Ray Dalio's Latest Post: Tariffs Are Just the Surface—We're Witnessing the Collapse of "Three Major Orders"
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Ray Dalio's Latest Post: Tariffs Are Just the Surface—We're Witnessing the Collapse of "Three Major Orders"
We are witnessing the collapse of a typical major monetary, political, and geopolitical order.
Navigating Web3 tides with focused insightsAuthor: Ray Dalio
Translation and compilation: Bitpush News
On the morning of April 7, Eastern Time in the U.S., Ray Dalio, founder of Bridgewater Associates, published a new post stating that markets are currently over-focusing on the surface-level issue of tariffs while overlooking deeper, systemic transformations. According to Dalio, we are witnessing the simultaneous restructuring of five major forces:
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The breakdown of the monetary/economic order;
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The disintegration of domestic political order in the United States;
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The reorganization of the international geopolitical order;
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The destructive impact of natural disasters (droughts, floods, and pandemics);
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The significant influence of technological change (such as artificial intelligence).
Below is the full text of the article:
Right now, people are understandably focusing enormous attention on the announced tariffs and their massive impacts on markets and the economy. Yet almost no one is paying attention to the fundamental reasons behind why these tariffs have emerged or to the even greater disruptions that may follow. Don’t get me wrong—I’m not saying the tariffs aren’t important. They are indeed significant events, and we all know President Trump is a key figure driving them into existence. But most people overlook the underlying background that led to his election and the emergence of these tariffs. They also largely ignore the more important forces driving everything forward—including the forces pushing for tariffs.
What we must keep in mind as a larger and more important truth is this: We are witnessing the collapse of a typical major monetary, political, and geopolitical order. Such collapses happen only once in a lifetime but have occurred many times throughout history—whenever unsustainable conditions arise, such breakdowns inevitably follow.
More specifically:
1) The monetary/economic order is collapsing because there is too much existing debt, new debt is being created too quickly, and capital markets and the economy depend on this unsustainably large amount of debt. This debt is unsustainable due to severe imbalances—on one hand, debtors (e.g., the U.S.) carry heavy debt burdens and continue borrowing to sustain excessive consumption because they are addicted to debt; on the other hand, creditors (e.g., China) already hold excessive debt assets and rely on exporting goods to debtor nations (like the U.S.) to sustain their own economies. Immense pressure exists to correct these imbalances in some form, and such corrections will significantly alter the monetary order.
For example, in a deglobalizing world where major players distrust each other—worried about being cut off from essential supplies (a U.S. concern) or defaulting on debt obligations (a Chinese concern)—the coexistence of massive trade and capital imbalances is clearly incongruent. This situation is essentially a state of war, in which self-sufficiency becomes paramount. Anyone who has studied history knows that risks like these often lead to the very problems we face today.
Therefore, the old monetary/economic order—where certain countries produce cheap manufactured goods, the U.S. imports them and accumulates massive debt, and countries like China accumulate U.S. debt assets—must change. This inherently unsustainable arrangement has been exacerbated by issues such as the decline of U.S. manufacturing, loss of middle-class jobs, and increased dependence on "Made in China" products. In an era of deglobalization, this highly interconnected relationship characterized by extreme imbalances in trade and capital must shrink in some way.
In addition, the level of U.S. government debt and its rate of growth are clearly unsustainable. (On this point, refer to my new book How Countries Go Broke: The Big Cycle.)
Clearly, in order to reduce these imbalances and excesses, the monetary order will change in dramatic and disruptive ways, and we are currently in the early stages of this process. These changes will have profound implications for capital markets and, consequently, the broader economy—a topic I will explore in greater depth at another time.
2) The domestic political order in the United States is collapsing due to enormous gaps among Americans in education, opportunity, productivity, income and wealth, and values—compounded by a political system that is incapable of addressing these issues. This manifests as ruthless power struggles between left- and right-wing populists competing for control. As a result, democratic institutions are eroding, since democracy requires compromise and adherence to the rule of law—both of which historically break down during periods like the current one.
History also tells us that strong authoritarian leaders tend to emerge when the rule of law and democratic systems weaken. Clearly, this unstable political environment will be influenced by the four other forces mentioned above—for example, stock market and economic problems are likely to trigger political and geopolitical tensions.
3) The international geopolitical order is collapsing because the era in which one dominant power (the U.S.) led and shaped the global order, with others following, has ended.
The U.S.-led multilateral world order is being replaced by unilateralism based on raw power. In this new order, the U.S. remains the strongest country in the world but is shifting toward a "America First" unilateral path. This shift is evident in U.S.-initiated trade wars, geopolitical conflicts, technology wars, and even military confrontations in certain cases.
4) Natural disasters (droughts, floods, and pandemics) are causing increasingly severe damage;
5) Technological change (such as artificial intelligence) will also have major impacts across all aspects of life—including effects on monetary/debt/economic order, political order, international order (via impacts on economic and military interactions between nations), and the costs associated with responding to natural disasters.
It is the evolution of these forces—and how they interact with each other—that should truly be our focus.
Therefore, I urge everyone not to be distracted by sensational developments like "tariffs," but instead to concentrate on these five major forces and their interrelationships, as they are the true drivers of the "Big Cycle" transformation. If you are misled by these surface phenomena, you will:
a) Overlook how the current state and dynamics of these major forces generate headline news;
b) Fail to reflect on how news events in turn affect these fundamental forces;
c) Lose track of the typical evolutionary patterns of the Big Cycle—which are essential for forecasting what lies ahead.
I also encourage you to consider these critical interconnections. For example, think about how Trump’s tariff policies might affect:
1) The monetary/market and economic order (they will disrupt this order),
2) The domestic political order in the United States (likely causing disruption, as it could undermine his support base),
3) The international geopolitical order (clearly creating disturbances in financial, economic, political, and geopolitical terms),
4) Climate issues (to some extent weakening the world’s ability to effectively address climate change),
5) Technological development (bringing certain positive effects for the U.S., such as reshoring tech manufacturing, but also negatively disrupting capital markets—the very mechanism that supports technological innovation—along with countless other complex ripple effects).
As you reflect, remember: What is happening now has happened many times before in history. I suggest studying the measures taken by policymakers in similar historical situations to help build a list of possible actions—such as suspending debt payments to “enemy” countries, imposing capital controls to prevent free outflows of capital, levying special taxes, and so on. Many of these policies would have seemed unimaginable not long ago, so we should also study how such policies actually function.
Following the collapse of monetary, political, and geopolitical orders, upheavals often take the form of depressions, civil wars, and world wars. Eventually, new monetary and political orders emerge to govern internal national affairs, and new geopolitical orders regulate interactions between nations—until these new orders eventually collapse again. This cycle repeats itself over and over and represents the most crucial historical pattern we should strive to understand deeply.
I elaborated on these themes in my book Principles for Dealing with the Changing World Order, which clearly outlines how this "Big Cycle" unfolds in six distinct phases, transitioning from one order to the next. The book provides detailed analysis, enabling readers to compare current events with historical precedents, identify which phase we are in, and anticipate what may come next.
When I wrote that book—and other books—I hoped, and still hope:
1) To help policymakers understand these forces and engage with them constructively, leading to better policies and improved outcomes;
2) To assist individuals—who cannot single-handedly influence policy but can collectively make a difference—in navigating these forces more effectively, thereby achieving better results for themselves and those they care about;
3) To encourage smart people with diverse perspectives to engage in open, deep dialogue with me, working together to uncover truths and discover effective responses.
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