Original Author: Ray Dalio

Original Translation: Shenchao TechFlow

Introduction: Legendary investor Ray Dalio has issued a stern warning regarding the current global turmoil, combining his "Big Cycle" theory with the present situation. He meticulously dissects how society is sliding from the "fifth stage" of wealth inequality and fiscal bankruptcy into the "sixth stage" of conflict eruption. This article not only summarizes historical patterns but also provides a deep diagnosis of the current political and economic landscape in the United States and globally. By comparing the collapse from 1930 to 1945, Dalio points out dangerous signals such as the failure of current rules, increasing polarization, and the loss of truth.

For me, observing what is happening now feels like watching a movie I have seen many times in history. As a global macro investor, I bet on the future by understanding the underlying mechanisms of how things work through historical lessons. I find that what is happening now has repeatedly occurred for the same reasons, and understanding the causal relationships has been immensely helpful to me.

I am currently at a stage in my life where I prefer to share these experiences that have helped me rather than keeping them for personal gain. For this reason, I described the typical sequence of events that lead to the rise and fall of monetary orders, domestic political orders, and international geopolitical orders in my book "Principles for Dealing with the Changing World Order." I refer to this series of events as the "Big Cycle" because it is large in scale and long in duration, typically lasting about 80 years (roughly a human lifespan).

The last time these orders collapsed was during the period from 1930 to 1945, which led to the establishment of the post-1945 monetary, domestic political, and international geopolitical orders—those very orders that we now see collapsing. My book comprehensively describes the symptoms that can be used to identify which stage of the "Big Cycle" we are in, as well as the forces driving the "Big Cycle." Most importantly, I detail the processes and sequences of events that typically lead to the collapse of monetary orders, domestic political orders, and international geopolitical orders, so that people can compare the actual sequence of events with those listed in the template.

For readers who have read the book, it should now be clear that we are on the brink of transitioning from the 5th stage (the eve of the collapse of the existing order) to the 6th stage (the collapse of the existing order).

The purpose of writing that book was: 1) to help policymakers understand the processes that lead to collapse and prevent them; 2) to help people protect themselves from the harms of these collapses. In doing so, I realized that my explanations might not have a substantial impact on the trajectory. And indeed, they have not.

Nevertheless, since we are now clearly on the edge of crossing from the 5th stage (pre-collapse) to the 6th stage (collapse), and the choices made may have a significant impact on the outcome, I feel it is necessary to reiterate the dynamic key points that I believe are hidden behind the current situation and clarify which choices will lead to better or worse outcomes.

To illustrate this, I will now briefly share the most relevant parts of what I wrote in "Principles for Dealing with the Changing World Order," particularly the key points about how the 5th stage (pre-collapse of order) leads to the 6th stage (collapse of order). This will allow you to compare the current situation with my "Big Cycle" template. It should be made clear that, although the likelihood of restoring the monetary order through the financial discipline required to achieve financial health is minimal, and the return of a rules-based domestic political and international geopolitical order, which is crucial for peacefully resolving disputes and democratic functioning, is also in doubt, these improvements are still possible because we have not yet fully crossed the threshold from the 5th stage to the 6th stage.

Below is an excerpt from the book that depicts this scenario. After sharing, I will explain how what I wrote five years ago applies to the current situation (see below "Where We Stand Now").

"Stage 5: When Financial Conditions are Poor and Conflicts are Intense"

"Since I covered that cycle comprehensively in Chapters 3 and 4, I will not elaborate here. But to understand Stage 5, you need to know that it follows Stage 3 (peace and prosperity, with good debt and credit conditions) and Stage 4 (excess and decay begin to bring about deteriorating conditions). This process peaks in the most difficult and painful stage—Stage 6—when national funds are exhausted, and terrible conflicts often take the form of revolutions or civil wars. Stage 5 is a period when interclass tensions, accompanied by deteriorating financial conditions, reach their peak. The ways in which different leaders, policymakers, and crowds handle conflicts significantly impact whether the necessary changes can be made peacefully or violently."

"The Classic Toxic Combination"

"The classic toxic combination of forces leading to significant internal conflict consists of the following factors: 1) the state and its people (or states, cities) are in poor financial condition (e.g., with massive debts and non-debt obligations), 2) there are huge income, wealth, and value gaps within that entity, and 3) there are severe negative economic shocks. This intersection often leads to chaos, conflict, and sometimes even civil war."

"In order to have peace and prosperity, society must have productivity that benefits the majority. The average level is not as important as the proportion of suffering individuals and their power." In other words, when there is no widespread productivity and prosperity, the risks will rise.

A key element of success is that the debt and currency created are used to generate productivity gains and favorable investment returns, rather than simply being distributed directly without generating productivity and income growth. If it is merely distributed without producing these benefits, the currency will depreciate to the point where the government or anyone else loses purchasing power.

History shows that using loans and spending to generate widespread productivity gains and investment returns (with returns exceeding borrowing costs) leads to rising living standards and debt repayment, making these good policies."

"History shows and logic proves that making good investments in education at all levels (including vocational training), infrastructure, and research that produces productive discoveries is very effective. For example, large-scale education and infrastructure programs almost always yield returns (as seen in the Tang Dynasty and many other Chinese dynasties, the Roman Empire, the Umayyad Caliphate, the Mughal Empire in India, Japan's Meiji Restoration, and China's educational development programs in recent decades), even though their payoff periods are long. In fact, improvements in education and infrastructure, even those financed through debt, are almost always necessary components of the rise of all empires, while the decline in the quality of these investments is almost always a component of imperial decline. If done well, these interventions can offset the classic toxic combination." This does not happen in Stage 5.

All of this makes the economy more susceptible to economic shocks. "Economic shocks can arise from various reasons, including financial bubbles bursting, natural disasters (such as pandemics, droughts, and floods), and wars. It creates a stress test. The financial condition at the time of the stress test (measured by income relative to expenditure, assets relative to liabilities) is the shock absorber. The size of the income, wealth, and value gaps is the best indicator of the system's vulnerability."

"When financial problems occur, they typically first impact the private sector, then the public sector. Because governments will never allow private sector financial problems to drag down the entire system, the financial condition of the government is the most important. When the government loses purchasing power, collapse occurs. But on the road to collapse, there will be numerous struggles for money and political power."

"Through the study of over 50 civil wars and revolutions, it is clear that the most reliable single leading indicator of civil war or revolution is bankrupt government finances combined with huge wealth gaps. This is because when the government lacks financial strength, it cannot financially save the private entities it needs to keep the system running (as most governments, led by the U.S., did at the end of 2008); it cannot purchase the necessary items, nor can it pay people to do what it needs them to do. It loses power."

"A classic marker of being in Stage 5, and a leading indicator of losing borrowing and spending capacity (which is one of the triggers for entering Stage 6), is that the government has a massive deficit, creating more debt than buyers other than the government’s own central bank are willing to purchase. This leading indicator is activated when a government that cannot print money has to raise taxes and cut spending, or when a government that can print money prints a large amount and buys a significant amount of government debt. More specifically, when the government runs out of funds (through massive deficits, huge debts, and lack of sufficient credit), its choices are very limited. It either has to raise taxes significantly and cut spending, or it has to print a lot of money, which will devalue it. Governments that have the power to print money will always do this because it is a much less painful path, but it will lead to investors fleeing the currency and debt being printed. Those governments that cannot print money must raise taxes and cut spending, which will lead wealthy individuals to flee the country (or state, city) because paying more taxes and losing services is unbearable. If these entities that cannot print money have a huge wealth gap among their voters, these actions often lead to some form of civil war/revolution."

"Those places (cities, states, and countries) with the largest wealth gaps, the most debt, and the most severe income declines are the most likely to experience the most intense conflicts. Interestingly, in the U.S., those states and cities with the highest per capita income and wealth levels are often also the most heavily indebted and have the largest wealth gaps—such as San Francisco, Chicago, and New York City, as well as Connecticut, Illinois, Massachusetts, New York, and New Jersey."

"Faced with these conditions, spending must be cut, or more funds must be raised in some way. The next question becomes: who will pay to fix these problems, the 'haves' or the 'have-nots'? Obviously, it cannot be the have-nots. Spending cuts are the hardest for the poorest to bear, so more taxes must be levied on those who can afford to pay more, which increases the risk of some form of civil war or revolution. But when the haves realize they will be taxed to pay off debt and reduce deficits, they often choose to leave, leading to a 'hollowing-out' process. This is precisely what is currently driving people to migrate between states in the U.S. If economic conditions worsen, this will accelerate the process. These situations largely drive the tax cycle."

"History shows that raising taxes and cutting spending in the presence of huge wealth gaps and poor economic conditions is a leading indicator of some type of civil war or revolution more than any other factor."

"Populism and Extremism"

"In times of chaos and discontent, strong-willed leaders emerge who are anti-elite and claim to fight for the common people. They are referred to as populists. Populism is a political and social phenomenon that attracts ordinary people who feel their demands are ignored by the elites. It typically develops in the presence of wealth and opportunity gaps, perceived cultural threats from differing values both domestically and internationally, and the failure of the 'establishment elites' in high positions to effectively serve the majority. When these conditions provoke anger among the general populace, leading them to desire political power and fight for their interests, populists rise to power.

Populists can be either right-wing or left-wing, and they are much more extreme than moderates, tending to appeal to the emotions of ordinary people. They are usually confrontational rather than collaborative, and exclusive rather than inclusive. This leads to intense struggles between left-wing and right-wing populists due to irreconcilable differences. The revolutions that occur under their leadership vary in extremity. For example, in the 1930s, left-wing populism took the form of communism, while the right took the form of fascism, and non-violent revolutionary changes occurred in the United States and the United Kingdom. Additionally, four democratic countries transformed into authoritarian states.

Recently, in the United States, the election of Donald Trump in 2016 marked a shift towards right-wing populism, while the popularity of Bernie Sanders, Elizabeth Warren, and Alexandria Ocasio-Cortez reflects the rise of left-wing populism. In many countries, political movements leaning towards populism are on the rise."

"Observe populism and polarization as markers. The higher the levels of populism and polarization, the further a country has progressed into Stage 5, and the closer it is to civil war and revolution. In Stage 5, moderates become a minority. In Stage 6, they will cease to exist."

"Class Struggle"

"In Stage 5, class warfare intensifies. This is because, as a rule, during periods of hardship and escalating conflict, people increasingly tend to view others as members of one or more classes through stereotypical lenses, seeing these classes as enemies or allies. This begins to become more apparent in Stage 5. In Stage 6, it becomes dangerous."

"A classic marker of Stage 5, which intensifies in Stage 6, is the demonization of individuals from other classes, which often produces one or more scapegoat classes that are widely regarded as the source of the problems. This leads to the drive to exclude, imprison, or destroy them, a situation that occurs in Stage 6. Ethnic, racial, and socioeconomic groups are often demonized. The most classic and horrific example of this comes from the Nazis' treatment of Jews, who were blamed for and persecuted over nearly all of Germany's problems.

Chinese minorities living in non-Chinese countries have also been demonized and scapegoated during times of economic and social pressure. In the UK, Catholics were demonized and scapegoated during many periods of stress, such as the Glorious Revolution and the English Civil War. Wealthy capitalists are often demonized, especially those seen as profiting at the expense of the poor. Demonization and scapegoating are typical symptoms and issues that we must closely monitor."

"Loss of Truth in the Public Sphere"

"As people become more polarized, emotional, and politically motivated, the situation of not knowing what the truth is due to media distortion and propaganda increases."

"In Stage 5, those involved in the struggle often collaborate with the media to manipulate people's emotions to gain support and destroy opponents. In other words, left-wing media figures join the leftist camp, while right-wing media figures join the rightist camp, participating in this dirty battle. The media becomes as frenzied as vigilantes: people are often attacked in the media and effectively judged and convicted, having their lives destroyed without a judge or jury.

A common action among left-wing (communist) and right-wing (fascist) populists in the 1930s was to control the media and establish ministers of propaganda to guide them. The media they produced was explicitly aimed at turning the public against groups deemed 'enemies of the state' by the government. The British government, functioning democratically, established the Ministry of Information during World War I and World War II to disseminate government propaganda, with major newspaper publishers being promoted by the government if they cooperated in winning the propaganda war, or otherwise being vilified and punished.

Revolutionaries also engaged in the same distortion of truth across various publications. During the French Revolution, newspapers run by revolutionaries promoted anti-monarchist and anti-religious sentiments, but once these revolutionaries gained power, they shut down dissenting newspapers during the Reign of Terror. During times of significant wealth disparity and the prevalence of populism, stories attacking elites often become popular and profitable, especially those that attack left-leaning elites in right-leaning media and vice versa. History shows that a significant increase in these activities is a typical problem of Stage 5, and when combined with the ability to impose other penalties, the media becomes a powerful weapon."

"Decline of Rule Following, Primitive Fighting Begins"

"When a cause that people are passionately engaged in becomes more important to them than the decision-making system, that system is in danger. Rules and laws are only effective when they are very clear and when most people value them enough and are willing to compromise to make them work well."

"If neither of these conditions is ideal, the legal system is precarious. If competing parties are unwilling to try to remain rational and pursue the overall welfare in a civilized manner—requiring them to give up certain things they want and might win in the fight—then a civil war will emerge that tests the relative strength of the parties. At this stage, winning at all costs becomes the game rule, and dirty means become the norm. In the late stages of Stage 5, rationality is replaced by passion."

"When victory becomes the only important thing, unethical fighting becomes increasingly powerful in a self-reinforcing manner. When everyone has a cause to fight for and no one can reach a consensus, the system is on the brink of civil war or revolution."

"This often occurs in several ways: in the late stages of Stage 5, the legal and police systems are often used as political weapons by those who can control them. Additionally, private police systems may form—such as thugs beating others and seizing their assets, and bodyguards protecting people from such events. For example, the Nazi Party established a paramilitary wing before coming to power, which became the official force after the party took control. The British Union of Fascists, which briefly existed in the 1930s, and the Ku Klux Klan in the U.S. were also effectively paramilitary organizations. Such cases are quite normal, so consider their development as a marker of entering the next stage."

"In the late stages of Stage 5, protests become more frequent and increasingly violent. Because there is not always a clear line between healthy protests and the onset of revolution, those in power often struggle with how to allow protests while not giving the populace perceived freedom to resist the system. Leaders must handle these situations carefully. When protests begin to cross into revolution, a classic dilemma arises. Allowing freedom of protest and suppressing protests are both risky paths for leaders, as either path could lead to revolutionary forces becoming strong enough to overthrow the system.

No system allows people to overthrow that system—such attempts are treason in most systems and are usually punishable by death. Nevertheless, the work of revolutionaries is to overthrow the system, so governments and revolutionaries will test each other's limits. When widespread discontent bubbles up and those in power allow it to grow, it may boil over to the point that when they try to cover it up, it explodes. Conflicts in the late stages of Stage 5 often accumulate to a climax, triggering violent fighting, marking the entry into the formally recognized civil war period defined by historians, which I define as Stage 6 in 'The Big Cycle.'"

"The occurrence of deaths in battle is a marker that almost certainly signifies entry into the next, more violent stage of civil war, which will last until the outcome is clear."

"This leads to my next principle: When in doubt, get out—if you do not want to get caught up in a civil war or war, you should leave while the situation is still good." "This often occurs in the late stages of Stage 5. History shows that when conditions worsen, people want to move to places where conditions are not as bad or are better, and for those wanting to leave, the doors often close. The same goes for investments and money, as countries will introduce capital controls and other measures during such periods."

"The transition from Stage 5 (extremely poor financial conditions and severe internal and external conflicts) to Stage 6 (civil war) occurs when the system for resolving differences shifts from functioning to non-functioning. In other words, it happens when the system collapses to the point of being irreparable, people inflict violence on each other, and leadership loses control."

"When a person is in Stage 5 (like the current situation in the U.S.), the biggest question is how much bending the system can endure before it collapses." "Democratic systems allow the populace to do almost anything they decide, which creates more bending because people can change leadership and can only blame themselves. Democratic systems have also been shown to collapse during significant conflicts. Democracy requires consensus decision-making and compromise, which necessitates a large number of people holding opposing views to cooperate well within the system. This ensures that parties with significant voter bases can be represented, but like all large committees with widely differing views (even those that may despise each other), decision-making systems are not efficient."

Over two thousand years ago, Plato's 'The Republic' excellently described how democratic systems collapse; it can be used as a commentary on what is currently happening, so this is not a new phenomenon.

"The greatest risk facing democracies is that the decisions they produce become so fragmented and confrontational that they are inefficient, leading to poor outcomes, which in turn triggers revolutions led by populist autocrats, who represent the majority of people hoping for a strong and capable leader to control the chaos and make the country function well for them."

"Also noteworthy is that history shows that during times of great conflict, federalist democracies (like the U.S.) often experience conflicts over their relative powers between states and the central government. This is a marker to watch for, which has not yet emerged significantly in the U.S.; once it does, it will signify a continued evolution towards Stage 6." Clearly, by 2026, this is happening and may intensify.

Stage 5: A Crossroads

"Stage 5 is a crossroads, where one path may lead to civil war or revolution, while the other may lead to peaceful and ideally prosperous coexistence. Clearly, the path of peace and prosperity is the ideal path, but it is also the most difficult to achieve. This path requires a strong leader who has the ability to inspire the majority 'rather than divide them' and to motivate them to undertake the difficult tasks necessary to correct problems and restore strength to the nation. These leaders, whom Plato referred to as 'benevolent despots,' gather opposing sides together to do the hard work necessary to reshape order so that it operates in a way that the majority considers fair (i.e., in a way that benefits the majority). Historically, such cases are rare. The second type is the 'strong fighter,' who leads the nation through the hell of civil war or revolution."

Stage 6: The Civil War Period

"Civil war is inevitably going to happen, so rather than assuming 'this won't happen here'—a common assumption among the people of most countries after experiencing a long period without civil war—it is better to remain vigilant and look for markers indicating how close it is."

"While there are countless examples that can be used to understand how they operate, I have chosen 29 that I believe are the most important, as shown in the table below. I have categorized this set of cases into those that led to significant changes to the system/regime and those that did not. For example, the American Civil War was a very bloody civil war, but it failed to overthrow the existing system or order, so it is in the second group at the bottom of the table; whereas those cases that overthrew the system or order are at the top. These classifications are certainly imprecise, but likewise, we should not let imprecision hinder our ability to see what cannot be seen without adhering to precision. Most of these conflicts (though not all) occurred in the prototypical manner described in this section."

"A classic example of a civil war destroying a system and necessitating the establishment of a new one is the Russian Revolution and Civil War of 1917. This established an internal order of communism, which ultimately entered Stage 5 in the late 1980s and led to its attempt at revolutionary change within the system—what is known as 'perestroika' (restructuring)—but failed, resulting in the collapse of the Soviet order in 1991. The communist internal order lasted for 74 years (from 1917 to 1991). This order was replaced by the new system or order that now governs Russia, established in the classic way I described earlier in this chapter when explaining Stages 1 and 2."

"Another case is Japan's Meiji Restoration, which arose from a revolution lasting three years (1866–69). This revolution occurred because the Japanese were pursuing a policy of isolation from the outside world and failing to make progress. The Americans forced Japan to open up, prompting a revolutionary group to challenge and defeat the rulers (led by the military shogunate), leading to the overthrow of the internal order of Japan, which was then operated by four classes—samurai, farmers, artisans, and merchants.

The old Japanese order, run by traditionalists, was extremely conservative (for example, social mobility was illegal), and it was replaced by revolutionaries who were relatively progressive and modernized the emperor's power. Early in this period, a large number of labor disputes, strikes, and riots occurred due to classic wealth gaps and poor economic conditions. During the reform process, the leadership provided universal primary education for boys and girls, adopted capitalism, and opened the country to the outside world. They achieved this by utilizing new technologies, which made them highly competitive and wealthy."

"There are many such cases where some countries did the right things to produce revolutionary beneficial improvements, just as there are many revolutionaries who did the wrong things, bringing decades of terrible suffering to their people. By the way, due to its reforms, Japan continued to progress through the classic stages of the 'Big Cycle.' It became extremely successful and wealthy. But over time, it became decadent, overextended, and fragmented, experiencing the Great Depression and waging costly wars, all of which led to its classic demise. Its Meiji order and its classic 'Big Cycle' lasted for 76 years from 1869 to 1945."

"Civil wars and revolutions inevitably occur to fundamentally change internal orders."

"They involve total restructurings of wealth and political power, encompassing a complete reshaping of debt and financial ownership, as well as a reorganization of political decision-making mechanisms. These changes are a natural result of the need for significant transformations that cannot be achieved within the existing system. Almost all systems will encounter them. This is because almost all systems will sacrifice the interests of certain classes to benefit others, which ultimately becomes intolerable, leading to fighting to determine the path forward.

When the gaps in wealth and values become very large, and subsequently poor economic conditions arise, causing the system to fail a large portion of the population, people will fight for a change in the system. Those who suffer the most economically will fight to seize more wealth and power from those who possess wealth, power, and benefit from the existing system. Revolutionaries naturally want to completely change the system, so they are willing to break the laws that the rulers require them to obey. These revolutionary changes often occur through violent civil war, although, as mentioned earlier, they can also be achieved peacefully without overthrowing the system."

"The civil war period is usually very brutal. Typically, early on, these wars are strong, powerful, and orderly power struggles, but as fighting and emotions escalate, and parties resort to any means necessary to win, the level of brutality can accelerate unexpectedly. So much so that the actual brutality occurring in civil wars and revolutions in Stage 6 would be considered impossible in Stage 5. Elites and moderates often flee, are imprisoned, or are killed. Reading the stories of civil wars and revolutions, such as the Spanish Civil War, the Chinese Civil War, the Russian Revolution, and the French Revolution, sends chills down my spine."

"How do they happen? Earlier, I described the dynamics of Stage 5 that lead to crossing the line into Stage 6. At this stage, all these factors greatly intensify. I will explain."

"How Civil Wars and Revolutions Happen"

"As previously described, cycles of wealth creation and wealth disparity lead to a very small number of people controlling a disproportionately high share of wealth, ultimately resulting in the impoverished majority overthrowing the wealthy minority through civil war and revolution. The frequency of this occurrence is beyond imagination."

"While most typical civil wars and revolutions involve a transfer of power from the right to the left, there are also many that transfer wealth and power to the right, away from the left. However, the latter are fewer in number and the situations differ. They typically occur when the existing order slides into a dysfunctional anarchy, and the majority of the populace yearns for strong leadership, discipline, and productivity.

Examples of revolutions transitioning from left to right include Germany, Spain, Japan, and Italy in the 1930s; the collapse of the Soviet Union from the late 1980s to the early 1990s; the 1976 coup in Argentina that replaced Isabel Perón with a military junta; and the coup that led to the Second French Empire in 1851. The reasons for the success or failure of all these cases I have studied are the same. Like leftist revolutions, these new internal orders succeed when they can generate widespread economic success, and fail when they cannot. Because widespread economic prosperity is the greatest reason for the success or failure of new regimes, the long-term trend has been an increase in total wealth and an expansion of wealth distribution (i.e., improvements in the economic and health conditions of ordinary people). When one is in a certain stage of the Big Cycle and experiences it firsthand, this macro vision can easily be overlooked."

"Typically, those who lead civil wars or revolutions are well-educated individuals from middle-class backgrounds. For example, three key revolutionary leaders of the French Revolution were: Georges-Jacques Danton, a lawyer raised in a bourgeois family; Jean-Paul Marat, a doctor; and Maximilien Robespierre, also a lawyer.

The leaders of the Russian Revolution included Vladimir Lenin, who came from an educated middle-class family with a father who was a senior civil servant; and Leon Trotsky, who came from a wealthy peasant family. The leaders of the Chinese Communist Revolution included Mao Zedong, who came from a wealthy peasant family; and Zhou Enlai, who came from a scholar-official family. Fidel Castro came from a very wealthy plantation owner family and began his political activities while studying law. The officers who led Japan towards right-wing populism and fascism in the 1930s mostly came from the middle class. As these examples show, leaders typically do not come from impoverished classes but from those with knowledge, vision, and the ability to organize the masses."

"These leaders often also possess extraordinary charisma, enabling them to collaborate well with others and build strong, well-functioning organizations, thus having the power to initiate revolutions. If you want to look for future revolutionaries, pay attention to those who possess these qualities. Over time, they often evolve from idealistic intellectuals wanting to make the system fairer into ruthless revolutionaries pursuing victory at all costs."

"While the enormous wealth gap during times of economic hardship is often the greatest root of conflict, there are always other causes of conflict that accumulate to form a significant opposition force against the leadership and the system. Typically in revolutions, revolutionaries with different demands unite to push for revolutionary change; although they may appear united during the revolution, they often end up fighting each other over specific issues and power after winning the revolution."

"As mentioned earlier, during the civil war/revolution phase of the cycle, the ruling government almost always faces severe shortages of funds, credit, and purchasing power. This shortage creates a desire to seize money from the wealthy, leading those who possess wealth to transfer their assets to safe places and forms, prompting the government to implement capital controls to prevent these outflows—namely, restrictions on transfers to other jurisdictions (such as other countries), other currencies, or assets that are harder to tax and/or less productive (such as gold)."

"Worse still, when internal turmoil arises, external enemies are more likely to challenge the country. This is because the vulnerabilities created by domestic conflict make external wars more likely to occur. Internal conflicts divide the populace, financially drain them, and distract the leadership, leaving them unable to attend to other matters—all of which creates conditions for foreign powers to exploit the vulnerabilities. This is the main reason why civil wars and external wars often follow one another."

Other reasons include: heightened emotions and tempers; at this time, the strong populist leaders who come to power are inherently fighters; when there is internal conflict, leaders find that perceived external enemy threats can unite the nation around them, so they tend to encourage conflict; additionally, scarcity can lead the populace/nation to be more willing to fight for the resources they need (including resources held by other countries).

"Almost all civil wars involve some foreign powers attempting to influence the outcome for their own benefit."

"The onset of civil wars and revolutions is not clear when they occur, although they become obvious when you are deeply entrenched in them."

"While historians set dates for the beginning and end of civil wars, these dates are arbitrarily defined. The fact is that at the time, almost no one knows that a civil war has begun or ended, but they know they are in the midst of it. For example, many historians mark July 14, 1789, as the start of the French Revolution because that day, rioters attacked a military fortress and prison known as the Bastille. But at that time, no one thought it was the beginning of the French Revolution, nor did they know how horrific and brutal that civil war and revolution would become. While people may not know what will happen in the future, some vague markers can help locate the stage they are in, clarify the direction of movement, and provide insight into what the next stage may look like."

"Civil wars are extremely brutal because they are battles of life and death. Everyone becomes an extremist because everyone is forced to choose sides and fight—additionally, in hand-to-hand combat, moderates are always the losers."

"As for what kind of leaders are best suited for civil wars and revolutions, they are 'inspirational generals'—strong enough to rally support and win the various battles that must be won. Because the fighting is brutal, they must be ruthless enough to win at all costs."

"The civil war periods marked by historians typically last for several years and determine the formal victors and losers, which is often reflected in who can occupy the government buildings in the capital. But like the beginning, the end of a civil war/revolution is not as clear-cut as historians convey. After the formal end of a civil war, battles may continue for a long time to consolidate power."

"Although civil wars and revolutions are often extremely painful, they can lead to restructuring, which, if handled properly, can lay the foundation for improved outcomes in the future. The future after a civil war/revolution depends on how the next steps are managed."

Current Situation: America on a Powder Keg in Minneapolis

Let us now focus on the significant events of the past few days: the killing of a second immigrant protester against ICE (Immigration and Customs Enforcement) in Minneapolis. Two classic markers seem to be occurring as we transition from Stage 5 to Stage 6:

"The death of someone in battle is a marker that almost certainly signifies entry into the next, more violent stage of civil war, which will last until the victors and losers are clear."

"History shows that during times of great conflict, federal democratic countries (like the United States) often experience conflicts between states and the central government over their relative powers."

America today is a powder keg. According to the latest PBS News/NPR/Marist poll, nearly one-third (30%) of Americans say that people may have to resort to violence to get the country back on track. The Pew Research Center (September to October 2025) found that 85% of American adults acknowledge that politically motivated violence is increasing in the U.S.

An analysis by the Center for Strategic and International Studies (CSIS) found that from 2016 to 2024, there were 21 partisan political attacks or conspiracies, while there were only two such incidents in the more than 25 years prior to 2016. This means that politically motivated conspiracies/attacks increased by about tenfold in a relatively short period. There are more guns than people in America, and many have violent tendencies.

There is no doubt that the conflict between the central government and Minnesota (as well as other state governments) is very serious and appears to be worsening. The world has witnessed the killings of two opponents of Trump's ICE plan in Minneapolis and is now watching to see which side will back down. Many are waiting to see whether President Trump will continue to fight—I believe this risks pushing us closer to a clearer edge of civil war; or whether he will try to pull us back from the brink by calling for peace, committing to and demonstrating that the judicial system will properly handle the shooting, and scaling back ICE activities. (In an interview with The Wall Street Journal, he stated that the government would review the killings and said that ICE would not remain in Minneapolis forever.)

While his choices will have a significant impact on the developments to come (including potentially igniting the powder keg), it is important to view everything happening in the context of the forces and events driving the "Big Cycle." Regardless of the outcome of the Minneapolis case, these are significant forces that are evolving and determining how the "Big Cycle" will progress.

Conclusion (Excerpt from "Principles for Dealing with a Changing World Order")

"My study of history tells me that nothing is eternal except evolution. In the process of evolution, there are cyclical tides that ebb and flow, which are difficult to change or resist. To properly respond to these changes, one must understand which stage of the cycle they are in and grasp the eternal and universal principles for dealing with it.

As conditions change, the best responses will also change—that is, what is best depends on the environment, and the environment is constantly changing in the ways we have just seen. Therefore, it is a mistake to rigidly believe that any economic or political system is the best forever. Because there will certainly be times when that system is not suited to the environment at that time; if a society does not adjust, it will perish.

That is why continuously reforming the system to adapt to the environment is the best choice. The test of any system is simple: it is measured by how well it delivers what the majority of people want, which can be objectively measured, and we are doing and will continue to do so.

That said, the loudest and clearest lesson history teaches us is that creating efficient win-win relationships through skilled collaboration, growing the pie and sharing it well, making the majority feel happy, is far more valuable and less painful than engaging in civil wars for wealth and power, leading one side to enslave the other."

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