Billionaire investor Ray Dalio is worried about 'something worse than recession’: Full interview

Summary

In an insightful interview, billionaire investor Ray Dalio outlines his concerns about global economic instability, suggesting that current economic pressures could lead to something more severe than a recession. He identifies five historic forces shaping economies: financial cycles, political conflicts, international orders, natural events, and technological advancements. Dalio emphasizes potential disruptions caused by tariffs, debt, and new international dynamics, drawing parallels to historical crises like the 1930s. He stresses the importance of reducing budget deficits to 3% of GDP and advocates for careful global negotiations to avoid severe economic disruptions or conflicts.

Highlights

• Dalio identifies five major forces driving economic shifts throughout history. 📈
• He warns that mishandling current economic pressures could lead to severe consequences. ⚠️
• The interview draws parallels between today's challenges and the 1930s economic crisis. 📉
• Ray suggests a '3% pledge' to manage the US budget deficit efficiently. 🏛️
• He stresses the necessity of strategic, diplomatic negotiations to prevent economic turmoil. 🤝

Key Takeaways

• Multilateral cooperation is key to managing international economic challenges 🌏
• Immediate action is needed to address rising financial imbalances 🚨
• Historical patterns indicate potential for severe economic disruptions 📊
• Reducing budget deficits to 3% of GDP is crucial for stability 💼
• Technological advancements are reshaping economic orders 🔧

Overview

Ray Dalio, founder of the world's largest hedge fund, Bridgewater Associates, and author of 'How Countries Go Broke' shares his insights in a recent NBC News interview. Dalio highlights the complexities facing today's economy, pointing to historic patterns and warning of potential crises beyond a recession. He suggests that economic cycles, internal political conflicts, shifting global powers, natural events, and rapid technological changes are reshaping the world economy.

Throughout the interview, Dalio emphasizes the critical state of the current global economic situation, drawing striking similarities with the 1930s. He points to current tariffs and debt levels as symptoms of larger systemic issues. His concerns extend to potential breakdowns in monetary order and international conflicts, which he fears might disrupt global and domestic economic stability.

To mitigate these risks, Dalio advocates for a disciplined approach to economic management by suggesting a reduction of the US budget deficit to 3% of GDP—a strategy adopted in the 1990s. He calls for cooperative international negotiations to manage global economic changes, potentially avoiding severe disruptions. His insights serve as a cautionary tale, urging prompt and collaborative action to steer clear of devastating economic outcomes.

Chapters

• 00:00 - 00:30: Introduction and Ray Dalio's Background In this introductory chapter, Ray Dalio, founder of Bridgewater Associates, the world's largest hedge fund, joins Meet the Press. He discusses his extensive experience of over 50 years in the financial industry and introduces his new book 'How Countries Go Broke,' which is set to be released in June.
• 00:31 - 01:30: Five Forces Driving History The speaker considers himself apolitical and identifies tariffs as a symptom of bigger issues, specifically pointing to financial problems and imbalances.
• 01:31 - 03:00: Impact of Tariffs The chapter discusses the impact of tariffs and identifies two major forces that affect economies over time. The first force is the buildup of government debt in a cyclical manner that can create significant economic problems. The second major force is internal conflict within a country, driven by differences in wealth and values between different political groups, namely the left and right. This conflict can lead to changes in the political order within a country, while the debt issues affect the monetary order.
• 03:01 - 06:00: Predictions for the Future The chapter discusses significant shifts in global political dynamics, focusing on the transition from a multilateral world order, dominated by American influence, to a unilateral one characterized by conflict. It also touches upon historical patterns where rising powers challenge existing powers, leading to political and social changes. Moreover, the chapter acknowledges environmental factors like droughts, floods, and pandemics, as recurring influences in shaping the world.
• 06:01 - 08:00: Proposals for Solutions The chapter 'Proposals for Solutions' discusses how technology and its evolving nature are central to solving current global challenges. The integration of new technologies is highlighted as a significant force shaping the future. Additionally, the chapter touches on economic imbalances and political factors, such as President Trump's tariffs, and their impact on the global economic environment. The narrative suggests that the successful handling of these issues depends on adaptability to these changes and how effectively solutions are implemented.
• 08:01 - 09:30: Conclusion The conclusion focuses on the desire to increase tax revenue and build manufacturing jobs locally. It addresses the reality and challenges of achieving these goals, including practical, stable, and quality negotiations versus chaotic and disruptive methods.

Billionaire investor Ray Dalio is worried about 'something worse than recession’: Full interview Transcription

• 00:00 - 00:30 welcome back and joining me now is Ray Dalio the founder of the world's largest hedge fund Bridgewater Associates he is also the author of the new book How Countries Go Broke it's out in June mr dalio welcome to Meet the Press thank you good to be here just call me Ray okay well Rey I'll take you up on that thank you so much for being here uh we really appreciate your perspective as I just said you did found the world's largest hedge fund uh you have been in this field for more than 50 years it's
• 00:30 - 01:00 worth pointing out to our viewers I think it's important to note you consider yourself to be apolitical and you say that the tariff problem is a symptom of a much greater problem what do you mean by that there's uh a financial problem there's an imbalance problem there are basically five big forces through history that drive everything first there's the money credit debt economic cycle in which there's a
• 01:00 - 01:30 building up of debt in a cyclical way that becomes too large and we're going to have problems we're going to have a government debt problem maybe we can get into this the second big force through time is the um internal conflict force the left and the right differences in wealth and values causing a conflict that we're seeing it changing our political order so the first is changing our monetary order the second is
• 01:30 - 02:00 changing our political order internally and then the third is the great world order the how countries deal with each other when there's a rising power challenging existing power and now we are going from multilateralism which is largely an American world order type of thing to a unilateral world order in which there's great conflict and the other two factors all through history have been acts of nature droughts floods and pandemics and number four is
• 02:00 - 02:30 technology technology changing and how they are coming together are the main forces behind this for example there can't be imbalances anymore in that environment do you think that President Trump's tariffs are exacerbating what you are describing this complicated mix of challenges that the world is facing uh I think it's just a function of how well they're handled you know it's a reality that it's a
• 02:30 - 03:00 desire to bring in tax revenue from that it's a reality that we would like to build manufacturing and jobs here this is a reality that's how that's done whether that's done in a practical way whether that's done in a stable way whether that's done with quality negotiations in which that's a mutual problem or whether that's done in a chaotic and disruptive way that produces
• 03:00 - 03:30 great conflict makes all the difference in the world based on what you're seeing right now do you think that these tariffs are being carried out in a practical way or a chaotic way i think we'll we'll see so far very disruptive so far very disruptive right and and so we don't know what the numbers are but that could be part of a process right it depends where we are at the end of the 90 days because what was put there is like throwing rocks into the production system and those impacts are going would be enormous in terms of the efficiency
• 03:30 - 04:00 of the whole world great cost i want to ask you about something that's on a lot of people's minds your predictions for the future and I want to start with the Rword i know you think this is just a piece of it of course I'm talking about a recession do you think it is likely that the United States will dip into a recession because of President Trump's tariffs i I think that um right now we are at a decision makingaking point and very close to a recession and I'm
• 04:00 - 04:30 worried about something worse than a recession if this isn't handled well a recession is two negative quarters of GDP and whether it goes slightly there we always have those things we have something that's much more profound we have a breaking down of the monetary order we are going to change the monetary order because we cannot spend the amounts of money so we have that problem and when we talk about the dollar and we talk about tariffs we have that we are having a profound changes in
• 04:30 - 05:00 our domestic order how ruling is existing and we're having profound changes in the world order such times are very much like the 1930s i've studied history and this repeats over and over again so if you take tariffs if you take debt if you take the rising power challenging existing power if you take those factors and look at the PA factors that those changes in the orders the systems are very very disruptive how
• 05:00 - 05:30 that's handled could produce something that is much worse than a recession or it could be handled well let's take the debt situation yeah I'm sorry go ahead well very very quickly because I want to be very specific about what you mean you're saying worse than recession you're saying this is reminiscent of the 1930s we should tell our viewers you correctly predicted the 2008 financial crisis what is your prediction for where the country is headed right now right now we're at a juncture let's take the
• 05:30 - 06:00 budget it the budget deficit can be reduced to 3% of GDP it's about it will be about 7% if things are not changed if it could be reduced to about 3% of GDP and these trade deficits and so on are managed in the right way this could all be managed very well i believe that members of Congress should take the pledge what I call the 3% pledge that in one way or another that they will get
• 06:00 - 06:30 that budget deficit down to that number if they don't we're going to have a supply demand problem for debt at the same time as we have these other problems and the results of that will be worse than a normal recession so can and just to follow up on that point worse than a recession you're talking about the 1930s what specifically are you warning of are you saying that it could be as bad as a depression what's your biggest fear the value of money what is a storehold of wealth that is a bond in other words
• 06:30 - 07:00 one man's debt is another man's assets bond holders and so we're going to be in a situation where if that storehold of wealth is in jeopardy because there's too much supply and demand and so on and we have a monetary inflation we will have great disruptions and that that could be like the breakdown of monetary system 71 it could be like 2008 it's going to be very severe i think it could be more severe than those if these other
• 07:00 - 07:30 matters simultaneously occur imagine if we have a downturn politically and and and international conflict what's worstc case scenario that you're warning of to be very specific to to be very specific the value the value of money uh internal conflict that is not the normal democracy as we know it an
• 07:30 - 08:00 international conflict in a way that is highly disruptive to the world economy and could even be a military conflict just as these breakdowns have occurred before you know we have a new order that began in 1945 a new monetary order and a new geopolitical order and these go in cycles that can be measured and I worry about the breakdown of that kind of an order particularly since it
• 08:00 - 08:30 doesn't need to happen because there are certain things that could be done in which this is better a better restructuring of these debts and actions taken so that takes me to my next question you have this book how countries go broke the big cycle what is the solution here well there are a series of solutions but let's let's take the most important and we have one minute one minute okay 3% of GDP bring that deficit down it can be done in a bipartisan way the way it was done
• 08:30 - 09:00 between 1991 and 98 i explain how that could be done doing things together for the greater good and then internationally on all of these issues to um use American strength but to negotiate well to lay out ways in which bad conflict and inefficient policies don't create great disruptions but get us through this in an orderly way all right Ray Dalio thank you so much your
• 09:00 - 09:30 book How Countries Go Broke: The Big Cycle we really appreciate it thank you so much for being here we really appreciate it thanks for watching stay updated about breaking news and top stories on the NBC News app or follow us on social media