Ray Dalio thinks the world looks like 'pre-1945 times' as we near the end of his 'Big Cycle'

Good morning. How will AI impact Ray Dalio’s prognosis for the economy? The Bridgewater founder published a piece in Fortune this weekend, in which he argues that we are in stage 5 of what he calls the “Big Cycle.” (The global macro investor has studied the six stages of how major empires rise and fall, with stage 5 being the period prior to collapse.)

Dalio writes that “it is indisputably clear that what is happening now is more analogous to pre-1945 times than the post-1945 times that we have gotten used to, which misleads most people’s expectations and causes them to be shocked about what’s happening.”

Among the hallmarks of stage 5:

“Large and rapidly rising government debts and geopolitical conflicts that lead to concerns about the value of and security of money, especially of the reserve currency, which drives a movement out of fiat currencies and into gold.” (Gold prices are up 70% over the past year.)

“Large income, wealth, and values gaps within countries that lead to the rise of populism of the right and populism of the left and irreconcilable differences that can’t be resolved with compromises and rule of law.” (The income gap has increased and, well, look around.)

“The movement from a world order with a dominant power and relative peace to a world order that reflects a great powers conflict.” (Iran could be the final blow to the WTO-based world order.)

Other forces could disrupt or accelerate the Big Cycle: AI is creating a drastic shift of wealth, with the potential to destroy jobs unlike anything we’ve experienced before. Artificial general intelligence could materially change the structure of money and nature of growth while creating faster and more volatile cycles. And one other factor comes to mind, following a fascinating discussion at the Explorers Club on Friday with NYU glaciologist David Holland about the “doomsday” Thwaites glacier in Antarctica: The accelerating pace of climate change, if not addressed, could make that coveted stage 1 seem even further away.

Contact CEO Daily via Diane Brady at [email protected]

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The markets

S&P 500 futures are up 0.4%, following a 0.6% drop before the weekend. Japan’s Nikkei 225 fell 0.1%, South Korea’s KOSPI is up 1.1%, and Hong Kong’s Hang Seng Index is up 1.5%. BYD, CATL and Xiaomi, all Chinese manufacturers working with green products, rose by over 5% in Hong Kong trading. India’s NIFTY 50 is flat; the STOXX Europe 600 is also flat in early trading. WTI Crude passed $100/barrel, Bitcoin is hovering just above $73,000.