now and the cost of this mistake will be devastating.

Once you understand that the economy is evolving and what forces drive that evolution, you not only better understand shorter-term movements in the economy over 2 to 5 years, but also longer-term trends across 5 to 15 years and beyond. An accurate short-term and long-term view of the economy has a great deal of value. The short-term view helps enormously in understanding how to protect yourself and profit during times of economic upheaval. The long-term view is critical for planning long-term investments and business, as well as understanding how to move the overall economy out of upheaval and back to solid, sustainable growth.

Even though people often talk about business cycles, we all sort of intuitively know that the economy is really evolving. We know, for example, that the business cycle of the 1920s never really repeated itself. Neither have the business cycles of the 1930s or the 1960s. Every era has had its own unique aspects that made it very different from the others, like different stages in a person’s life. A five-year-old is not a fifteen-year-old.