“People DON’T KNOW What’s Coming!” Prepare For The CHANGING WORLD ORDER | Ray Dalio

TL;DR

Ray Dalio says the changing world order follows a recurring cycle: war creates a new system, the dominant power ushers in peace and prosperity, and rising debt, wealth gaps, and foreign competition gradually weaken its position. After World War II, the United States held 80% of the world’s gold and led the American world order. Read on to understand the cycle’s stages and the warning signs Dalio believes people should watch.

Transcript

new york city's becoming more dangerous chicago's becoming more dangerous places chica san francisco is becoming more dangerous you're seeing people leave some places for other places the greatest danger for most people is failing to look at the things that could be harmful to them ray dalio welcome back to the show great to be on your show again d... Read More

Key Insights

• 😮 The empire cycle follows a predictable pattern throughout history, with empires rising and falling.
• 💋 The US is currently in Stage 5 of the empire cycle, marked by internal conflicts and the potential for a major global conflict.
• 🤩 Financial strength, internal harmony, and geopolitical competition are key factors in determining the fate of an empire.
• 🎓 Investing in education, infrastructure, and increasing productivity are important for society's success.
• 📼 Diversifying investments and considering inflation-protected assets can help individuals protect themselves in an inflationary environment.

Questions & Answers

Q: What does Ray Dalio mean by the changing world order?

Dalio describes it as a recurring transition from one governing system to the next. A new order typically emerges from war, which determines how the system will work and which power will dominate it.

Q: How did the American world order begin?

The American world order began in 1945 after the United States won World War II. Dalio says the United States then had 80% of the world’s gold, the dominant military power, and nuclear weapons.

Q: Why do new world orders emerge after wars?

Dalio says wars are fights over how a system will work. Their conclusion establishes new rules, reduces many existing debts, shifts power, and creates a new beginning.

Q: Why does peace and prosperity follow the creation of a new order?

Other countries initially avoid fighting the dominant power that won the war, while societies exhausted by destruction want peace and productivity. Dalio says war also acts as a great leveler, leaving smaller wealth gaps and encouraging people to work together.

Q: How does prosperity contribute to an empire’s decline?

As prosperity continues, people increasingly expect it to last and take on more debt. Financial behavior also becomes less cautious as a new generation grows accustomed to the benefits created during the prosperous period.

Q: How do wealth gaps become opportunity gaps?

Prosperity is distributed unequally, so some people become richer than others. Dalio says richer families can devote more resources to educating their children and providing advantages, causing wealth gaps to produce opportunity gaps.

Q: How do rising countries challenge the dominant power?

Other countries rebuild and become competitors as time passes, including former wartime losers such as Germany and Japan. The victorious country’s once-unique power therefore becomes less unique as competition increases.

Q: What role does reserve currency status play in the empire cycle?

Dalio identifies control of the world’s reserve currency as a classic feature of the country that wins the war. A widely used currency is needed for transactions, reinforcing the victorious country’s position within the new order.

Summary & Key Takeaways

• New world orders are created after major wars, and the United States established its dominance after World War II, leading to a period of peace and prosperity.

• Over time, prosperity leads to increased debt and wealth gaps, which creates internal conflicts and the rise of new powers.

• The US is currently in Stage 5 of the empire cycle, marked by internal conflict and the potential for a major global conflict with rising powers like China.