Changing World Order

In contemplating the future, one must recognize that upcoming times may differ from our personal experiences, yet historical patterns persist. Drawing from five decades of global investing, Ray Dalio's insights stem from unforeseen events and an examination of 500 years of history, particularly the trajectories of Dutch, British, and US empires, each marking shifts in world orders.

A pivotal moment in 1971 saw the US default on debts, departing from the gold standard. This event, reminiscent of the devaluation pattern observed in 1933, resulted in a market surge. The lesson learned: central banks, when printing money, tend to invest in stocks, gold, and commodities.

In recent years, three unprecedented occurrences prompted focused study: countries resorting to money printing to settle debts, internal strife arising from wealth gaps, and external conflicts between ascendant and dominant powers.

Reflecting on historical cycles spanning 1930 to 1945, Dalio discerned shifts in domestic and global orders. The overarching big cycle encompasses rises and declines, often following major conflicts, ushering in eras of peace, prosperity, financial bubbles, and eventual decline. Power indicators, encompassing education, technology, competitiveness, and military strength, play pivotal roles in determining an empire's position in this cycle.

Breaking down the typical cycle into three phases - rise, peak, and decline - reveals a sequence of revolutionary leaders consolidating power, instituting effective systems, and fostering education. This paves the way for innovations and competitiveness, ultimately leading to prosperity.

However, ensuing challenges, from financial bubbles to widening wealth gaps, precipitate decline. Comprehending these recurring patterns facilitates anticipation and adept navigation of the future.