Bridgewater Associates founder Ray Dalio, speaking to Fortune‘s Kamal Ahmed at the World Economic Forum in Davos, Switzerland, issued a stark warning to global leaders and business executives: Stop pretending the old rules still apply. In a candid assessment of the current geopolitical landscape, Dalio argued the fate of the post-World War II global order—much debated amid President Donald Trump’s pursuit of Greenland and unsettling of the NATO alliance—is a moot level.
“Let’s not be naive and say, ‘Oh, we’re breaking the rule-based system,’” Dalio mentioned. “It’s gone.”
The billionaire founding father of the largest hedge fund in historical past added that as a scholar of monetary historical past, he pays shut consideration to the financial cycles of the final 500 years and sees cycles repeat themselves over time.
“And what I learned through that exercise is the same thing happens over and over again,” he mentioned. “And it’s like a movie for me. It’s like watching the same movie happen.”
According to Dalio, 5 particular forces work together to drive the film plot ahead, with the “money-debt cycle” serving as the MacGuffin that kicks issues off. The roots of the present instability, Dalio defined, lie in the financial selections made throughout the previous a number of many years. Since 1971, when the U.S. beneath President Richard Nixon broke the greenback’s hyperlink to gold, Dalio notes, governments have persistently chosen to “print money” somewhat than enable debt crises to naturally play out. This habits happens when debt-service funds rise sooner than incomes, squeezing spending. After greater than half a century of this, he argued, repeating a constant warning in his public remarks on the topic, the world is now witnessing a “breakdown of the monetary order,” evidenced by central banks altering their reserves and shopping for gold.
The earlier day, Dalio had mentioned in an look on CNBC’s “Squawk Box,” from the sidelines of the annual assembly in Davos, fiat currencies and debt as a storehouse of wealth have been “not being held by central banks in the same way” anymore. He pointed to a decoupling through which the U.S. markets have underperformed international markets in particular metrics, a development seen in the altering steadiness sheets of global central banks.
The core of Dalio’s concern lies in the transition from commerce disputes to what he phrases “capital wars.” He alluded to how U.S. Treasury bonds have been the bedrock of global reserves for many years, however now, Dalio mentioned the sheer provide of debt being produced by the U.S. is colliding with a shrinking global urge for food to carry it.
“There’s a supply-demand issue,” Dalio famous, including “you can’t ignore the possibility that … maybe there’s not the same inclination to buy U.S. debt.”
This reluctance is pushed by geopolitical friction. According to Dalio, in instances of worldwide battle, “even allies do not want to hold each other’s debt,” preferring as an alternative to maneuver capital into laborious currencies. This shift forces the issuer of the debt to monetize it, a phenomenon Dalio summarized bluntly: “We’re increasingly buying our own money. That’s… the lesson of all this.”
As Dalio was talking on Monday, markets weathered a global selloff as they digested the revelation that President Donald Trump was demanding U.S. possession of Greenland in revenge for not getting the Nobel Peace Prize in 2025. He had texted the Prime Minister of Norway Jonas Gahr Støre in anger about this, in response to confirmed studies over the weekend, although the Nobel Prize committee is individually operated from the authorities of Norway. But Dalio’s Tuesday remarks got here amid calmer markets, as Trump reiterated his request for Greenland however clarified he would not authorize use of power to accumulate it.
This financial instability feeds instantly into the collapse of political norms, Dalio advised Fortune on Wednesday. He argued the multilateral world order established in 1945—characterised by establishments such as the United Nations and the World Trade Organization—was arguably a “naive system” from the begin, as it relied on illustration with out assured enforcement.
“What happens when the leading power doesn’t want to abide by the vote?” Dalio requested. “Do you really expect that there’s going to be a United Nations vote or a World Court that’s going to resolve these things?”
The consequence, he argued, is a definitive shift from a multilateral system to a unilateral one. Dalio posited the central query of our time has change into: “Who makes the rules, who enforces the rules, and how are you going to deal with that?”
Perhaps the most chilling facet of Dalio’s evaluation is the erosion of authorized authority in favor of brute power. “Power matters more” than the regulation, he advised Fortune, noting conflicts are more and more determined by who controls the army, the police, and the National Guard. This development is seen not solely internationally however inside nations, the place democracy is threatened by populism and a rising perception the system is corrupt.
When requested if this rupture ought to strike worry into company boards and CEOs who’ve lengthy relied on secure global guidelines, Dalio responded ignoring the reality is way more harmful.
“I think what always scares me is the lack of realism,” he mentioned.
Dalio suggested leaders to cease counting on a dissolving rule-based system and as an alternative deal with “jurisdiction questions,” looking for out locations the place individuals are “like-minded” and mutually supportive. Whether coping with worldwide boundaries or home laws, Dalio insists companies should now face the laborious actuality the period of assured authorized safety is ending.
“Will law prevail?” Dalio requested. “Internationally, everybody is having to deal with that question.”
As confidence in establishments, the regulation itself, and fiat-denominated debt erodes, Dalio highlighted to CNBC the quiet however vital resurgence of gold. He emphasised gold ought to not be seen merely as a speculative asset however as “the second-largest reserve currency” in the world. He famous in the earlier yr, gold was the “biggest market to move,” and it carried out much better than tech shares as central banks diversified their holdings. JPMorgan CEO Jamie Dimon had related remarks in an interview with Fortune at the Most Powerful Women convention in October, when he mentioned for the first time in his life, it had change into “semi-rational” to have gold in your portfolio.
However, Dalio’s outlook was not completely defensive. He mentioned he sees the present period as a bifurcation between the decaying financial order and a “wonderful technological revolution,” echoing Trump’s remarks onstage earlier that day about the “economic miracle” happening. In that regard, a minimum of, would possibly could find yourself making proper.
