The Economic Collapse No One Wants To Talk About - Ray Dalio

1. 0:00 – 0:30

   Intro

   1. RDRay Dalio0:00

      We're on the brink of war with China for various reasons. I hope we make it to 2050. The demographics is as I describe it, and by the way, them losing doesn't make us winning. So I think you're in the part of the cycle where you've had the tightening and the dominoes are beginning to fall, and I think that that's going to produce more problems. The most important thing is to have this basic well-diversified portfolio is important.

   2. CWChris Williamson0:29

      Two years ago,

2. 0:30 – 7:43

   The Accuracy of Ray’s Predictions

   1. CWChris Williamson0:30

      you made some predictions about the future for America and the global economy. How accurate do you think you've been?

   2. RDRay Dalio0:38

      Uncomfortably accurate given the whole picture, you know. Um, it's like watching the movie (laughs) for over and over again. Um, maybe I should explain. Uh, for about 55 years I've been a global macro investor and I learned that many of the things that surprised me never happened in my lifetime before, so when I would see certain things happen that were like that, I would go back in history and study, uh, prior periods. Uh, studying, for example, the Great Depression allowed us to anticipate the financial crisis in 2008. Anyway, there are three big things that I observed happening, uh, that didn't happen in our lifetimes but happened during the 1930 to '45 period, and they are the creation of enormous amounts of debt and the printing of money to pay for those debts, and it having its economic effects on inflation and growth. The second is internal conflicts, um, over the largest wealth gaps we had since then, uh, values gaps, um, and the rise of populism of the right and the left, um, those conflicts, again, largest since that 1930 to '45 period. And then the rise of a great power, uh, producing a great powers conflict internationally, um, with the rise of China as a great power, uh, challenging the United States and, uh, with Russia, so the great power conflict. That also is the, uh, most that that's happened since the, the Great Depression. So because those three things are happening now and, um, I didn't study them, um, I went back and I needed to study the cycles, these, what's happened over longer periods of time. So I studied, hmm, the last 500 years because these big cycles, uh, take about 75 years, uh, give or take about 50, so. Um, and, um, you know, like the rise and decline of the British Empire, the rise and decline of the debt... and that dynamic I shared, um, in the book and I also shared it in an animated video, uh, which is called The Changing World Order, um, and that creates a, uh, path. Now it's not just because they repeat in this way, but one can see the cause-effect relationships that are happening and, um, so that has pretty much transpired according to script. We can get into those pieces, but I'd say those are the three main ones. There were two others that, um, had big effect that I paid more attention to, um, that I'll mention. One was, um, acts of nature in the form of droughts, floods and pandemics. Uh, they were very disruptive when they happened, killed more people and, uh, toppled more empires and, or orders than others. And then also, of course, over a period of time, there's learning and producing new technologies that raises living standards, you know, it's raised per capita income, life expectancy and so o- and so... But those five fla- factors transpire, um, in ways that we've seen before to create this big cycle and it's, uh, if we can look at the cause-effect relationships, um, that's what I wanna pass along 'cause I'm 74 years old and I'm in a phase in my life that I want to pass along the things that are of value, and I think this is an important thing. But yes, it's transpiring according to script.

   3. CWChris Williamson4:40

      Kassandra yet again, unfortunately. What do you think is the likelihood of the meltdown of the dollar? Is America going to be wiped out at some point soon?

   4. RDRay Dalio4:49

      I, I, hmm, I don't want, um, uh, histrionics, you know, just an I don't want to, um, overdo it and I also w- don't wanna just jump to conclusions. My goal here is to show people how the machine works, the cause-effect relationship, so I'm gonna answer your question by explaining certain things. Um, the dollar is, um, is held by countries in the form of debt. In other words when you say, "I'm holding the dollar," um, you're holding a debt instrument. And when we have a, a problem with the debt instrument, a few problems with it, holding the debt instruments, um, those problems are that, first of all, as a result of what the United States was in the world, the largest trading country, um, the dominant empire and so on, there's been a, a huge, um, accumulation of dollar-denominated debt, de- and dollars therefore.And there's also been, um, a lot of deficits that had to be funded, which happens by selling dollar-denominated debt, which a lot of foreigners and banks and others bought. And so they have a lot of dollar-denominated debt. Now, um, if you're a creditor, meaning an owner of dollar-denominated debt, you need to have an interest rate that is high enough to m- to more than compensate you for inflation. And so, um, the production now of a lot more debt an- and them having a lot of debt, and then also sanctions internationally, which means freezing dollar-denominated debt, all have (clears throat) created a reduction in the demand for dollar-denominated debt. There's also i- you know, concerns in the world about some of the things that are going on in the United States, and that's reduced th- that. As a result of that, um, you're seeing more transactions take place in other currencies, um, and if they tra- take place in other currencies, then, um, others wanna save in those other currencies, um, because that's how they pay for it. So if you wanna save in what you pay for, you save more in it and less in dollars. And so that's the dynamic that is reducing the demand for dollars and dollar den- debt at the same time as the supply of it keeps coming because we have large deficits.

3. 7:43 – 12:54

   Impacts of a Decreasing Dollar Value

   1. CWChris Williamson7:43

      So the underlying value that those dollars, uh, represent isn't increasing, but the number of dollars spread across that is.

   2. RDRay Dalio7:52

      Yeah. So that there's a supply-demand issue. That supply-demand issue, by the way, also exists in European currencies, okay, they have too much debt and they're financed the same way, and Japanese currencies. And so what you're seeing is the movement, all that weight of money and debt, is causing prices to go up, inflation. And that's also being, uh, worsened, um, by the supply chain deteriorations that are due to the international conflict. So for example, um, in the case of, let's say, China and the United States, um, and other countries, as they prepare for the possibility of war, they wanna be self-sufficient. And so, um, uh, as a result, they work on being self-sufficient more than integrated and efficient. And so, um, that dynamic is playing an important role too.

   3. CWChris Williamson9:02

      What do you think the next few years have got in store for us?

   4. RDRay Dalio9:07

      Um, well, um, I'm going to take all three of those influences and answer it because they're all related. (clears throat) The, um, there's a, uh, business cycle, or a short-term debt cycle I call it, um, that w- you know, sort of recession to recession, and the way it works is you have a recession and weak economy, central banks, um, stimulate credit growth, credit gives you buying power, you go out and buy, the economy picks up, um, and then that continues until you start to have inflation, then they tighten monetary policy, and then it, uh, and then the economy weakens, and it goes into the next recession. Since 1945 when the New World Order began, in other words, we had the currency and also the American world order beginning in that-

   5. CWChris Williamson10:06

      Mm-hmm.

   6. RDRay Dalio10:06

      ... we've had 12 and a half of those cycles. We are... They typically last about seven years, give or take about three. And so we are now about halfway through this cycle in which they, um, you know, u- they did the stimulation, inflation rises, they tightened monetary policy, and we're in the phase of the cycle where there's going to be then the cracks occi- occurring and the negative, um, impact on economic activity and the like. And it's going to be more difficult than normal because there's so much debt outstanding a- and we're, you know, what we just talked about. So that is likely, um, to happen over, let's say, the next year and year and a half, which means that it will take us in through the elections, and what we have is a situation where the second of those influences, the internal conflict influence, is bad, and you have a lot of populism. So populists are people who will fight to win at all cost, they're not compromisers. You know, "I will fight and I will win for you and the rules be damned," you know, compromising be damned. And, um, so you're going to have a, a political situation in terms of, you know, that kind of environment. It's a bad time for that, but it'll end up being, uh, an impact on the, um, on the nature of the elections, I think. And then you have, um, the international conflict. We are much closer to, um-... a big conflict, a war of, of s- sorts, either a sanctions and economic war or even possibly a military war with China, and because of the politics also that that will be pushing its limits too, because there are, um... The one thing that most Americans are united on and both Democrats and Republicans are united on is anti-China, and, um, as a result, um, y- you know, and they all want a strong man or woman, strong person, uh, on that. And so I think you're going to see pushing of the limits there and that becomes a dangerous set of circumstances. So I think that, um, if we take the next, uh, you know, let's call it one, two, three years, I think that those are going to be, uh, riskier years.

   7. CWChris Williamson12:52

      I spoke to an

4. 12:54 – 15:54

   Different Types of Leaders for Different Times

   1. CWChris Williamson12:54

      evolutionary psychologist and an evolutionary anthropologist a little while ago on this show, and they were teaching me about the values and the type of characteristics that ancestral tribes would have preferred in leaders at different states. And in times of warfare, more dominant leaders were the ones that were preferred. In times of peace, more prestigious leaders were the ones that were preferred. Makes complete sense.

   2. RDRay Dalio13:15

      Yeah.

   3. CWChris Williamson13:15

      If you're facing a, a scary tribe from the other valley, you want someone that's gonna stand firm and is going to not take any shit, and they're gonna go for it. When times of peace, that person becomes a bit tyrannical. It's a little bit too much energy when there's not anybody else to fight. And it's so funny how you see this just same dynamic, to me, it seems to play out no matter how big the populations get. It's essentially the same physics.

   4. RDRay Dalio13:41

      That's right. It's, it, it's happened repeatedly. If you're, if you're in a war, y- what you want is, um, the commander and everybody, you know, to goddamn follow the instructions and just do what you're told. And, you know, it's not like we're gonna sit there and, uh, argue, debate, and, and so on. So what you see i- is the breakdowns, and particularly you see the breakdowns in, um, also when they're at odds. There's a lot more to argue about, um, like now, the populists of the left and the populists of the right. And so in the 1930s you saw four democracies become dictatorships, um, choose to become dictatorships. They had parliaments that chose to become dictatorships. Germany, Italy, Spain, and Japan chose that because in order to fight, y- th- that's what you need and that your anthropologist friends are, um, right on that.

   5. CWChris Williamson14:43

      Yeah, they're consolidating power in an attempt to try and be able to enact more change more easily. It's not we haven't got time, we haven't got time to get this across the line diplomatically, we haven't got time to get everybody on the same page. We'll have one person who knows what they're doing and they'll push it forward. One, one thing that I-

   6. RDRay Dalio14:58

      A- and another thing that's common is, um, the foreign enemy. When you have, um, a situation where you have internal dispute-

   7. CWChris Williamson15:10

      Mm-hmm.

   8. RDRay Dalio15:11

      ... um, it's very, very common to try to bring the country together, get support by the leader by having the common enemy, you know?

   9. CWChris Williamson15:22

      Yeah.

   10. RDRay Dalio15:22

       And so we'll all rally around, you know, the leader, and you could see, uh, you know, it was like, um, you know, when 9/11 happened and, you know, the president, uh, um, you know, Bush gets a standing ovation and we're all behind you in that fight. And so that's, yeah, that's timeless and universal dynamic.

   11. CWChris Williamson15:44

       If you can't bond yourselves together over shared love of an ingroup, shared hatred of an outgroup is a close enough proxy, I suppose, for that interim.

   12. RDRay Dalio15:53

       Yeah.

   13. CWChris Williamson15:53

       Was there anything, um,

5. 15:54 – 20:03

   Are We in a Unique Situation?

   1. CWChris Williamson15:54

      over the last two years that you didn't anticipate, or is there anything particularly unique about the situation that we're in now? Every, uh, what is it, uh, every time people say it's going to be different this time, is there anything that could make things different this time or was there- there anything that you've been surprised by?

   2. RDRay Dalio16:13

      Um, you know, by and large I haven't been surprised by... I mean, I didn't anticipate that we were going to have the war with Russia, um, so that, uh, um, but I did anticipate that we were likely, you know, headed in a warlike environment. It's very much fell with, um, as expected there. Um, the economic and the financial very much is the same. Um, so I'd have to, uh, uh, you know, by, by and large almost exactly it's transpired the way described. And that's why, again, look, I, I, I did the video for free on YouTube, um, The Changing World Order. Um, what I'm trying to do is to just pass it along for people's consideration, to understand the cause-effect relationship that goes there. But yes, it's unfortunately going according to script. That doesn't mean it's destined, okay? But it's difficult to take off track. Um, what do I mean by that? Um, each stage is the, the logical consequence of the stage that preceded it. So let's take the existing situation. The United States has a lot of debt and it has deficits, so it has to sell debt. Now if you say... (clears throat) And others are holding debt. And if you say, um, how do you get healthy?Um, you have to spend less than you earn to get ch- to not borrow money and get financially strong. That's difficult, uh, particularly when you have a lot of debt 'cause you have to take a portion of your income and you have to pay the debt, and also you're living and spending more than you're earning, and so how do you rectify that? What? Cut spending? I mean, it's very difficult to cut spending. Or raise income? That's not easy. So raise- cut spending? Um, what do you cut? Okay, so we're living in a world now where, um, policymakers don't think, "How much money do I have to spend and what should I prioritize it on?" They think, um, "How much money, um, you know, how much money do I need to spend?" without regard to how much they have, and then they go spend it and then they have deficits that, um, central banks can print. So it's just like the same as individuals. They have the deficit, but w- but in their case, they have the capacity to print the money to pay the deficit. So, um, it's not easy to fix the financial problem. Um, the internal problem, you know what it's like. Can you get people to come together to, uh, you know, say there's is a common problem, let's have the left and the right and people? Very difficult. People have big differences in values and conditions, and so, um, it's very difficult to bring them together to deal with the problems. And the same is true internationally, you know? It's easier said than done. So, um, given that dynamic, there is then the stages, and so it's pretty clear, normally, what comes next.

   3. CWChris Williamson20:02

      Given all of these changes,

6. 20:03 – 25:45

   How to Be Financially Prepared for the Next Few Years

   1. CWChris Williamson20:04

      what do you think people can do to best prepare themselves financially for the next few years?

   2. RDRay Dalio20:11

      Well, I think that, um, in saving, um, let's, let's talk about that, um, there is... I, I, I think of savings in tiers. The first tier is to secure your wellbeing, to own a portfolio of assets that are going to secure your wellbeing. And then, after you have that taken care of, then you can go to the next level, take more risk and so on. Um, that wellbeing, that purchasing power, has to be viewed in terms of inflation adjusted dollars, you know? If you're holding, um, a debt instrument and, you know, a cash paying instrument and it gives you a 2% interest and you have a 5 or 6% inflation, you lose money at 3% a year, so you have to look at that in real dollars, and you have to, uh, hold that portfolio in a way, uh, that is balanced to any kind of economic environment. And then the way I do it and I s- you know, I, I, I stood- I remember, you know, I didn't have anything, and then I start to acquire, um, money and I start to think, "Okay, how much, how many weeks do I have, months do I have, or years that I'm financially safe? And what do I hold it in?" So... And then, you know, once you've got that taken care of, you can go beyond it, and, um, and I wanted it in a very well balanced portfolio, th- the type of portfolio that does equally well no matter what happens. Um, I can explain that a little bit more if you want.

   3. CWChris Williamson22:05

      That would be good.

   4. RDRay Dalio22:07

      Um, okay. Um, there are basically two big influences on markets. Um, the growth rate and the inflation rate. Um, like if you know that, um, growth is going to be faster than expected and inflation's gonna be higher than expected, you know, you know that bonds are gonna go down, um, and vice versa. So the way I, um, I'll give that as an example. Um, i- so the way I look at it is there are those two big influences and then they can... So I've four environments and each one of them can go up or down. So there are four quadrants that I think of, rising growth, falling growth, rising inflation, and falling inflation, and I wanna have a portfolio that will be 25% of my risk in each one of those so that I don't have any bias. And so I pick the assets that are gonna do well in each of those four quadrants and I hold them in a balanced way, and I've tested that, you know, going back actually to 1900 and so on, and you'll maintain... You'll actually increase your buying power, um, and so it, um... You know, that's the kind of thing that I think in the beginning. Then you have to also make provision for, you know, taxes, to some extent. So I say, "Whatever that amount of money is, I want twice as that, so in case it goes in half."... and I wanna build a portfolio that looks like that, um, for, you know, I don't know, X number of years that I have that and that's the safe savings. And then when I go beyond that, then I'll take more, uh, risk. But I think that being safe, uh, particularly in this kind of an environment, uh, is important and I would take a perspective of how to do that that's, uh, like the one I'm just describing.

   5. CWChris Williamson24:27

      What would be an example of an investment for each of those four quadrants?

   6. RDRay Dalio24:31

      Well, I'm worried that we're gonna take a long time to explain it. I've explained it, uh, elsewhere. But let, let me give an example. I'll, I'll, I'll take it. Um, like if growth... So there's these four quadrants, growth and inflation. If, if growth is less exp- uh, less than expected and inflation's less than expected, you would like to own bonds. Okay? If it's higher than expected, you would n- not want to own bonds. Okay? If, if inflation is higher than expected, you would wanna own assets such as commodities and gold and inflation index bonds. Um, if growth is faster than expected, particularly if inflation is less than expected, you'd wanna own stocks. So, you get the idea.

   7. CWChris Williamson25:43

      One of the things that you brought up earlier

7. 25:45 – 32:28

   The Crisis of Unproductive People

   1. CWChris Williamson25:45

      on was the, uh, changing internal structure. This is driven by a number of factors, but one of them being, uh, increasing wealth inequality. At the moment, it seems like there is a decline in praising work ethic, especially in the US. Do you think that that is a symptom or a cause of what we're seeing at the moment?

   2. RDRay Dalio26:07

      Well, I think the... I, I'm referring to the, let's say, the wealth gap. Um, I think that there's, um, a, a... and so, there's a lot of, um, particularly unproductive people. Um, uh, for example, um, f- for various reasons, but I, I live in the state of Connecticut and my wife tries to help, um, students in the poorest neighborhoods who have the worst conditions, and I'll give you, um, this example. I... The state of Connecticut is usually number one, two, or three in the richest state in the country, but 22% out of the last survey, it's actually higher than this, 22% of the high school students in Connecticut have either dropped out of high school or are, have absentee rates of greater than 25% and are in failing classes. And there's a great deal of poverty, um, and the breakup of the families and, and the guidance. There's a cycle, um, that takes place. And so you're seeing, um, the general competitive education levels, the con- conditions. Um, in the, in Connecticut, uh, so we operate philanthropically and I'll give you an example. Um, there was COVID and the kids have to get educated, and 60,000 kids, uh, didn't have computers or connectivity and no government was gonna do anything about it. So, you, you know, we had to buy 60,000 computers to give it to kids in order for them to have education. Well, this, the... and there's hunger and there's poverty and there's drugs. Um, I l- it's, it's how the educational system is funded. Eh, um, education is a state issue by the Constitution, and then within a state, it's a tax m- uh, uh, typically within a state, it's a tax district issue. So I live in Greenwich, Connecticut, which is relatively... it's a rel- it's a rich, uh, s- town and the public education gets about $24,000 per student, last number I looked at. It's probably higher than that now. Gets $24,000 a s- student. Up, uh, the road at Bridgeport, Connecticut, 10 minutes up the road, they get $14,000 a student because there's no tax base. And, um, and they need it more, they need more money because, you know, the expenses of raising a kid are, are... You also have to get them the computer, you've gotta get them the, you know, the food, the clothes, all of those things, and they have less food, less clothes (laughs) , a-all those things. So, um, a- and well, but in any case, what you can see is the education test scores and measures of how we're doing in education relative to other countries, uh, have declined. So part of it is, uh, education and circumstances. Part of it is drugs, part of it is... um, you know, there are lots of parts of it. And then there's, um, a certain element of it which, uh, let's say because of COVID or other reasons, um, that people, um, have moved around and, and say, "You know, I don't have to work as hard anymore." So, you know, just l- for example, the change in the attitudes of restaurant workers, you know. "Okay, I can... I found another..."... a way to live, and so on, and that's playing a role. Um, of course, also people, um, um, as the baby boomers are older, um, you know, they drop out of it or they want to retire earlier and they do. So there are a number of factors that affect, um, you know, the, this kind of set of circumstances. The bi- the wealth gap is very much due to a self-reinforcing cycle in which if you earn a lot of money, you can afford to take care of your kids' education, you can raise them in a better way. Um, if you don't earn a lot of money, you don't have that privilege. So, uh, you know, it, so all through history, um, during those such times, wealth gaps have increased. So you look at the cycles, um, you have a new, you know, like a new world order, like in the 1850s, you know, you, you have the Civil War and then you have that, and then you have new technologies and inventing, you have the Industrial Revolution take place and things go great, but, uh, what it does is it also increases the wealth gap. Some people make a lot of money, others don't. And it also increases the level of indebtedness. And you make the turn of the century, you, there's, then you see big conflicts over wealth. You have the, um, panic of 1907, and so what you see is the Industrial Revolution turns into what's called the Gilded Age in which there are very rich, decadent, um, you know, uh, while there's poverty in, you know, in the early turn of the century, um, they're living, people are living very, very lavishly, very decadently at the same time as there are, you know, sweatshops and all of that, and then there's kind of a revolutionary reaction to that. So these things happen over and over again, that, for the same reasons.

8. 32:28 – 35:31

   Ray’s Advice for Young People

   1. RDRay Dalio32:28

   2. CWChris Williamson32:28

      What would you tell young people, then, at the moment? What advice would you give them?

   3. RDRay Dalio32:33

      Um, well, um, first of all, uh, learn, uh, uh, learn how, uh, I'd say a few things. First, know your nature. Everyone has a different nature, a way, a pull, what's their pull toward. Um, I created a, um, personality profile test called Principles You, it's, I put it online for free, and it tells you a lot about, you know, what your nature is, and, uh, it also s- shows if you, uh, if you take the test and you do it and you put somebody else's in, they take the test, it'll tell you about your relationship. So you want to know what your nature is, what your pull is going for, and then you go through your journey of learning experiences that, um, you know, has its ups and downs and, you know, you learn, you have your, uh, you know, your, your painful experiences but, um, I have a principle, pain plus reflection equals progress. You learn, you get that. And, um, and then to have perspective, to understand, um, that all of these things, um, events transpire, uh, you know, know the whole cycle, see the whole thing, gain perspective, and understand where you are in the cycle, understand where you are in the life cycle. There's a life cycle, um, you know, from birth to death and let's say it on average it lasts about 80 years, and you know that at different parts in that cycle, certain thi- certain things are gonna happen. You're gonna, you know, um, first third of it, uh, you're gonna be dependent on others and you're learning. Second and third of it, um, you're gonna be independent of your parents and so on, and you're gonna be, others will become dependent on you and you're working to be successful. At the various ages, you, you get married, you have kids, you, uh, all of these cycles, there's a life cycle. That happens over and over again, and then there are these other cycles. The cycles of, um, you know, um, y- you know, let's call it almost from, from war to war, um, um, whether that's a internal war that changes the internal order or an external war that changes the external order, and there's a cycle that has to do with a debt cycle and those others, and, um, and you, you, and you have to know what those cycles are like and kind of where you wi- are in those cycles, and you navigate it well. I mean, the main thing, you know, is being strong, smart, capable and adaptable. But, um, that's why I put out (clears throat) these, um, you know, videos and books, to try to help people understand that.

   4. CWChris Williamson35:29

      You mentioned one of the

9. 35:31 – 41:07

   Should We Worry About the Population?

   1. CWChris Williamson35:31

      common life landmarks that people get to is having kids and getting married. At the moment, especially in the West but also even more so in Asia, birthrates are falling through the floor. We've got 0.78 I think in South Korea, we've got just around about 1 in Japan, China also looking really bad at the moment. What, how concerned are you about current population decline and future demographics?

   2. RDRay Dalio35:59

      Well, it's a, it's a, it's a real burden, uh...And also depending on where it is, it's a, a, a real burden, um, because the young have to take care of the old. Um, so let's say for example in China, um, that with the one child policy, uh, a married couple has four old adults that they have to take care of. There's not an adequate social program, um, and that takes, uh, time and money, um, and it makes it, you know, a, a, a, a great burden, makes productivity a problem. And so, um, you see, you know, like you say, you, you know, you see this th- um, you know, that, that, that is a, these are burdens, costs, because the, those who need taking care of, um, and are not earning money, uh, need, um, you know, those resources, and it's, and it's sapping. Um, you know, one hopes that productivity increases faster than this burden. And th- but then it, you know, r- requires you, you have to, if you raise that, you have to then divide the pie well. So it's, uh, yeah, it's, um, demographics is a burden.

   3. CWChris Williamson37:27

      You are maybe alluding there to stuff like AI, uh, robot, uh, robotized work forces assisting in terms of getting more juice out of the smaller demographics that we do have, and the potential gains of that accruing to a small number of people that own that organization. You'd need a, a relatively small group to be able to... I don't know how many people are in the OpenAI company, but something tells me it's a significantly smaller number than the amount of impact that it's had and is probably going to have.

   4. RDRay Dalio38:00

      Right. So that's exactly right. So if you, i- if the society as a whole can do that, what it will do is it'll naturally make the people who, some people very rich and some people very poor, but it can raise productivity enough that, um, it can raise living standard. Let's just imagine robots always work there and you don't have to have people in doing the jobs. Um, then what you can have, then what you have to deal with is how do you redistribute the wealth and opportunity? Because, as I say, it'll be concentrated in some and others will lose jobs, and, um, um, there's more productivity for the whole, but you have a, a distribution issue.

   5. CWChris Williamson38:50

      Are you familiar with Nicholas Eberstadt? Do you know him? He wrote Men Without Work.

   6. RDRay Dalio38:55

      No. I'm afraid.

   7. CWChris Williamson38:55

      He came on the show, he came on the show last week. I think you'd be really interested. The book's very, very short. Uh, and, uh, he's discovered this odd cohort of men that are lurking inside of the unemployment statistics, the seven million men age 22 to 55 in the US who aren't working and aren't looking for work, only 10% of that number are students, from the remaining 6.7 million, about 2,000 hours is the average amount of time that they spend watching screens, and 50% of that time on average is spent whilst on either prescription medication or weed, recreational drugs, and two thirds of those men are living in homes that claim at least one disability benefit. So basically, lurking inside of the low unemployment numbers is this cohort of prime working age men who don't have a job and don't want a job either.

   8. RDRay Dalio39:49

      Right.

   9. CWChris Williamson39:49

      One of, one of the potential downstream implications for that is what does this mean for universal basic income? That if these men are able to be supported by social welfare, but they're not, uh, they're not going out and enacting poetry, staring up at the stars, you know, speaking the truth forward, and, uh, dealing with the existential pain of living in a good way, this doesn't seem like they're flourishing particularly. And given the automation that's potentially coming down the pike, I wonder what that means.

   10. RDRay Dalio40:21

       Well, I think you paint, um, or he paints an accurate picture, and obviously, uh, it's not good, you know. Um, m- my, as my wife was describing when she's, uh, dealing with, uh, that population, now it's very common for kids to come to school high, and you know, then they have a pop-

   11. CWChris Williamson40:43

       At what, at what ages?

   12. RDRay Dalio40:45

       Oh, young ages. You know, 10.

   13. CWChris Williamson40:52

       Wow. Okay.

   14. RDRay Dalio40:53

       Well, marijuana is readily available. And, um, so yeah, we have a number of these issues.

   15. CWChris Williamson41:04

       We've brought China up a couple of times, and

10. 41:07 – 45:02

    The Threat of China

    1. CWChris Williamson41:07

       I think based on what I know about your work, the conflict between the USA and China, uh, as China the ascending new power that may be overtaking the USA. However, we do have this perhaps, uh, unprecedented demographic collapse that China's facing. The best predictions that I've seen suggest that it's going to go from about 1.1 to 1.2 billion now to about 650 to 700 million by 2050. So it's pretty much getting chopped in half. Does that, uh, change the way that, uh, the world orders change moving forward?

    2. RDRay Dalio41:46

       Uh, I think the main thing with China right now is, um, you know, we're on the brink of war with, uh, China for various reasons. Um, you know, like, um, I hope we make it to 2050. (laughs) Um so, um, yeah, the demographics as, is as I describe it, um, and by the way, them losing doesn't make us winning.Um, just so we're look- look at that. W- you know, we hope everyone gets better (laughs) . Um, and the world economy, w- we hope everybody has a better way, um. Nobody... Everybody loses in wars. And so, um, you know, that's their set of circumstances and it'll be what it'll be. I think the most important thing is how do we deal with our circumstances? You know, how do we become strong and healthy, financially healthy, health- productivity healthy and so on? So, um, yeah, the- we could talk about the demographic problem in- in China, um, uh, which is just what we talked about before, in terms of, you know, does robotics and productivity and all of that make up for that? I don't know. But, um, I really think we're projecting too much on the outside world. Okay, what do we do with China? What, of what relevance? Well, we trade with China. We don't have to go to a military war with China. I mean, let's... Why would we... We shouldn't do that, um, y- you know. Um, uh, and, um, and then if that's the case, you know, what's the problem with them growing, you know? You know, uh, okay, there's not- m- it's not very much, you know, okay, let them grow and invent and let us grow and invent and share the inventions. That would be good. Um, but the problems that we're facing are pretty much our own problems, the things we're talking about, and the breakdown of infrastructure and, you know, all of that. So really, um, I think we should focus on that, and, you know, maybe their demograph- demographics is a big burden or not. Uh, you know they have other big burdens too, we all do, but let's focus on how we can be as good as we can be.

    3. CWChris Williamson44:15

       Yeah, as opposed to presuming that this zero sum game is China finds life harder, therefore America finds life easier. That's not-

    4. RDRay Dalio44:25

       Yeah, that- that- that doesn't work.

    5. CWChris Williamson44:26

       Yeah, I understand. Um, you might have seen the RESTRICT Act, which was brought up recently. It's, uh, lining up a potential ban for different types of online services, and it seems like one of the potential bases for banning TikTok from America, which again, to me, just, um, further embeds this them and us, China is enemy. If we can remove that influence from the West as much as possible, then we are going to end up in a better situation.

    6. RDRay Dalio44:58

       Well, that's the dynamic, yes.

11. 45:02 – 49:28

    Is a ‘Soft Landing’ Possible?

    1. CWChris Williamson45:02

       What do you think about the Fed's messaging about this soft landing thing? Is that possible? Like historically, I don't think it's- it's really happened, but do they have enough control over the economy to be able to make this work?

    2. RDRay Dalio45:15

       The big issue is that, um, a lot of debt was created. A lot of it is government debt, but it is also corporate, to a lesser extent, household debt. Um, uh, w- um, so, um, if you look at the Silicon Valley- Valley Bank issue, um, it's not so much their issue as much as a worldwide issue. And what happened is that, you know, what's a bank? A bank takes in deposits, um, uh, and then it takes that money and it invests it in things. And so they bought a lot of government bonds that had a higher yield than they were paying out in the deposits. There's a tightness of monetary policy, and those yields went up and the bonds went down in value, and then the amount they have to pay out went up in value, and so, uh, they went broke. And, um, that is happening all over. Um, that happens not only through banks, banks as a whole did a lot of that, but, um, insurance companies and so on all around the world. Same sort of thing happened in Europe, same sort of thing happened with Japanese, uh, companies even buying US dollar bonds, uh, a lot. And, um, and so you have, um... If you were to mark those to market, you would have a- a- a terrible calamity. Um, but what's going to likely happen is they don't want any more of those bonds, and we're going to have to sell more bonds because we're gonna have a deficit. So when you have a deficit, you have to pay for it through selling debt, and there's a lesser demand for that debt. And, um, I think that that creates, um, you know, a problem in which either interest rates go up or the Federal Reserve's got to come in and print. And this is a problem that exists also in Europe with the European Central Bank, the Bank of Japan, all of them. So that's where- that's where we are, um, and it has knock-on effects. It's like dominoes that fall. So it will produce less credit, and as it produces less credit, less- less deman- less- less credit, that'll produce less spending. It'll come in certain parts of the economy. For example, commercial real estate, um, for example, um, venture capital and private equity, uh, for example, um, low-grade, uh, bonds where they're- have a heavily indebted con- company and the interest rate goes up a lot and that causes problems. So I think you're in the part of the cycle...... where you've had the tightening and then the dominoes are beginning to fall, and I think that that's going to produce, um, more, uh, more problems. So I think when it comes down to it, there's just too much debt and, and we're adding into it too quickly. And so it's going to, um, either that debt will be paid off with hard money, in which case there's not much printing and so on, or it'll be paid off with, um, printing a lot of money to make it easier to pay off. I think in the end, it'll, it's always the case that they print a lot of money and, and make it easier to pay off but you have the reduced value of money. So that's how it looks to me. You'll have probably a stagflation environment and because you have that dynamic going on at the same time as you have supply chain disruptions 'cause of the geopolitical, um, I think it's gonna be a difficult environment.

    3. CWChris Williamson49:27

       Let's say

12. 49:28 – 54:06

    Can You Benefit From a Recession?

    1. CWChris Williamson49:28

       that we do hit quite an aggressive recession, what are some of the ways that people could even look to benefit financially from that happening? Are there any things that individuals can do?

    2. RDRay Dalio49:43

       Um, the most important thing, as I say, is to have this basic well-diversified. And n- you know, there are some assets and, and think about different, you know, a small percentage of your money even in asset-like gold or s- or i- i- and diversification for countries, you know, to just to create a diversified portfolio is important.

    3. CWChris Williamson50:12

       One of the things that did occur, you mentioned, uh, Silicon Valley Bank there, there was a big bump in terms of Bitcoin and other cryptocurrencies around about that time, and it seemed like one of the first periods where people genuinely saw crypto as a store of value, as a way to just, "I, I need to put my money somewhere that I feel is safe." And given the last 18 months of what's happened with crypto-

    4. RDRay Dalio50:35

       (laughs)

    5. CWChris Williamson50:35

       ... considering that as, "That's the place I'm going to store my assets in order for it to be safe," I think said quite a lot about how people sort of perceived the state of the dollar and the security of banks and stuff at the moment. It, what, what's the role of Bitcoin or cryptocurrency in a, a, the current economy in your, in your eyes?

    6. RDRay Dalio50:57

       Um, I think, um, (clears throat) cryptocurrency or Bitcoin, um, doesn't move in a reliable way related to almost anything. It's, uh, you know, moves up and down because of, um, this mood and that move and mood. Um, and, um, unlike gold, let's say, I, I would prefer gold than, than I would prefer crypto for various reasons. Crypto, um, i- it's very easy to track the owners and transactions in it, it's not liked by the government. Um, it's, um, i- i- i- i- i- it doesn't move in a way that's consistent with, you know, kind of any of the environments, and it's a fairly s- and it's a small asset class. Um, you know, we talk a lot more about it but its size is about, you know, 30% of the size of Microsoft, and Microsoft is one stock among many stocks. So, uh, it's given, um, probably a lot more attention. Um, I don't know, uh, that, you know, who, who knows? Maybe i- you know, there's some element of it. I don't understand why people are more inclined to go to m- Bitcoin than gold. Um, if you look internationally, um, gold is, uh, for central banks, the third-highest reserve asset. First is dollars, then euros, then gold, then, uh, Japanese yen. Um, and central bankers are buying gold and they're not buying, um, bonds. And, um, and so, and it's, you know, timeless and universal, it's been there. So, um, but, um, you know, um, so I'm not, I'm not a big fan of it, as I've said before. Um, you know, having a little bit, I have a little bit of it, but if you have a little bit of it, you have to, um, think about the, those things, and, you know, like I said, you know, you have to be prepared for it to fall a lot, you know, if, if it goes down 80% or something, but that limits the amount that you can have in it. So, I don't know. It's, um, I don't think a lot of Bitcoin.

    7. CWChris Williamson53:21

       I think what's interesting there is holding crypto essentially has a cognitive load on you. Using it as, uh, somewhere that you're using for investment as a store of value to just put assets that you've got, it's almost that there is a price that you pay because of the volatility but the price that you pay is with your own sanity with regards to that, um, which is something that I hadn't quite considered. There are, uh, less sanity-sapping, uh, forms-

    8. RDRay Dalio53:50

       (laughs)

    9. CWChris Williamson53:50

       ... of investment.

    10. RDRay Dalio53:51

        Yeah. That's a, that's a good way to d- You know what I mean? I've seen so many people, you know, I've seen people get very rich and I've seen get, people get very broke with it. Uh-

    11. CWChris Williamson54:01

        I have friends in both camps, yeah. So, uh, you know, we've spoken about today

13. 54:06 – 59:52

    Finding Solace in a Tumultuous World

    1. CWChris Williamson54:06

       this v- very quickly changing, highly volatile environment that we're in, whether that be socio-culturally, politically, globally, locally, financially. Ah. Where should people go in order to find, um, some solace in this given the fact that it is, uh, difficult? It's difficult to exist in this world.

    2. RDRay Dalio54:31

       Um, go to- go to places or spend time where there's not as much of this junk going on, you know. Um, I mean first of all, I think recognize, let's- let's go to some of the basics. Um, what do you really need? Um, y- you know, you need a bed to sleep in, you need food to eat. Um, um, most depressions, most people remain employed. Most wars, most people don't get- die or get in- injured. Um, uh, so, um, you know, let's put, let's calm down and put all this in place. Le- let's be in places where there's, um, you know, goodness, and harmony, and beauty. You know, maybe even spend more time in nature or, you know, you go out there and, um... I like to meditate. Meditate is, meditation has had a big effect on me. So, um, yeah, um, don't get all stressed about it (laughs) you know? Navigate it well. Um, in- you know, enjoy life, enjoy those things, and I think that that's, you know, that, I think that's most important.

    3. CWChris Williamson56:00

       What would you say to the people that say, "How- how am I expected to enjoy life when there's all of this chaos going on, there's so many bad news stories and headlines and what about the financial collapse?"

    4. RDRay Dalio56:11

       Well, um, first of all, if it's really having that impact on you, don't get so hung up on the financial stories, and you don't- don't- don't watch the television or something. You know, go out for a nice walk and (laughs) in the nature light. All that story, you don't really need all that story, okay? Now, what's gonna happen to you? Like I say, um, you know, don't get so hung up on expectations of having the most amount of money or whatever. Just, you know, think about it, um, like I say, will- will you lose where you live? Will you, you know... Um, what matters? You know, uh, your friends? Your family? Your, um... You know, give a bed to, a good bed to sleep in, adequate food, go out into nature. You know, like, uh, uh, I think my own view is sometimes, you know, like the most luxurious thing I can do is take a tent and be out (laughs) in a beautiful spot, you know? Um, so, um, you know, uh, avoid it. You know, don't- don't get stressed out. You know, understand it, be prepared.

    5. CWChris Williamson57:30

       Redefining success and what happiness means and what we should be aiming for in life, I think, is a very worthwhile pursuit.

    6. RDRay Dalio57:38

       Right. I'll- I'll tell you, um, this idea of success being, uh, measured in the amount of money and status you have is really screwed up. Um, um, like if you think about money, and- and this is, uh, con- shown in measures of happiness, um, past a basic amount of money so that you don't have, uh, misery, there is no correlation between the level of money you have and the level of happiness you have. Lots of studies show that. And the highest correlation is, do you have a community? Um, that's the highest source of, um, happiness and also, uh, longevity, it has a big effect on longevity, stress-

    7. CWChris Williamson58:30

       More than smoking, more than stopping alcohol, more than going to the gym and exercising.

    8. RDRay Dalio58:35

       Right, right. And so, uh, and then you think, like, "What is money for?" It has no intrinsic value. It only has a value of what it buys. And so, um, it has a limited marginal ability. You, uh, uh, benefit. You- you add more and more to it and, you know, like what are you gonna do? Okay, so you're gonna get a bigger house or a bigger car or what- what, you know, okay. Um, and what does that really mean incrementally? Relative to spending time with friends and family and all of those things? You know, most of the good things in life are not expensive, right? Um, friends, family, uh, nature, sex, anything, you know? It- it's not gonna get better with more money, right? Materially better. And so, um, it seems to me that, um, it then can become an obsession, um, and that's not healthy. So, I think it's, you know, by and large you handle it well and it's all gonna be okay. Um, it's all gonna be okay.

14. 59:52 – 1:00:43

    Where to Find Ray

    1. CWChris Williamson59:52

       Ray Dalio, ladies and gentlemen. If people want to keep up to date with the work that you're doing, where should they go?

    2. RDRay Dalio59:58

       Um, my more lengthy writings are on LinkedIn, but I'm on all of the social media, so, um, in various ways and- and when- if I write something that's longer, um, it, I'll- it'll be linked to, uh, LinkedIn. So, you know, all the major social media, I'm on.

    3. CWChris Williamson1:00:20

       Ray, I really appreciate you. Thank you for today.

    4. RDRay Dalio1:00:23

       Thank you for your time.

    5. CWChris Williamson1:00:24

       What's happening people? Thank you very much for tuning in. If you enjoyed that episode, then press here for a selection of the best clips from the podcast over the last few weeks. And don't forget to subscribe. Peace.

Episode duration: 1:00:43