Ray Dalio, billionaire investor and founder of Bridgewater Associates, has again raised an alarm against what he considers a dangerous path under American economic policy during the administration of Donald Trump. A forecaster of the 2008 Financial crash, he points to the current trade and geopolitical actions as triggers of alarms typically ignored by decision-makers.
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In a recent interview, he said he felt tariffs and trade policies are putting China in particular into further long term ramifications. “It’s already too late,” he wrote, “importers and exporters are preparing for a future with radically reduced interdependencies of the United States and the other major powers. “He added that it won’t even matter what extent of discussions may lead to healing those cracks between the U.S. and China; damage would most likely have been permanent by now, anyway.
The larger PAYOFF: A vracking world order
To Dalio, the picture is way darker than just strained trade relations. As he puts it, America heads toward a breaking point in many severe areas: monetary policy, domestic politics, and international relations. Thus, the warning does not have to take you far to understand just how dire it really is-he believes the entire global system as we know it is starting to fall apart.
“There are many indicators showing that we are nearing a kind of disintegration of the monetary order and also the domestic political and the international world orders,” Dalio said. He likens the situation to historical patterns by which nations run into a wall due to massive debt, political division, and weakening global influence.
The debt dilemma “unsustainable and naive”
An essential of Dalio’s reckoning is U.S. debt. As the world’s largest consumer and biggest producer of debt, Dalio warns that the American habit of borrowing to finance its spending has become unsustainable. He says foreign countries might soon tire of the belief that the U.S. will repay its debts in strong, stable dollars.
This real fear? That international investors will flee from the U.S. and set up alternative trade and financial systems outside of the American institutions. Such a shift would considerably alter global influence and leave the U.S. in total isolation.
A call for smart, coordinated action
After all this gloom, there still is a slant of hope for Dalio. According to him, unfortunately, very little can be done to fix it because time is running out for policymakers to act wisely. He appeals for “calm, analytical, and coordinated engineering” and gives the example of what he teaches in his new book, How Countries Go Broke-The Big Cycle.
“The 3-Part, 3-Percent Solution” is what Dalio contends will help solve the debt crisis, which he believes could prevent further economic discomfort. But thus far, he says, America has entered chaos, not collaboration.
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Final thought: Time is running out
We have crossed the best time to know about and prepare for such large transformations. This is how Dalio sums up the scene. For him, the time has come when leaders and investors should turn away from reacting to emotional headlines on a day-to-day basis and should rather concern themselves with the broad changes taking place.
In his view, the next crisis will not be possible, but probable. And this time, we have a warning.
