Principles for Dealing with the Changing World Order Quotes

“Most importantly, I was seeing the confluence of huge debts and zero or near-zero interest rates that led to massive printing of money in the world’s three major reserve currencies; big political and social conflicts within countries, especially the US, due to the largest wealth, political, and values gaps in roughly a century; and the rising of a new world power (China) to challenge the existing world power (the US) and the existing world order.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“In 1931, Japan went broke—i.e., it was forced to draw down its gold reserves, abandon the gold standard, and float its currency, which depreciated it so greatly that Japan ran out of buying power. These terrible conditions and large wealth gaps led to fighting between the left and the right. By 1932, there was a massive upsurge in right-wing nationalism and militarism, in the hope that order and economic stability could be forcibly restored. Japan set out to get the natural resources (e.g., oil, iron, coal, and rubber) and human resources (i.e., slave labor) it needed by seizing them from other countries, invading Manchuria in 1931 and spreading out through China and Asia. As with Germany, it could be argued that Japan’s path of military aggression to get needed resources was more cost-effective than relying on classic trading and economic practices. In 1934, there was severe famine in parts of Japan, causing even more political turbulence and reinforcing the right-wing, militaristic, nationalistic, and expansionistic movement. In the years that followed, Japan’s top-down fascist command economy grew stronger, building a military-industrial complex to protect its existing bases in East Asia and northern China and support its excursions into other countries. As was also the case in Germany, while most Japanese companies remained privately held, their production was controlled by the government. What is fascism? Consider the following three big choices that a country has to make when selecting its approach to governance: 1) bottom-up (democratic) or top-down (autocratic) decision making, 2) capitalist or communist (with socialist in the middle) ownership of production, and 3) individualistic (which treats the well-being of the individual with paramount importance) or collectivist (which treats the well-being of the whole with paramount importance). Pick the one from each category that you believe is optimal for your nation’s values and ambitions and you have your preferred approach. Fascism is autocratic, capitalist, and collectivist. Fascists believe that top-down autocratic leadership, in which the government directs the production of privately held companies such that individual gratification is subordinated to national success, is the best way to make the country and its people wealthier and more powerful.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“Out of disorder and discontent come leaders who have strong personalities, are anti-elitist, and claim to fight for the common man. They are called populists. Populism is a political and social phenomenon that appeals to ordinary people who feel that their concerns are not being addressed by the elites. It typically develops when there are wealth and opportunity gaps, perceived cultural threats from those with different values both inside and outside the country, and “establishment elites” in positions of power who are not working effectively for most people. Populists come into power when these conditions create anger among ordinary people who want those with political power to be fighters for them. Populists can be of the right or of the left, are much more extreme than moderates, and tend to appeal to the emotions of ordinary people. They are typically confrontational rather than collaborative and exclusive rather than inclusive. This leads to a lot of fighting between populists of the left and populists of the right over irreconcilable differences. The extremity of the revolution that occurs under them varies. For example, in the 1930s, populism of the left took the form of communism and that of the right took the form of fascism while nonviolent revolutionary changes took place in the US and the UK. More recently, in the United States, the election of Donald Trump in 2016 was a move to populism of the right while the popularity of Bernie Sanders, Elizabeth Warren, and Alexandria Ocasio-Cortez reflects the popularity of populism of the left. There are increased political movements toward populism in a number of countries. It could be said that the election of Joe Biden reflects a desire for less extremism and more moderation, though time will tell. Watch populism and polarization as markers. The more that populism and polarization exist, the further along a nation is in Stage 5, and the closer it is to civil war and revolution. In Stage 5, moderates become the minority. In Stage 6, they cease to exist.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“From studying 50-plus civil wars and revolutions, it became clear that the single most reliable leading indicator of civil war or revolution is bankrupt government finances combined with big wealth gaps. That is because when the government lacks financial power, it can’t financially save those entities in the private sector that the government needs to save to keep the system running (as most governments, led by the United States, did at the end of 2008), it can’t buy what it needs, and it can’t pay people to do what it needs them to do. It is out of power. A classic marker of being in Stage 5 and a leading indicator of the loss of borrowing and spending power, which is one of the triggers for going into Stage 6, is that the government has large deficits that are creating more debt to be sold than buyers other than the government’s own central bank are willing to buy. That leading indicator is turned on when governments that can’t print money have to raise taxes and cut spending, or when those that can print money print a lot of it and buy a lot of government debt.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“Throughout history, rulers have run up debts that won’t come due until long after their own reigns are over, leaving it to their successors to pay the bill. Printing money and buying financial assets (mostly bonds) holds interest rates down, which stimulates borrowing and buying. Those investors holding bonds are encouraged to sell them. The low interest rates also encourage investors, businesses, and individuals to borrow and invest in higher-returning assets, getting what they want through monthly payments they can afford.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“History has shown that we shouldn’t rely on governments to protect us financially. On the contrary, we should expect most governments to abuse their privileged positions as the creators and users of money and credit for the same reasons that you might commit those abuses if you were in their shoes. That is because no one policy maker owns the whole cycle. Each comes in at one or another part of it and does what is in their interest to do given their circumstances at the time and what they believe is best (including breaking promises, even though the way they collectively handle the whole cycle is bad).”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“Since governments have the ability to both make and borrow money, why couldn’t the central bank lend money at an interest rate of about 0 percent to the central government to distribute as it likes to support the economy? Couldn’t it also lend to others at low rates and allow those debtors to never pay it back? Normally debtors have to pay back the original amount borrowed (principal) plus interest in installments over a period of time. But the central bank has the power to set the interest rate at 0 percent and keep rolling over the debt so that the debtor never has to pay it back. That would be the equivalent of giving the debtors the money, but it wouldn’t look that way because the debt would still be accounted for as an asset that the central bank owns, so the central bank could still say it is performing its normal lending functions. This is the exact thing that happened in the wake of the economic crisis caused by the COVID-19 pandemic. Many versions of this have happened many times in history. Who pays? It is bad for those outside the central bank who still hold the debts as assets—cash and bonds—who won’t get returns that would preserve their purchasing power. The biggest problem that we now collectively face is that for many people, companies, nonprofit organizations, and governments, their incomes are low in relation to their expenses, and their debts and other liabilities (such as those for pensions, healthcare, and insurance) are very large relative to the value of their assets.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“While having a perfect model that gives a nearly perfect picture of that predestined future would be great, I don't expect my model to come close to that. My goal is simply to have a crude yet evolving model that gives me a leg up relative to the competition and relative to the position I would be in if I didn't have the model.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“Essentially, if I have a bunch of bets that are attractive but unrelated, I can reduce my risks by up to 80 percent without reducing my upside at all.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“Know all the possibilities, think about the worst-case scenarios, and then find ways to eliminate the intolerable ones.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“be clear, because the reserve currency countries that are running big deficits have their deficits and debts denominated in their own currencies, their ability to print the money to service the debts transfers the risks from them as debtors to those who are holding the debt as creditors. So, the big risk is not that those big debtors will default; it is that creditors will hold assets that will be devalued—i.e., that the returns from holding debt assets will be less than the inflation rate.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“biggest risk in the long run is the “currency value of money” risk, which most people don’t pay enough attention to.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“Also, price matters. It’s possible to invest in great companies and lose money because they are so expensive and invest in bad companies and make money because they are so cheap.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“Think about all the things that we can’t imagine not having that were invented or discovered in just the last 150 years. Before we had them, nobody could have imagined them—e.g., the telephone (1876), the electric light bulb (1879), the internal combustion powered vehicle (1885), the radio (1895), movies (1895), the airplane (1903), television (1926), antibiotics (1928), the computer (1939), nuclear weapons (1945), nuclear power plants (1951), GPS (1973), digital cameras (1975), online shopping (1979), the internet (1983), online search (1990), online banking (1995), social media (1997), Wi-Fi (1998), the iPhone (2007), CRISPR gene editing (2012), etc., etc., etc.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“five determinants that have had the biggest impacts in the past and that I believe will have the biggest impacts on what happens in the years ahead: innovation, the debt/money/capital market cycle, the internal order and disorder cycle, the external order and disorder cycle, and acts of nature.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“One of the overarching principles I derived from my research and my 50-plus years of investing experience is in the markets and in life, to be successful one should bet on the upside that comes from a) evolution that leads to productivity improvements, but not so aggressively that b) cycles and bumps along the way knock you out of the game. In other words, betting on things being better—e.g., real earnings being greater—is pretty much a sure bet. But betting too much on that so that a bump along the way can ruin you is bad.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“This list gives a sense of the timing and pace of innovation in the UK: 1712: Steam engine invented. 1719: Silk factory established. 1733: Flying shuttle (basic weaving machine) invented. 1764: Spinning jenny (multi-spindle weaving machine) invented. 1765: Separate condenser (for steam engines) invented. 1769: Water frame (hydraulic power for weaving machines) invented; steam engine upgraded. 1785: Power loom invented; iron refining developed. 1801: Steam-powered locomotive on wheels invented. 1816: Steam-powered locomotive on rail patented. 1825: Railway construction initiated on a line connecting Manchester and Liverpool.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“its peak, with only 2.5 percent of the world’s population in the UK, the British empire produced over 20 percent of the world’s income and controlled over 20 percent of the world’s land mass and over 25 percent of the global population.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“Sólo un avance tecnológico inesperado, por ejemplo, en materia de computación cuántica, puede darle a una u otra potencia una ventaja suficiente para que se esfume la condición de una destrucción mutuamente asegurada.”
― Ray Dalio, Principios para enfrentarse al nuevo orden mundial: Por qué triunfan y fracasan los países

“history has shown that there are very large risks in holding interest-earning cash currency as a storehold of wealth, especially late in debt cycles.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“The next chart shows the real returns from holding gold between 1850 and the present. From 1850 to 1971, gold returned (through its appreciation) an amount that roughly equaled the amount of money lost to inflation on average, though there were big variations around that average both across countries (e.g., Germany seeing large gold outperformance, while countries with only limited devaluations, like the US, saw gold prices not keep up with inflation) and across time (e.g., the 1930s currency devaluations and the World War II-era devaluations of money that were part of the formation of the Bretton Woods monetary system in 1944). After the war, gold stayed steady in price across most countries, while money and credit expanded until 1971. Then, in 1971, there was a shift from a Type 2 monetary system (notes backed by gold) to a Type 3 fiat monetary system. That delinking of currencies from gold gave central banks the unconstrained ability to create money and credit. That led to high inflation and low real interest rates, which led to the big appreciation in the real gold price until 1980–81, when interest rates were raised significantly above the inflation rate, leading currencies to strengthen and gold to fall until 2000. That is when central banks pushed interest rates down relative to inflation rates and, when they couldn’t push rates any lower by normal means, printed money and bought financial assets, which supported gold prices.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“Since 2000, the value of money has fallen in relation to the value of gold due to money and credit creation and because interest rates have been low in relation to inflation rates. Because the monetary system has been free-floating, it hasn’t experienced the abrupt breaks it did in the past; the devaluation has been more gradual and continuous. Low, and in some cases negative, interest rates have not provided compensation for the increasing amount of money and credit and the resulting (albeit low) inflation.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“Debt is a promise to deliver money, so giving more money to those who need it lessens their debt burden. Where this newly created money and credit then flow determines what happens next. In cases in which debt relief facilitates the flow of this money and credit into productivity and profits for companies, real stock prices (i.e., the value of stocks after adjusting for inflation) rise. When the creation of money sufficiently hurts the actual and prospective returns of cash and debt assets, it drives flows out of those assets and into inflation-hedge assets like gold, commodities, inflation-indexed bonds, and other currencies (including digital). This leads to a self-reinforcing”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“要想创造更多的财富，就必须提高生产率。”
― Ray Dalio, 原则：应对变化中的世界秩序

“The Rise and Fall of the Great Powers, historian Paul Kennedy described it well:”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed or Fail

“The war killed about 8.5 million soldiers and 13 million civilians, leaving all of Europe exhausted, weakened, and indebted.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“By 1900, Germany’s GDP had surpassed Britain’s (excluding its empire), although the latter was still the leading trading nation in the world.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“The Age of Exploration and Colonialism (1400s–1700s)”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“the way, many of the European Renaissance innovations had already been in place in China for centuries because the Chinese discovered the key elements to produce it—e.g., the printing press, the scientific method, and the meritocratic placements of people in jobs—much earlier.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

“Knowledge and ideas spread rapidly because of the invention of the printing press in the mid-15th century.”
― Ray Dalio, Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail