Simon Hinrichsen points us to this fascinating chart from Ray Dalio’s work on debt cycles, leveragings, and deleveragings.
“The chart below shows the geographic size of the British Empire going back to 1860,” writes Dalio. “Note how it rose from 1860 until 1920, flatted out until 1950 and then collapsed. By comparing this chart with the one that follows showing relative incomes, you will note that the size of the British Empire correlated with the level of its relative income. In the charts that follow, you will also see that it correlates with sterling’s stature as a reserve currency and that these changed due to the reasons explained in my description of the long term economic cycle.”