Last week, I was discussing Ray Dalio’s recent article in Time magazine with a friend, where he warns that the world is teetering on the edge of significant chaos. For those unfamiliar with Dalio, he is the founder of Bridgewater, one of the largest hedge funds globally. Interestingly, he started this venture after a notorious incident involving excessive drinking and punching his boss in the nose, which ultimately led to his termination. Despite this unconventional career path, Dalio is an intriguing figure who closely examines history for parallels to contemporary events. He believes that humanity has encountered similar circumstances before, often on multiple occasions.
Dalio’s article, published a few days ago, highlights three alarming factors that haven’t been witnessed since the 1930s. Firstly, there is a soaring level of debt and inflation. Secondly, there are historic disparities in income and wealth. And finally, major world powers are flirting with the possibility of a global conflict. Dalio is deeply concerned that these factors may trigger a complete collapse of our system within the next 18 months, leading to significant changes. He even raises the specter of civil war due to the escalating anti-elite sentiments on both ends of the political spectrum. According to his estimation, around 30 to 40% of Americans identify with populism, with two-thirds leaning towards the right (as exemplified by Trump) and one-third towards the left (as represented by Bernie), while RFK attempts to bridge the gap between the two sides.
In the midst of this, Dalio believes that the moderate elite, who typically support the status quo, lack the necessary drive and influence. They merely coast along, relying on inertia, and their opinions hold little weight unless financial incentives are involved. While I agree with Dalio’s concerns, I believe he fails to identify the root cause of these issues, namely, the expansion of government and, above all, the scope and scale of the Federal Reserve. These factors drive mounting debt and inflation, exacerbate wealth inequality through the Fed’s asset purchases, and intensify political polarization as more aspects of life become entangled in the political arena. This includes even matters concerning children, forcing both sides of the political spectrum to engage in constant conflict or appeasement.
The rise of populism on both the left and the right following the 2008 crisis can be attributed to its failure being a stark indictment of the elite, while simultaneously exposing deep-seated corruption within the country’s systems. Millions of Americans correctly concluded that the system was rigged. The COVID-19 pandemic, with its heightened levels of incompetence and corruption, has only further exposed the flaws we are beginning to uncover. As for Dalio’s third point regarding war, throughout history, when the masses reject the establishment, the elites often resort to war as a unifying distraction. Furthermore, war allows for the implementation of sweeping measures under the guise of national security, leading to an alarming level of control akin to totalitarianism. COVID-19, however, does not require such extreme measures for the establishment to exert control.
So, what is the solution? The easier route would be for the elite to reduce their influence and involvement significantly. They should remove the government from economic affairs, cease social engineering initiatives, and refrain from propagandizing and suppressing dissent, particularly among the younger generation. The establishment’s unpopularity stems from its overreaching attempts to control every aspect of society, which have proven unsuccessful. Therefore, a reduction in control seems logical. Unfortunately, this scenario is unlikely, as it necessitates a wise elite capable of recognizing the need to retract. Regrettably, the current crop of elites does not possess such wisdom. Consequently, the possibility of Dalio’s prediction of great disorder becomes increasingly likely with each subsequent failure. Until next time, stay informed and stay vigilant.
