The talk I usually give around the world on the “changing of the guard” in US supremacy is too big to be posted, but here’s the relevant words that address the moment:

* No country stays at the #1 Superpower position forever. Previous to the US it was England, and previous to England (in the Western World) we saw the French, Spanish, Netherlands, Portugal, Venice, etc. That’s just the western world we’re talking about.

* The world supremacy cycle usually lasts about 150 years. A country is usually recognized as “the tops” for about 100 of those years, the first years ignored as the young upstart slowly establishes itself. Witness China the next leader. Within these cycles are large term Kondratieff cycles that on average last around 54 years (the 60 years Indian and Chinese cycle, Jewish 50 year Jubille, Mayan 54 year calendar, 3 generations, etc.). We are in the Autumn entering Winter phase of the current Kondratieff cycle that was longer than usual because of the inflationary policies of the FED started by Greenspan, which temporarily delayed the crash side … but in so doing amplified the underlying forces of too much debt of the wrong type. Austrian economics explains the boom/bust characteristics quite nicely. It is ALWAYS too much debt that looked safe that takes the leader down, along with a lack of regulation, excessiveness (greed), and mind-set that ignored the dictum “the best bank is to store money among the people (not corporations, banks or the government).” The country as it plummets usually turns socialistic in tone. Conservatism returns, protectionism, and debt destruction. A negative social mood breeds an enviroment too ready for war that increases the destruction. War is not the solution, and cannot start a consumptive uptrend.

* The LONG TERM bottom of the current cycle is probably 2014-2015 if we use long term cycle analysis (see timingsolution.com). Between now and then, lots of ups (2009 and 2010) and also downs. It is a period of deflation – destruction of debt and value of property. Cash is king. The value of safe cash increases over everything else.

* The only way out is not inflation, but the Schumpter destruction-creation cycle. New waves of innovation and MASSIVE efficient changes in infrastructure, transportation, energy, banking, etc. can power the uptrends, such as the following past waves in the US:
Cotton/textile: 1787-1842 (Canals, roads, bridges, agriculture, commerce)
Railroad/industrial: 1842-1896 (railroads)
Mass Production: 1896-1949 (Electronics, communications, chemicals)
Information: 1949-2004 (Electronics, consumerism, aerospace, internet)
The government MUST work on promoting this type of massive structural change, like a giant NASA project though in multiple directions. Hidden away projects must be released that can provide breathroughs in energy, transportation, cost recduction, materials, etc. It is the ONLY thing that works.

* As examples, here are sample previous western K-waves in the west that powered the uptrend until debt took each one down or a new trend eclipsed the old trend and became the new powering force (see Michael Alexander):
British rum/tobacco/slave trade
Spanish silver/Sugar
Portuguese gold
Portuguese pepper trade
English textiles boom
English wool
Dutch Asian shipping

* In China, some sample K-waves were (see Modelski and Thompson):
Printing paper/woodblock printing: 930-990 (informational)
National market/new rice/iron casting/paper currency: 990-1060 (networks)
Public finance/tribute system: 1060-1120 (new political framework)
Maritime Trade/compass: 1120-1190 (new global trade)

* The only thing that brings us out of these is a NEW economic force of new possibilities to make money because of a new revolutionary introduction into the economy of something, as illustrated, not a war. The destruction of the old capital base dries up the availability of capital, but new capital will come out of the woodwork if something new is found that displaces the old capital base that was previously the predominant power that demanded protection. After all, it’s already destroyed at the bottom, so there is no use to protect the old base anymore and prevent the new paradigm from manifesting. Such as — a cheaper source of energy, cheaper transportation, more efficient manufacturing system, invention of new revolutionay materials, new informational system, etc. as you can glean from the above examples. For instance, the US governemment (see Greene) has locked away in off book projects many technologies it does not want released that might start the whole thing anew by launching a boom that can absorb the losses even now. Capital will come from everywhere, even after a more devastating final destructive bottom is reached, to risk on these new things. This is the ONLY thing that can help .. not inflation.

* You will definitely see higher taxes. Kuan Tzu would predict that you may even see several countries combining their financial or monetary systems (ex. US and Canada) to get over this.

* History shows you may also see the taxing of non-profits, Foundations and university endowments. Whenever they grow too large, as is the case, and exert too much influence or control, this has happened in the past (France, India, China). Regardless of the religion, it happens. The large non-profit Foundations (Ford, Rockefeller, …) are prime targets.

* You may even see the splitting up of countries because of Federal government decisions to make unwise forays elsewhere that cause national repercussions, or due to the institution of national policies against populist wishes, and then a clamp down on the possible protests by citizens or more intrusions on citizens. Resenting this, and for a variety of other reasons too numerous to mention, countries sometimes split along economic, cultural, language, religious, or mind-set lines.

* The most irresponsible, arrogant, imbecile, stupid, imprudent “screw you rest of the world I’m doing what I want” threatening thing anyone can do right now is invade a country like Iran which is seen as a “maybe possible threat after five years or so.” It’s the worst possible thing that can happen at such a vulnerable juncture, especially when time is on the side of waiting. Remember, there is no immediate threat, and the future threat is only a theoretical possibility. If this can be avoided and people hold on their heads, we have a good chance.

Solution:
Pay attention to the cycles for your investments, but remember cash is king
Encourage the government to release its off book projects that might power a new uptrend, or stop suppressing changes that obliviate billions/trillions in previous infrastructure (ex. solar power, electric car, …)
Be careful of placing people in power whose mindset is asura-like