When he’s not busy running his huge hedge fund, Ray Dalio likes to inform.
However, recently Dalio’s interests haven’t been in finance. At least not directly.
Instead, he has turned his attention to history. Examining and unravelling the cycles of power.
Or, as his latest LinkedIn essay was titled:
‘The Big Cycles Over The Last 500 years’
It certainly sounds grand, and it is a lengthy piece. Not to mention the fact that it is the third part of his ongoing ‘Changing World Order’ series. One that, has to date, mainly covered economics.
This latest piece though was all about empires. And particularly, how they end…
All good things come to an end
To make a long story short: Dalio believes the era of US supremacy is on the way out.
As many before him have stated, China looks all but primed to dethrone the US. A transition that will bring about a new era for a new empire. One that we could speculate about to our hearts content.
Now, you’ve probably heard claims like this before. It’s no secret that a lot of people see China’s rise as the next logical step in terms of global rule.
Whether everyone is happy about that is another matter entirely…
Politics aside, to date this claim has yet to pass. We’ve been hearing about the fall of the US and rise of China for years now. But, it still hasn’t happened.
Dalio, armed with the lessons of history though, thinks we’re now closer than ever. And he believes this graph proves it:
Source: LinkedIn / Ray Dalio
Keep in mind; Dalio himself admits this graph is ‘ultra-simplified’. The lack of any real timescale or pinpoint events is indicative of that.
However, as a broad guide, Dalio believes it can tell us (roughly) where we are in this cycle. Which, if his analysis is correct, we are close to the midway point in the decline. Toward the tail end of the ‘Printing Money and Credit’ zone.
That reading certainly aligns with current events. As Dalio argues, ever since the ‘80s we’ve been loading up on debt and liabilities. All of which has led to bubbles that have pushed interest rates to extreme lows.
It has made us prosperous, but historically it has always come at a cost.
Now, we may all soon have to collect the tab for that cost.
As the graph suggests though, it won’t be paid with money. Not at first, anyway.
No, what Dalio believes is to come is revolution and war. A fiery end that will mark the last days of US reign.
You may have heard this referred to as ‘The Thucydides Trap’. A precedent that shows that when one great power threatens another, war is all but guaranteed.
Whether the US and China can buck the trend is yet to be seen. Right now though, it certainly doesn’t look positive.
What does it mean for you?
So, precedent aside, why should you care?
Well, the fact of the matter is any reordering will present massive ramifications. Trade, politics and culture are all part of the broader systems of power.
Just look at how much influence the US has had over the world in recent decades.
Their currency is a crucial part of global reserves. Their policies and politics influence much of our guiding principles. And their culture has stormed the world through movies, books, and the internet.
If China were to take over this role, it would look very different. Providing a framework that would give rise to different industries, values, wants, and needs.
The influence of a global superpower is an important part of human history.
I’m not going to sit here and speculate on what it might look like though. That would be far too presumptuous.
What we do need to consider is what it will mean for our wealth. Not just as a nation, but as individuals.
If war and revolution is coming as Dalio expects, that is a dire warning for us all. One that could see a complete overhaul of the systems that we have taken for granted for so long.
This is something that our own editors — Jim Rickards and Shae Russell — are very wary of.
They believe there are deep, structural problems within the system. Just like Dalio states.
We are in the midst of big changes for our world. Beyond even our current pandemic. And navigating it won’t be easy for anyone.
If, however, you want to protect your wealth — and you should — you need to be prepared.
That’s why we’ve laid out a ‘Pandemic Market Crash Roadmap’. A resource that can help you better understand what is happening and how to preserve your wealth.
Get your copy of the roadmap, right here.
Because if Dalio is right, we could be in for a whole lot more trouble.
Regards,
Ryan Clarkson-Ledward,
For The Daily Reckoning Australia
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