Ray Dalio is perhaps the most successful global macro investor in the 21st century, with his fund Bridgewater being among the most watch investment house in the world. In this book, he synthesized factors that brought nations into becoming a global superpower and signposts to watch for their rise and decline. With the rivalry between the U.S. and China being on the front page news today, and the various war – technology, trade, geopolitical – being waged, this book provides a unique perspective of how this rivalry could evolve in the future. Some of my favorite excerpts shown below has served me well as a reminder of the book’s core content.
This Big Cycle produces swings between 1) peaceful and prosperous periods of great creativity and productivity that raise living standards a lot and 2) depression, revolution, and war periods when there is a lot of fighting over wealth and power and a lot of destruction of wealth, life, and other things we cherish. I saw that the peaceful/creative periods lasted much longer than the depression/revolution/war periods, typically by a ratio of about 5:1, so one could say that the depression/revolution/war periods were transition periods between the normally peaceful/creative periods.
Yet, most people throughout history have thought (and still think today) that the future will look like a slightly modified version of the recent past. That is because the really big boom periods and the really big bust periods, like many things, come along about once in a lifetime and so they are surprising unless one has studied the patterns of history over many generations. Because the swings between great and terrible times tend to be far apart the future we encounter is likely to be very different from what most people expect.
I learned that the biggest thing affecting most people in most countries through time is the struggle to make, take, and distribute wealth and power, though they also have struggled over other things too, most importantly ideology and religion.
throughout time and in all countries, the people who have the wealth are the people who own the means of wealth production. In order to maintain or increase their wealth, they work with the people who have the political power, who are in a symbiotic relationship with them, to set and enforce the rules. I saw how this happened similarly across countries and across time.
over time, this dynamic leads to a very small percentage of the population gaining and controlling exceptionally large percentages of the total wealth and power, then becoming overextended, and then encountering bad times, which hurt those least wealthy and least powerful the hardest, which then leads to conflicts that produce revolutions and/or civil wars. When these conflicts are over, a new world order is created, and the cycle begins again.
Human productivity is the most important force in causing the world’s total wealth, power, and living standards to rise over time. Productivity—i.e., the output per person, driven by learning, building, and inventiveness—has steadily improved over time. However, it has risen at different rates for different people, though always for the same reasons—because of the quality of people’s education, inventiveness, work ethic, and economic systems to turn ideas into output. These reasons are important for policy makers to understand in order to achieve the best possible outcomes for their countries, and for investors and companies to understand in order to determine where the best long-term investments are.
Countries with large savings, low debts, and a strong reserve currency can withstand economic and credit collapses better than countries that don’t have much savings, have a lot of debt, and don’t have a strong reserve currency.
Briefly, a credit collapse happens because there is too much debt. Typically, the central government has to spend a lot of money it doesn’t have and make it easier for debtors to pay their debts and the central bank always has to print money and liberally provide credit—like they did in response to the economic plunge driven by the COVID pandemic and a lot of debt. The 1930s debt bust was the natural extension of the Roaring ’20s boom that became a debt-financed bubble that popped in 1929. That produced a depression that led to big central government spending and borrowing financed by big money and credit creation by the central bank.
The quicker the printing of money to fill the debt holes, the quicker the closing of the deflationary depression and the sooner the worrying about the value of money began. In the 1930s US case, the stock market and the economy bottomed the day that the newly elected president, Franklin D. Roosevelt, announced that he would default on the government’s promise to let people turn in their money for gold, and that the government would create enough money and credit so that people could get their money out of the banks and others could get money and credit to buy things and invest. That took three-and-a-half years from the initial stock market crash in October 1929.
Most cycles in history happen for basically the same reasons. For example, the 1907–19 period began with the Panic of 1907 in the US, which, like the 1929–32 money and credit crisis following the Roaring ’20s, was the result of a boom period (the Gilded Age in the US, which was the same time as the Belle Époque in continental Europe and the Victorian Era in Great Britain) becoming a debt-financed bubble that led to economic and market declines. These declines also happened when there were large wealth gaps that led to big wealth redistributions and contributed to a world war. The wealth redistributions, like those in the 1930–45 period, came about through large increases in taxes and government spending, big deficits, and big changes in monetary policies that monetized the deficits.
rising education leads to increased innovation and technology, which leads to an increased share of world trade and military strength, stronger economic output, the building of the world’s leading financial center, and, with a lag, the establishment of the currency as a reserve currency. And you can see how for an extended period most of these factors stayed strong together and then declined in a similar order. The common reserve currency, just like the world’s common language, tends to stick around after an empire has begun its decline because the habit of usage lasts longer than the strengths that made it so commonly used.
One timeless and universal truth that I saw go back as far as I studied history, since before Confucius, who lived around 500 BCE, is that those societies that draw on the widest range of people and give them responsibilities based on their merits rather than privileges are the most sustainably successful because 1) they find the best talent to do their jobs well, 2) they have diversity of perspectives, and 3) they are perceived as the fairest, which fosters social stability.
since one entity’s spending is another’s income, when one entity cuts its expenses, that will hurt not just that entity, but it will also hurt others who depend on that spending to earn income. Similarly, since one entity’s debts are another’s assets, an entity that defaults reduces other entities’ assets, which requires them to cut their spending. This dynamic produces a self-reinforcing downward debt and economic contraction that becomes a political issue as people argue over how to divide the shrunken pie.
The biggest problem that we now collectively face is that for many people, companies, nonprofit organizations, and governments, their incomes are low in relation to their expenses, and their debts and other liabilities (such as those for pensions, healthcare, and insurance) are very large relative to the value of their assets. It may not seem that way—in fact, it often seems the opposite—because there are many people, companies, nonprofit organizations, and governments that look rich even while they are in the process of going broke. They look rich because they spend a lot, have plenty of assets, and even have plenty of cash. However, if you look carefully, you will be able to identify those that look rich but are in financial trouble because they have incomes that are below their expenses and/or liabilities that are greater than their assets, so if you project what will likely happen to their finances in the future, you will see that they will have to cut their expenses and sell their assets in painful ways that will leave them broke.
In the real economy, supply and demand are driven by the amount of goods and services produced and the number of buyers who want them. When the level of goods and services demanded is strong and rising and there is not enough capacity to produce the things demanded, the real economy’s capacity to grow is limited. If demand keeps rising faster than the capacity to produce, prices go up and inflation rises. That’s where the financial economy comes in. Facing inflation, central banks normally tighten money and credit to slow demand in the real economy; when there is too little demand, they do the opposite by providing money and credit to stimulate demand. By raising and lowering supplies of money and credit, central banks are able to raise and lower the demand and production of financial assets, goods, and services. But they’re unable to do this perfectly, so we have the short-term debt cycle, which we experience as alternating periods of growth and recession.
Related to this confusion between the financial economy and the real economy is the relationship between the prices of things and the value of things. Because they tend to go together, they can be confused as being the same thing. They tend to go together because when people have more money and credit, they are more inclined to spend more and can spend more. To the extent that spending increases economic production and raises the prices of goods, services, and financial assets, it can be said to increase wealth because the people who already own those assets become “richer” when measured by the way we account for wealth. However, that increase in wealth is more an illusion than a reality for two reasons: 1) the increased credit that pushes prices and production up has to be paid back, which, all things being equal, will have the opposite effect when the bill comes due and 2) the intrinsic value of a thing doesn’t increase just because its price goes up. Think about it this way: if you own a house and the government creates a lot of money and credit, there might be many eager buyers who would push the price of your house up. But it’s still the same house; your actual wealth hasn’t increased, just your calculated wealth. It’s the same with any other investment asset you own that goes up in price when the government creates money—stocks, bonds, etc. The amount of calculated wealth goes up but the amount of actual wealth hasn’t gone up because you own the exact same thing you did before it was considered to be worth more. In other words, using the market values of what one owns to measure one’s wealth gives an illusion of changes in wealth that don’t really exist. As far as understanding how the economic machine works, the important thing to understand is that money and credit are stimulative when they’re given out and depressing when they have to be paid back. That’s what normally makes money, credit, and economic growth so cyclical.
when the central bank loses its ability to produce money and credit growth that passes through the economic system to produce real economic growth. Throughout history, central governments and central banks have created money and credit, which weakened their own currencies and raised their levels of monetary inflation to offset the deflation that comes from deflationary credit and economic contractions. This typically happens when debt levels are high, interest rates can’t be adequately lowered, and the creation of money and credit increases financial asset prices more than it increases actual economic activity. At such times those who are holding the debt (which is someone else’s promise to give them currency) typically want to exchange the debt they are holding for other storeholds of wealth. Once it is widely perceived that money and debt assets are no longer good storeholds of wealth, the long-term debt cycle is at its end, and a restructuring of the monetary system has to occur.
Debt assets (e.g., bonds) are held by investors who believe they are storeholds of wealth that can be sold to get money, which can be used to buy things. When holders of debt assets try to make the conversion to real money and real goods and services and find out that they can’t, a “run” occurs, by which I mean that lots of holders of that debt try to make the conversion to money, goods, services, and other financial assets. The bank, regardless of whether it is a private bank or a central bank, is then faced with the choice of allowing that flow of money out of the debt asset, which will raise interest rates and cause the debt and economic problems to worsen, or of printing money, in the form of issuing bonds and buying enough of the bonds to prevent interest rates from rising and hopefully reverse the run out of them. Inevitably the central bank breaks the link, prints the money, and devalues it because not doing that causes an intolerable deflationary depression. The key at this stage is to create enough money and devaluation to offset the deflationary depression but not so much as to produce an inflationary spiral. When this is done well, I call it a “beautiful deleveraging,” which I describe more completely in my book Principles for Navigating Big Debt Crises. Sometimes that buying works temporarily; however, if the ratio of claims on money (debt assets) to the amount of “hard” money there is and the quantity of goods and services there is to buy are too high, the bank is in a bind that it can’t get out of. It simply doesn’t have enough “hard” money to meet the claims. When that happens to a central bank it has the choice either to default or to break the link to the hard money, print the money, and devalue it. Inevitably the central bank devalues. When these debt restructurings and currency devaluations are too big, they lead to the breakdown and possible destruction of the monetary system. The more debt (i.e., claims on money and claims on goods and services) there is, the more it will be necessary to devalue the money.
The shift from a system in which the debt notes are convertible to a tangible asset (e.g., gold and silver) at a fixed rate to a fiat monetary system in which there is no such convertibility last happened in the US on the evening of August 15, 1971. As I mentioned earlier, I was watching on TV when President Nixon told the world that the dollar would no longer be tied to gold. I thought there would be pandemonium with stocks falling. Instead, they rose. Because I had never seen a devaluation before, I didn’t understand how it works. In the years leading up to 1971 the US government had spent a lot of money on military and social programs, then referred to as “guns and butter” policy, that it paid for by borrowing money, which created debt. The debt was a claim on money that could be exchanged for gold. Investors treated this debt as an asset because they got paid interest on it and because the US government promised that it would allow the holders of those notes to exchange them for the gold that was held in US vaults. As the spending and budget deficits grew, the US had to issue much more debt—i.e., create many more claims on gold—even though the amount of gold in the bank didn’t increase. Investors who were astute enough to notice could see that the amount of outstanding claims on gold was much larger than the amount of gold in the bank. They realized that if this continued the US would have to default, so they turned in their claims. Of course, the idea that the US government, the richest and most powerful government in the world, would default on its promise to give gold to those who had claims on it seemed implausible at the time. So, while most people were surprised by Nixon’s announcement and the effects on the markets, those who understood the mechanics of how money and credit work were not.
History has shown that we shouldn’t rely on governments to protect us financially. On the contrary, we should expect most governments to abuse their privileged positions as the creators and users of money and credit for the same reasons that you might commit those abuses if you were in their shoes. That is because no one policy maker owns the whole cycle. Each comes in at one or another part of it and does what is in their interest to do given their circumstances at the time and what they believe is best
When one can manufacture money and credit and pass them out to everyone to make them happy, it is very hard to resist the temptation to do so.5 It is a classic financial move. Throughout history, rulers have run up debts that won’t come due until long after their own reigns are over, leaving it to their successors to pay the bill. Printing money and buying financial assets (mostly bonds) holds interest rates down, which stimulates borrowing and buying. Those investors holding bonds are encouraged to sell them. The low interest rates also encourage investors, businesses, and individuals to borrow and invest in higher-returning assets, getting what they want through monthly payments they can afford.
The Fed announced that plan on April 9, 2020. That approach of printing money to buy debt (called “debt monetization”) is vastly more politically palatable as a way of shifting wealth from those who have it to those who need it than imposing taxes because those who are taxed get angry. That is why central banks always end up printing money and devaluing. When governments print a lot of money and buy a lot of debt, they cheapen both, which essentially taxes those who own it, making it easier for debtors and borrowers. When this happens to the point that the holders of money and debt assets realize what is going on, they seek to sell their debt assets and/or borrow money to get into debt they can pay back with cheap money. They also often move their wealth into better storeholds, such as gold and certain types of stocks, or to another country not having these problems. At such times central banks have typically continued to print money and buy debt directly or indirectly (e.g., by having banks do the buying for them) while outlawing the flow of money into inflation-hedge assets, alternative currencies, and alternative places.
While people tend to believe that a currency is pretty much a permanent thing and that “cash” is the safest asset to hold, that’s not true. All currencies devalue or die, and when they do, cash and bonds (which are promises to receive currency) are devalued or wiped out. That is because printing a lot of currency and devaluing debt is the most expedient way of reducing or wiping out debt burdens.
printing money is the most expedient, least well-understood, and most common big way of restructuring debts. In fact, it seems good rather than bad to most people because: It helps to relieve debt squeezes. It’s tough to identify any harmed parties that the wealth was taken away from to provide this financial wealth (though they are the holders of money and debt assets). In most cases it causes assets to go up in the depreciating currency that people measure their wealth in, so it appears that people are getting richer.
holding debt as an asset that provides interest is typically rewarding early in the long-term debt cycle when there isn’t a lot of debt outstanding, but holding debt late in the cycle, when there is a lot of debt outstanding and it is closer to being defaulted on or devalued, is risky relative to the interest rate being offered. So, holding debt is a bit like holding a ticking time bomb that rewards you while it is still ticking and blows you up when it stops. And as we’ve seen, that big blowup (i.e., big default or big devaluation) happens something like once every 50 to 75 years.
The goal of printing money is to reduce debt burdens, so the most important thing for currencies to devalue against is debt (i.e., increase the amount of money relative to the amount of debt, to make it easier for debtors to repay). Debt is a promise to deliver money, so giving more money to those who need it lessens their debt burden. Where this newly created money and credit then flow determines what happens next. In cases in which debt relief facilitates the flow of this money and credit into productivity and profits for companies, real stock prices (i.e., the value of stocks after adjusting for inflation) rise. When the creation of money sufficiently hurts the actual and prospective returns of cash and debt assets, it drives flows out of those assets and into inflation-hedge assets like gold, commodities, inflation-indexed bonds, and other currencies (including digital). This leads to a self-reinforcing decline in the value of money. At times when the central bank faces the choice between allowing real interest rates (i.e., the rate of interest minus the rate of inflation) to rise to the detriment of the economy (and the anger of most of the public) or preventing real interest rates from rising by printing money and buying those cash and debt assets, they will choose the second path. This reinforces the bad returns of holding cash and those debt assets.
Typically, a country loses its reserve currency status when there is an already established loss of economic and political primacy to a rising rival, which creates a vulnerability (e.g., the Netherlands falling behind the UK, or the UK falling behind the US), and there are large and growing debts monetized by the central bank printing money and buying government debt. This leads to a weakening of the currency in a self-reinforcing run that can’t be stopped because the fiscal and balance of payments deficits are too great for any cutbacks to close.
be successful the system has to produce prosperity for most people, especially the large middle class. As Aristotle conveyed in Politics: “Those states are likely to be well-administered in which the middle class is large, and stronger if possible than both the other classes… where the middle class is large, there are least likely to be factions and dissensions… For when there is no middle class, and the poor are excessive in number, troubles arise, and the state soon comes to an end.”
There is the rapidly increasing debt-financed purchases of goods, services, and investment assets, so debt growth outpaces the capacity of future cash flows to service the debts. So bubbles are created. These debt-financed purchases emerge because investors, business leaders, financial intermediaries, individuals, and policy makers tend to assume that the future will be like the past so they bet heavily on the trends continuing. They mistakenly believe that investments that have gone up a lot are good rather than expensive so they borrow money to buy them, which drives up their prices, which reinforces
this bubble process. That is because as their assets go up in value their net worth and spending-to-income level rise, which increases their borrowing capacity, which supports the leveraging-up process, and so the spiral goes until the bubbles burst. Japan in 1988–90, the US in 1929, the US in 2006–07, and Brazil and most other Latin American commodity producers in 1977–79 are classic examples. There is a shift in the spending of money and time to more on consumption and luxury goods and less on profitable investments. The reduced level of investments in infrastructure, capital goods, and R&D slows the country’s productivity gains and leads its cities and infrastructure to become older and less efficient. There is a lot of spending on the military at this stage to expand and protect global interests, especially if the country is a leading global power. The country’s balance of payments positions deteriorate, reflecting its increased borrowing and reduced competitiveness. If the country is a reserve currency country, this borrowing is made easy as the result of non-reserve currency country savers having a preference to save in/lend to the reserve currency. Wealth and opportunity gaps are large and resentments between classes emerge.
From studying 50-plus civil wars and revolutions, it became clear that the single most reliable leading indicator of civil war or revolution is bankrupt government finances combined with big wealth gaps. That is because when the government lacks financial power, it can’t financially save those entities in the private sector that the government needs to save to keep the system running
when the government runs out of money (by running a big deficit, having large debts, and not having access to adequate credit), it has limited options. It can either raise taxes and cut spending a lot or print a lot of money, which depreciates its value. Those governments that have the option to print money always do so because that is the much less painful path, but it leads investors to run out of the money and debt that is being printed. Those governments that can’t print money have to raise taxes and cut spending, which drives those with money to run out of the country (or state or city) because paying more taxes and losing services is intolerable. If these entities that can’t print money have large wealth gaps among their constituents, these moves typically lead to some form of civil war/revolution.
History shows that raising taxes and cutting spending when there are large wealth gaps and bad economic conditions, more than anything else, has been a leading indicator of civil wars or revolutions of some type.
History shows that lending and spending on items that produce broad-based productivity gains and returns on investment that exceed the borrowing costs result in living standards rising with debts being paid off, so these are good policies. If the amount of money being lent to finance the debt is inadequate, it is perfectly fine for the central bank to print the money and be the lender of last resort as long as the money is invested to have a return that is large enough to service the debt. History shows and logic dictates that investing well in education at all levels (including job training), infrastructure, and research that yields productive discoveries works very well.
When the causes that people are passionately behind are more important to them than the system for making decisions, the system is in jeopardy. Rules and laws work only when they are crystal clear and most people value working within them enough that they are willing to compromise in order to make them work well. If both of these are less than excellent, the legal system is in jeopardy. If the competing parties are unwilling to try to be reasonable with each other and to make decisions civilly in pursuit of the well-being of the whole, which will require them to give up things that they want and might win in a fight, there will be a sort of civil war that will test the relative powers of the relevant parties. In this stage, winning at all costs is the game and playing dirty is the norm.
History has shown that when things get bad, the doors typically close for people who want to leave. The same is true for investments and money as countries introduce capital controls and other measures during such times.
the biggest question is how much the system will bend before it breaks. The democratic system, which allows the population to do pretty much whatever it decides to do, produces more bending because the people can make leadership changes and only have themselves to blame. In this system regime changes can more easily happen in a peaceful way. However, the “one person, one vote” democratic process has the drawback of having leaders selected via popularity contests by people who are largely not doing the sort of thoughtful review of capabilities that most organizations would do when trying to find the right person for an important job. Democracy has also been shown to break down in times of great conflict.
To make matters even worse, when there was internal disorder, foreign enemies were more likely to challenge the country. This happens because domestic conflict causes vulnerabilities that make external wars more likely. Internal conflict splits the people within a country, is financially taxing on them, and demands attention that leaves less time for the leaders to tend to other issues—all things that create vulnerabilities for foreign powers to take advantage of. That is the main reason why internal wars and external wars tend to come close together. Other reasons include: emotions and tempers are heightened; strong populist leaders who tend to come to power at such times are fighters by nature; when there are internal conflicts leaders find that a perceived threat from an external enemy can bring the country together in support of the leader so they tend to encourage the conflict; and being deprived leads people/countries to be more willing to fight for what they need, including resources that other countries have.
While attempts have been made to make the external order more rule-abiding (e.g., via the League of Nations and the United Nations), by and large they have failed because these organizations have not had more wealth and power than the most powerful countries. When individual countries have more power than the collectives of countries, the more powerful individual countries rule. For example, if the US, China, or other countries have more power than the United Nations, then the US, China, or other countries will determine how things go rather than the United Nations. That is because power prevails, and wealth and power among equals is rarely given up without a fight. When powerful countries have disputes, they don’t get their lawyers to plead their cases to judges. Instead, they threaten each other and either reach agreements or fight. The international order follows the law of the jungle much more than it follows international law.
the two things about war that one can be most confident in are 1) that it won’t go as planned and 2) that it will be far worse than imagined. It is for those reasons that so many of the principles that follow are about ways to avoid shooting wars. Still, whether they are fought for good reasons or bad, shooting wars happen. To be clear, while I believe most are tragic and fought for nonsensical reasons, some are worth fighting because the consequences of not fighting them (e.g., the loss of freedom) would be intolerable.
Seeing things through your adversary’s eyes and clearly identifying and communicating your red lines to them (i.e., what cannot be compromised) are the keys to doing this well. Winning means getting the things that are most important without losing the things that are most important, so wars that cost much more in lives and money than they provide in benefits are stupid. But “stupid” wars still happen all the time for reasons that I will explain. It is far too easy to slip into stupid wars because of a) the prisoner’s dilemma, b) a tit-for-tat escalation process, c) the perceived costs of backing down for the declining power, and d) misunderstandings existing when decision making has to be fast. Rival great powers typically find themselves in the prisoner’s dilemma; they need to have ways of assuring the other that they won’t try to kill them lest the other tries to kill them first. Tit-for-tat escalations are dangerous in that they require each side to escalate or lose what the enemy captured in the last move; it is like a game of chicken—push it too far and there is a head-on crash. Untruthful and emotional appeals that rile people up increase the dangers of stupid wars, so it is better for leaders to be truthful and thoughtful in explaining the situation and how they are dealing with it (this is especially essential in a democracy, in which the opinions of the population matter).
When thinking about how to use power wisely, it’s also important to decide when to reach an agreement and when to fight. To do that, a party must imagine how its power will change over time. It is desirable to use one’s power to negotiate an agreement, enforce an agreement, or fight a war when one’s power is greatest. That means that it pays to fight early if one’s relative power is declining and fight later if it’s rising.
Deflationary depressions are debt crises caused by there not being enough money in the hands of debtors to service their debts. They inevitably lead to the printing of money, debt restructurings, and government spending programs that increase the supply of, and reduce the value of, money and credit. The only question is how long it takes for government officials to make this move. In the case of the US, it took three and a half years from the crash in October 1929 until President Franklin D. Roosevelt’s March 1933 actions. In Roosevelt’s first 100 days in office, he created several massive government spending programs that were paid for by big tax increases and big budget deficits financed by debt that the Federal Reserve monetized. He instituted jobs programs, unemployment insurance, Social Security supports, and labor- and union-friendly programs. After his 1935 tax bill, then popularly called the “Soak the Rich Tax,” the top marginal income tax rate for individuals rose to 75 percent (versus as low as 25 percent in 1930). By 1941, the top personal tax rate was 81 percent, and the top corporate tax rate was 31 percent, having started at 12 percent in 1930. Roosevelt also imposed a number of other taxes. Despite all of these taxes and the pickup in the economy that helped raise tax revenue, budget deficits increased from around 1 percent of GDP to about 4 percent of GDP because the spending increases were so large.5 From 1933 until the end of 1936 the stock market returned over 200 percent, and the economy grew at a blistering average real rate of about 9 percent. In 1936, the Federal Reserve tightened money and credit to fight inflation and slow an overheating economy, which caused the fragile US economy to fall back into recession and the other major economies to weaken with it, further raising tensions within and between countries.
Before going on to describe the hot war, I want to elaborate on the common tactics used when economic and capital tools are weaponized. They have been and still are: 1. Asset freezes/seizures: Preventing an enemy/rival from using or selling foreign assets they rely on. These measures can range from asset freezes for targeted groups in a country (e.g., the current US sanctions of the Iranian Revolutionary Guard or the initial US asset freeze against Japan in World War II) to more severe measures like unilateral debt repudiation or outright seizures of a country’s assets (e.g., some top US policy makers have been talking about not paying our debts to China). 2. Blocking capital markets access: Preventing a country from accessing their own or another country’s capital markets (e.g., in 1887 Germany banned the purchase of Russian securities and debt to impede Russia’s military buildup; the US is now threatening to do this to China). 3. Embargoes/blockades: Blocking trade in goods and/or services in one’s own country and in some cases with neutral third parties for the purpose of weakening the targeted country or preventing it from getting essential items (e.g., the US’s oil embargo on Japan and cutting off its ships’ access to the Panama Canal in World War II) or blocking exports from the targeted country to other countries, thus cutting off their income (e.g., France’s blockade of the UK in the Napoleonic Wars).