The author tries to show nothing less than the laws for the eternal pendulum of nations between rise and fall.
(Photo: Getty Images)
He is something like the lateral thinker and thought leader of the financial world. Ray Dalio, founder of Bridgewater, the world’s largest hedge fund, has long been calling for capitalism to be reformed, denouncing social inequality and voluntarily willing to pay higher taxes on his billions of dollars. None of these things can be taken for granted for a man who owes his wealth to a system that, in his opinion, is not so viable.
The 72-year-old now has a book entitled “Principles for Dealing with the Changing World Order. Why Nations succeed and fail “is written down.
The work is ambitious because with the word “Principles” it claims to show the historical laws for the eternal pendulum of nations between rise and fall. Many scholars who had a broader education than those who graduated from Harvard Business School have failed to face this challenge.
Dalio doesn’t care. It is his third book to have the word “principles” in the title and come across like a geopolitical investment bible. Bridgewater sees itself as a global macro company, which means that Dalio and his team have the big picture in mind and specialize in seeing, sooner than others, when the order of the world changes.
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In his opinion, this is exactly what is happening now. For him, capital, be it in the form of assets or debts, is the most important motor for change.
Ray Dalio: Principles for Dealing with the Changing World Order.
Simon + Schuster UK
London 2021
576 pages
25.10 euros
The German edition will be published by Finanzbuch Verlag in February.
Basically, his new book is an investment advisor on how to protect and grow your wealth in a world of pandemics, climate disasters and geopolitical crises. It gives a good insight into how financial professionals look at the many world crises and try to convert their knowledge advantage into money.
However, those who expect new insights into how the world works and why some nations rise and others lose importance will be disappointed. With the work of Daron Acemoglu and James Robinson “Why Nations Fail”, the politically interested investor would be much better off. Paul Kennedy’s classic “Rise and Fall of the Great Powers” from 1987 gives more food for thought.
Dalio’s analysis has long been common knowledge in politics and business. His insights, which are highlighted in bold for the quick reader (time is money), all too often come across as platitudes. For example, when he states, “If the wealth and value gap is big and there’s an economic downturn, chances are there’s going to be a lot of conflict over how the pie is divided.” On Wall Street, that would probably be a “no -brainer “.
Caught in the cycle of history
The finance manager sees the history of mankind in an eternal cycle between ascent and decline, war and peace, as well as prosperity and depression, commuting back and forth, with the rising and falling among the nations often changing, some like China in particular, but for him to the eternal Belong to favorites. These cycles are “like the tides that come and go”.
He discovered, Dalio said, that great empires typically lasted for around 250 years. Accordingly, the USA, as the dominant world power, should already be on the decline.
The New York-born author sees three great forces at work that are unhinging the old world order and setting the pendulum of history in motion again.
First of all, it is the combination of extremely low interest rates on the financial markets and high debt that, in his opinion, harbors enormous risks for many countries and at the same time considerably limits the ability of the major central banks to act. “Interest rates have never been so low in our lifetime.” Debt of more than $ 16 trillion would even be paying negative interest this year. This is the strongest part of the book.
Even if one does not agree with all of Dalio’s conclusions, he still puts his finger in the open wounds of the global economy. It is also interesting and correct to point out that in history those nations that had the respective reserve currency of the world hold what is perhaps the most important lever of power in the financial world in their hands. This is still the US dollar, “but I wonder when and why the decline of the dollar as the leading reserve currency will begin and what will replace it”.
Internal contradictions paralyze the USA
For Dalio, the second big engine of change is internal political contradictions, especially in the USA. The hedge fund manager compares the political division in America with the 1930s, when there was a similar polarization with strong populism.
In his opinion, growing social inequality also contributes to the tensions, which could intensify in the event of a renewed economic downturn, since neither monetary nor fiscal policy would have the means to counteract this.
The author sees the third force shaking the old world order in the rise of China and the growing rivalry between Beijing and Washington. Dalio predicts a change of guard at the top of the world. China will become stronger than America in important respects, he predicts. In the future, the two countries will at least compete on an equal footing.
There will be conflicts above all in the areas of technology, trade, capital and political system competition. The two great powers are already rubbing against each other on all of these fronts. And if one believes the dire predictions of the finance manager, the disputes between the US and China will intensify in the coming years.
He attaches the decline of the USA to excessive debts, low productivity, political turmoil and excessive military demands. China, on the other hand, appears economically strong and internally and externally stable. It is therefore only a matter of time before the new superpower overtakes the old superpower.
How can you protect and increase your wealth in a world of pandemics, climate disasters and geopolitical crises?
(Photo: Mauritius Images)
Dalio knows the Middle Kingdom well and ought to know better: Financially, China has been hit by the crisis in the real estate empire Evergrande at the latest. Politically, it is still an open question whether Beijing’s diabolical pact “Prosperity against Unfreedom” will survive a tangible economic crisis that, according to Dalio’s calendar, is due in China.
Most of the geopolitical developments Dalio describes will hardly come as a surprise to the careful observer of the world situation. Dalio’s explanation of the world hardly deviates from the spiritual mainstream of other prophets. His customers and fans will therefore primarily search through the book to find out which financial conclusions the financial magician draws from his crisis story and what he advises them for their own portfolio.
Here, too, readers have to be prepared for disappointment. Most people “typically miss the great moments of evolution that come in life because they only experience tiny parts of what happens”. He doesn’t know any investors or high-ranking economic politicians who have an excellent understanding of what has happened in the past and why, writes Dalio. In other words: none of you would see the “big picture” and therefore could not recognize the turning points of the eternal cycles of history.
Not all “ants” are created equal
“We are like ants,” writes the author, “who are busy carrying crumbs in their short lifespan, rather than having a broader perspective on the patterns and cycles of the big picture.”
That should leave many readers perplexed and frustrated. In Dalio’s logic, the simple investor can only entrust his money to Bridgewater and follow the wisdom of its founder. But it is also possible to deal with history yourself and draw your own conclusions.
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