Ray Dalio's latest post: Tariffs are just appearances, we are witnessing the collapse of the "three major orders"

Author: Ray Dalio

Original text: " Don't Make the Mistake of Thinking That What's Now Happening is Mostly About Tariffs"

Compilation: BitpushNews

On the morning of April 7, Eastern Time, Ray Dalio, founder of Bridgewater Associates, issued a latest statement saying that the current market is overly focused on the appearance of tariffs and ignores deeper systemic changes. Dalio believes that we are witnessing the synchronous reconstruction of the five major forces:

• The collapse of currency/economic order;

• The domestic political order in the United States collapsed;

• Reorganization of international geopolitical order;

• The destructive nature of natural disasters (drought, floods and outbreaks);

• The significant impact of technological changes (such as artificial intelligence).

The following is the full text of the article:

At this moment, people rightly focus a lot of attention on the already announced tariffs and their huge impact on the market and the economy, but few pay attention to the root causes of these tariffs and the greater damage that may occur next. Don't get me wrong, I'm not saying these tariffs are not important - they are really important events, and we all know that US President Trump is the key figure in driving these tariffs, but most people ignore the fundamental background that led to his election as president and led to the introduction of these tariffs. Most of them have overlooked the more important forces that drive everything, including the forces that drive tariffs.

The bigger and more important fact we need to remember now is that we are witnessing the collapse of a typical major currency, political and geopolitical order. This kind of collapse usually only goes through once in a lifetime, but it has happened many times in history. Whenever a similar unsustainable situation occurs, it will come.

More specifically:

1. Money/Economic order is collapsing because there are too many existing debts and the speed of new debt is too fast, and the capital market and the economy rely on this unsustainable huge debt support. This kind of debt is unsustainable because of the serious imbalance - on the one hand, the debtors (such as the United States) are heavily burdened with debt, but are still borrowing debts to satisfy their over-consumption because they are addicted to debt; on the other hand, the creditors (such as China) already hold too much debt assets and rely on exporting goods to these debtors (such as the United States) to maintain their own economies. Great pressure requires some form of correction of these imbalances, which will change the monetary order in a significant way.

For example, in a deglobalized world where major players distrust each other, worry that each other will cut off their needed supplies (this is the US concern) or fail to fulfill their debt obligations (this is the China concern), the existence of huge trade imbalances and capital imbalances is obviously inconsistent. This situation is essentially a state of war, in which self-sufficiency is the top priority. Anyone who has studied history knows that in similar situations, risks often lead to the problems we face today.

Therefore, the old monetary/economic order—that is, some countries are responsible for providing cheap manufacturing, the United States imports and accumulates huge debt burdens, and the Chinese and other countries accumulate U.S. bond assets—must change. This already unsustainable situation has become even more severe due to problems such as the decline in the US manufacturing industry, the loss of middle-class jobs, and the deepening of dependence on "Made in China". In the era of deglobalization, this huge imbalance that embodies the high interconnection of trade and capital must be narrowed in some way.

In addition, the debt level and debt growth rate of the US government are obviously unsustainable. (For this, you can refer to the analysis of my new book How Countries Go Broke: The Big Cycle.)

It is clear that to reduce these imbalances and excessive behaviors, the monetary order will change in a drastic, destructive way, and we are currently in the early stages of this process. This change will have a huge impact on the capital market and in turn have a profound impact on the economy. I will explore this topic in depth at other times.

2. The domestic political order in the United States is collapsing because there are huge gaps in education level, opportunities, productivity, income and wealth, values, etc. between the American people - coupled with the inability to solve these problems in the existing political system. This situation is reflected in the unscrupulous power struggle between populists from the left and right, fighting for control of affairs. This leads to the collapse of democratic institutions, which require compromise and compliance with the rule of law, and history shows that both of them collapse in the current similar period.

History also tells us that strong authoritarian leaders tend to rise in this environment where the rule of law and democracy are weakened. Obviously, the current unstable political situation will be affected by the aforementioned four major forces - for example, stock market and economic issues are likely to cause political and geopolitical issues.

3. The international geopolitical order is collapsing because the era of being dominated by a dominant power (the United States) and crafting order and following other countries is over.

The multilateral cooperative world order that the United States once dominated is being replaced by unilateralism that "strength is supreme". In this new order, the United States remains the most powerful country in the world and is turning to the unilateral route of "America First". This has been shown through the United States-led trade wars, geopolitical conflicts, technological wars, and even military conflicts in some cases.

4. Natural disasters (drought, floods and epidemics) are bringing increasingly severe and destructive effects.

5. Technological changes (such as artificial intelligence) will also have a significant impact on all aspects of life, including on the currency/debt/economic order, political order, international order (through the impact on economic and military interactions between countries), and the cost of responding to natural disasters.

These changes in power, and how they influence each other, are the core of what we really should focus on.

Therefore, I urge everyone not to be distracted by the eye-catching dramatic changes of "tariffs", but to focus on these five forces and their relationships, because they are the real driving forces of "overall large-cycle changes." If you are confused by these appearances, you will:

a) How the status quo and dynamics of these major forces are ignored can lead to news events;

b) There is no deep thought about how news events react to fundamental forces;

c) Disconnect from the tracking of typical evolution laws of large cycles -this is the key coordinate for predicting the future.

I also want you to think about these key relationships. For example, think about how Trump’s moves on tariffs will affect:

1. Money/market, economic order (it will have a destructive impact on the order);

2. the domestic political order of the United States (it is likely to cause damage, because it may weaken its support rate);

3. International geopolitical order (obviously causing interference in financial, economic, political and geopolitical aspects);

4. Climate issues (to a certain extent will weaken the global ability to effectively respond to climate change);

5. Technology development (will have a positive impact on some aspects of the United States, such as bringing more technology manufacturing back to the local area, but it will also bring negative interference to the capital market, which is the support mechanism for technological development, and there are too many aspects that cannot be listed one by one).

When thinking, remember: Everything that is happening at the moment is just a reappearance of what has happened repeatedly in history. I suggest you study the measures taken by policy makers in history in similar situations to help you build a list of possible actions—such as suspending debt payment services to "enemy countries", establishing capital controls to prevent free capital outflows, imposing special taxes, etc. Many of these policies were unimaginable not long ago, so we should also study the operating mechanisms of these policies.

After the collapse of the monetary, political and geopolitical order, there are often drastic changes in the form of depression, civil war and world war, and then a new monetary and political order is produced to regulate the interaction within the country, and a new geopolitical order to regulate the interaction between countries until these new orders collapse again. This process is repeated and is the historical law that we should understand most deeply.

I elaborate on these in "Principles for Dealing with the Changing World Order", which clearly shows how this "overall large cycle" unfolds into six clearly discernible stages, transitioning from one order to the next. The content in the book is detailed, so that everyone can compare the current situation with typical evolutions in history, so as to identify which stage we are at and what may happen next.

I had hoped when I wrote that book and other books, and still hoped:

1. It can help policy makers understand and interact with these forces, and promote better policies to produce better results;

2. Help individuals—though they cannot influence policies alone, they can generate forces together—to better cope with these forces, thereby seeking better results for themselves and those they care about;

3. Encourage smart people with different opinions to have open and in-depth communication with me, work together to discover the truth and find a way to deal with it.