‘Prepare for the worst’: grim predictions as recession looms

[KaptainRob]

Ray Dalio, the founder of Bridgewater Associates, wrote about the "Period of Great Disorder" in his book "The Changing World Order." He predicts that there will be a major shift in the world order due to a combination of factors, including rising debt levels, wealth inequality, and political polarization. According to Dalio, this period of disorder will likely result in economic and social upheaval, as well as geopolitical tensions and conflicts. 

As recession looms for many countries including Australia, the following article makes compelling reading.  It does not paint a pretty picture of the future our children and grandchildren may face though it should serve as a catalyst toward belt-tightening and conservation of assets.

 

 

‘Period of great disorder’ looms > source News.com.au

Meanwhile, the timing and intensity of a recession could be determined by what billionaire investor Ray Dalio calls the “big cycle”.

The hedge fund manager said forces like debt, wealth, conflict, acts of nature and the evolution of technology will form a “period of great disorder”.

Mr Dalio claims such an event would see “financial turbulence and great conflicts within and between countries”.

There are five forces that could contribute to disruptions in “domestic and world orders” according to the Bridgewater Associates asset management firm founder.

The first one is the generation of large debts through the efforts of major banks.

“The creation of enormous amounts of debt bought by central banks via their printing of money and buying the debt, (is the first force),” Mr Dalio said in a LinkedIn post.

“In other words, the government finances itself in a big way by both borrowing a lot and printing a lot of money.”

The second and third forces include “big conflicts” within and between countries, prompted by “wealth and value” gaps causing political divide and countries challenging existing world powers and orders.

Climate change, the pandemic and natural disasters – which fall under the acts of nature – is the fourth force that has the capacity to change world order.

 

Finally, the invention of new technologies, use of artificial intelligence (AI) and development of the internet is the last factor to drive change.

“Each force, and most importantly, the combination of them, is now occurring at the largest magnitude since the 1930-45 period,” Mr Dalio said.

But while it may seem like the world has reached a stage of “great disorder” already due to events like Russia’s invasion of Ukraine, the cost of living crisis and the global pandemic, fortunately we’re not quite at that stage just yet.

Rather, Mr Dalio said the world is in the 13th short-term debt cycle stage of the self-proclaimed “Big Cycle” event, after 12 similar events which unfolded between 1945 and today.

“This is when the tightening to fight inflation is causing a cracking in the financial markets and just before there is the economic contraction part of the cycle,” Mr Dalio said.

“Looking at the long-term debt cycle, debt asset and debt liability levels have become unsustainably high via unsound finances, and debts are projected to increase so much that they will have to be bought by central banks.”

Ultimately, Mr Dalio said the economic system is near a point where “restructurings” are needed to counteract the impact high interest rates have on borrower-debtors.

We should be ‘prepared for the worst’

Mr Dalio expressed there’s no doubt the world is changing and will continue to evolve “dramatically”, however, he also argued the outcome of such changes will depend on how such changes are managed.

“If the people who have their hands on the levers of power rise above their tendencies to focus on … their own benefits and instead focus on working together to … divide the pie well, (the five forces) can change in peaceful ways to create a better world order for most people,” he said.

 

While bipartisanism is the ideal outcome, the billionaire knows this probably won’t be the most realistic result.

“I agree that history has shown the pursuit of self-interest has proven to be a more powerful force than the pursuit of collective interests and that there is a good chance that movement to higher-level thinking and better outcomes is unlikely,” he said.

“So we also should be prepared for the worst. If we are prepared for the worst, we will be fine.”

 

 

 

[Vigo]

 I saw the same thing  predicted 25 years ago when I was in school.

1.Central Bank debt should be amended to include Sovereign Debt and Fiscal Deficit. Stable advanced countries like Japan are deep in debt and like a stack of playing cards, it is only a matter of time before a great reset happens. Countries like Canada have  horrific national deficits because of their spending on social programs that pander to the public but do not really help the country. When responsible political leaders in Australia or Canada  try to address the  deficit, they are shouted down and abused by  the general public and "progressives". Therefore, if an adjustment occurs and there is  pain, then the people will have brought it on themselves. At some point young people will rebel against their elders dumping of debt on them.

2.“big conflicts” within and between countries, prompted by “wealth and value” gaps causing political divide and countries challenging existing world powers and orders.  Nonsense. The wealth gap is internal and will cause the  upheaval.  Gap indices like Gini are misleading because the numbers of super wealthy skew the  gap difference, making the problem seem worse than it is in some western countries. The  wealth disparity is in the  the non"western" countries, where corruption is rampant. Africa, the Americas (excl USA & Canada), Asia  excl. NE Asia. The  wealthy countries have social assistance programs that effectively paper over the  wealth gap. Other countries do not and from time to time, the locals rebel. For the most part, no one cares enough to stop it.

3.natural catastrophe & Climate: yes.  Conflict will occur over scarce resources. If Pakistan and India go to war, or  South Asia  takes on China, it will be over water. No water and there will be war anywhere and everywhere even in western countries. One need only look at the violent altercations that occur in North America when there is water rationing.

4. New Technologies: Not a big worry. The Nigerian prices are still relying on email to run their scams. I do however expect China and North Korea to use the technology to  sabotage other countries and to attempt exploitation. However,  counter measures will be deployed.

 

The coming doom will be from national debts combined with another pandemic. We barely managed with Covid. The next one will upend the world.