Billionaire Investor Ray Dalio Warns of Deadly Economic Crisis (Here's How to Avoid It)

Ray Dalio, thank you very much. We spoke

last year in Exactly this place and and you outlined in part kind of the cycle that you see in civilizations uh vying for supremacy of the world. Um

and not everyone I think bought kind of bought into your views on this and you were derided as um you know a Jeremiah scaring people and everything. A year

later, you have a new summary of ideas that you've been formulating for a long time out this week and about 18 people have sent it to me and so I think we've reached a moment where people are ready to hear what you're saying. So, if you

wouldn't mind outlining in whatever detail you like the cycle that you see that countries go through and where our country, the US is in that cycle.

Gladly. Um, yeah. So there's um there's a cycle, there are orders, there are systems, right? So there's a monetary

systems, right? So there's a monetary order.

Um how does the economy work? You put in money creates credit. People with credit take do things with that. They borrow if they can uh earn enough money to pay back. Uh the system works well. They

back. Uh the system works well. They

create productivity. They create

opportunities. The capital markets and so on. That's the monetary system. And

so on. That's the monetary system. And

the way that works um in the cycle is that when there's no debt um such as in 1945 we start a new monetary order there's no debt there's a system and it

builds up over a period of time and it's a mechanics that when incomes when debt service payments rise relative to incomes it squeezes out other spending

the way it would do for you as an individual the way it would do for uh companies except governments can print money but that squeezes out spending and

that becomes a problem and then um you also have a supply demand problem. So

when you have a new monetary system which the United States um had the new monetary system and the dollar was the world's reserve currency then uh you can

sell a lot more uh of the debt. So

there's a supply and a demand, right?

And so when that builds up and everybody's one man's debts are another man's assets and they build up holding a lot of uh dollar denominated debt and

then they sell a lot more debt then there's a mechanics of that supply demand and then when you have politics and world politics geopolitics enter

into it that monetary system is more at risk for those reasons. We'll get into that. But the first force of these five

that. But the first force of these five forces is the mechanics of this uh process which is the monetary system.

The second is there's a domestic political order. There's all countries

political order. There's all countries have an order, a system and all these orders change and they evolve and of course that is connected to the uh

economic system and so when you get large wealth and values differences and there's a sense that the system isn't working for them and there's greater polarity. There's the emergence of

polarity. There's the emergence of populism like in the 30s, you know, the left and the right and there's um that populism gets to the point that there

are irreconcilable difference. And in

other words, the lack of willingness to compromise, the lack of willingness to accept loss, losing one's vote and and

so on. But a fight and win for me at all

so on. But a fight and win for me at all costs. Like in the 30s, four democracies

costs. Like in the 30s, four democracies chose to be autocracies because the polarity uh was so great and the uh willingness to go along with that

democracy system um ceased to exist. So

that dynamic has happened throughout history. Um and then um the the third is

history. Um and then um the the third is the geopolitical order. How countries

work relative to each other. What's the

system? And after World War II, we created a system, a multilateral system in which it was um in some ways naive, but it was very different than existed

before in that by being multilateral, having a United Nations, a World Trade Organization, a World Health Organization, a World Court, and all of those, the idea of being representative,

and they would make decisions in a certain rule-based system um was u the path. And uh of course the problem of

path. And uh of course the problem of that is that any system has to have its uh enforcement and if the system as a whole a multilateral system is not

consistent with the interests of those who are the most powerful the well you know power rules and so you have the dynamic of the breaking down of that

order. Right? So we're breaking down the

order. Right? So we're breaking down the monetary order in in a very classic way.

We're breaking down the political order in a very classical way. We're breaking

down the geopolitical order. So those

orders, we have to recognize throughout time all of those orders have changed.

There's never been a time that they haven't changed and haven't broken down.

And there are issues and they're getting back to how they were in some ways in the past. Number four is acts of nature.

the past. Number four is acts of nature.

Drought, floods, and pandemics have killed more people than wars. So you

can't ignore it as a big influence. And

number five is the inventions of new technologies particularly um you know fabulous new technologies u come about and they're important not only for

prosperity but they're important in wars you know whoever wins the tech war wins also the economic and the geopolitical war and so there's that dynamic and

there that dynamic is when there's rising powers challenging an existing powers there's no court to go to there's no way of resolving that there tests of

these powers and we're in a power type of dynamic. Now when you understand that

of dynamic. Now when you understand that that dynamic works through time and you get down to its individual s symptoms and in other words there's in in my book

u um principles for dealing with the changing world order which I wrote about five years ago. I took um and I broke that cycle into five parts of the six

parts of the cycle and the like a disease you can see the symptoms in those parts and you could see it progress and you could see the choices

that exist at those stages. So when

you're in a different stage, the leadership has a difference uh stage.

And all I wanted to do, whether it's in that book or in our conversation here today, is to try to um uh let people um

see that. And um and I'm I'm just a

see that. And um and I'm I'm just a practical uh investor, right? I've been

a for 60 years I've been a macro investor. So I have to bet on what the

investor. So I have to bet on what the future is going to be like. I place

financial bets on that. And now I'm at a stage in life that I want to pass that along. So um I hope that we could talk

along. So um I hope that we could talk about or look at that in a dispassionate way to say how does the machine work to produce that dynamic.

That's exactly right. And you're not casting judgments here. You're just

acknowledging what has happened and and what therefore is likely to happen. Can

I just go back? I don't want to let this pass. In the second factor that you

pass. In the second factor that you described in this, the political factor, you pointed back to the very fraught decade of the 1930s. And you said you

had four democracies become or revert to autocracies because of the partisanship that became unworkable.

They couldn't reconcile and so they became autocratic. Is that a consistent

became autocratic. Is that a consistent principle? Do you think?

principle? Do you think?

Yeah, that's you can look at it through Chinese dynasties. You could look at it

Chinese dynasties. You could look at it through Rome like who is in control right that they you know Caesar and the Senate and being st in the Senate. um uh

Plato wrote about this. I think it was like um 350 BC. He wrote about the cycle in the republic. In other words, democracies and the challenge of

democracies where you vote and so on.

But then there's the the wealth gaps and the rich gaps and then who has the money and then the not willing to vote and then there's the power that changes.

Yes. So partisanship becomes gridlock becomes irreconcilable just mess and then that evolves by necessity into autocracy.

Right? When the when I'm no longer willing to accept that the system the rule of the system because everybody thinks it's rigged. Okay. Is this the

Supreme Court is it rigged because that partisan has more appointees and it won't be fair. And so the I remember when the Supreme Court was kind of the Supreme Court and we lived in a time

where we said the system is fair. The

legal system when you go in and you're convicted, okay, is the legal system fair and so on and then you believe in that system with its imperfections and

so on. When that ceases to be the case,

so on. When that ceases to be the case, when the when the causes that people are behind are more important to them than

the system, the system is in jeopardy, right? Yes,

right? Yes, of course, by definition. And you know, all this is relevant to where we are now. So tribalism, whether it's

now. So tribalism, whether it's political or ethnic, but when people square off into tribes and they have no common ground and they have no hope of reconciling or compromising, then you're getting a new system. And and and you

see it it it's so interesting. It's like

watching a movie over and over and over again because then you see how it is they make stereotypes of the other, right?

The stereotype of this that personality, the stereotype of that type, whether it's an ethnic or economic or whatever it is. Oh, they're one of those and I'm

it is. Oh, they're one of those and I'm one of these. And now it becomes the stereotypes that are fighting, right?

which are non-human, right? So, it's

easier to there's there's no empathy. There's of

course there's the it's not a human being. It's a stereotype.

being. It's a stereotype.

It's the fight, right?

And so, then you have to pick a side. I

mean, one of three things. You have to pick a side and fight for it or you keep your head down and hope you don't get shot or flee

throughout this throughout history.

Yeah. And that's what's be happening.

hate to brag, but we're pretty confident this show is the most vehemently pro- dog podcast you're ever going to see. We

can take or leave some people, but dogs are non-negotiable. They are the best.

are non-negotiable. They are the best.

They really are our best friends. And

so, for that reason, we're thrilled to have a new partner called Dutch Pet.

It's the fastest growing pet teleaalth service. Dutch.com is on a mission to

service. Dutch.com is on a mission to create what you need, what you actually need, affordable quality veterinary care anytime, no matter where you are. They

will get your dog or cat what you need immediately.

It's offering an exclusive discount.

Dutch is for our listeners. You get 50 bucks off your vet care per year. Visit

dutch.com/tucker

to learn more. Use the code Tucker for $50 off. That is an unlimited vet visit.

$50 off. That is an unlimited vet visit.

$82 a year. 82 bucks a year. We actually

use this. Dutch has vets who can handle any pet under any circumstance in a 10-minute call. It's pretty amazing,

10-minute call. It's pretty amazing, actually. You never have to leave your

actually. You never have to leave your house. You don't have to throw the dog

house. You don't have to throw the dog in the truck. No wasted time waiting for appointments. No wasted money on clinics

appointments. No wasted money on clinics or visit fees. Unlimited visits and follow-ups for no extra cost. Plus, free

shipping on all products for up to five pets. It sounds amazing like couldn't be

pets. It sounds amazing like couldn't be real, but it actually is real. Visit

dutch.com/tucker

to learn more. Use the code Tucker for 50 bucks off your veterinary care per year. Your dogs, your cats, and your

year. Your dogs, your cats, and your wallet will thank you.

So, you join effectively the Civil War.

You try and find a safe place domestically or you just split.

Yeah. You, In other words, you're quiet because you don't want to get into the fight. You're going to get injured,

fight. You're going to get injured, right? A lot of people are scared now,

right? A lot of people are scared now, right? People you'd imagine never would

right? People you'd imagine never would be scared, right? Yes.

right? Yes.

Right. They they don't want to speak up or something. So you keep your head

or something. So you keep your head down. You either get in the fight and

down. You either get in the fight and fight. Pick a side and fight for it.

fight. Pick a side and fight for it.

Throughout history, this is true. Pick a

side and fight for it. Or keep your head down or in some cases flee. You know,

people leave. They go from, you know, immigration. Think about how all the

immigration. Think about how all the immigration largely has taken place.

There's some hell taking place in there and then they move to someplace else where there's not. Here we are in uh the UAE. Okay. a lot of people are coming to

UAE. Okay. a lot of people are coming to the UAE because they're fleeing in a sense. Um so there's that dynamic and so

sense. Um so there's that dynamic and so you can see many many many symptoms right there are things um uh you know

when it gets violent and when you get um killing too many people then you start to cross the lines you know like maybe in Iran. Okay. do we

cross the lines and and then where you you you know there are these symptoms that and there's financial you know how do you pay um so and I'm rambling

but just no you're not rambly I but just back to the political one last question is is it ever resolved does the system ever stay intact when you get to a point where people just don't want to

compromise at all or even live in the same place have you seen any example of where people sort of say wait a second let's let's enter into power sharing and pull back before this gets violent or we

get a king.

Um in some places sometimes in dynasties and so on.

Um they're but they're not often there.

What happens is there's a reversal or a fixing by somebody who can not um who's

strong enough to deal with the issues.

For example, we have a debt issue. We

have all of these other issues and can bring people together. Um but there needs to be almost um Plato would say the benevolent despot.

Yes. they and that's in his cycle. In

other words, there's somebody who can um stop the fighting and be smart and impose the disciplines that are necessary. For example, there's a

necessary. For example, there's a financial discipline. Do how do we deal

financial discipline. Do how do we deal with um the debt and the um all the supply demand and and so on? Do

can we raise taxes? Can we u cut spending? What are we going to do to

spending? What are we going to do to bring about a budget balance or not a budget balance let's say a deficit of 3% of GDP which would sustain the set of

circumstances what is that financial discipline what is that way of working together so we do not do each other harm because we are at a point let's say as

we come to the next um u midterm elections you know um and there's a u significant probability that the um

Republicans would lose the House and um talk of even could be the Senate. Okay.

Now, when you go after that and you imagine what the conflict can be like, how will that conflict work? Will it be

rule of law or will it be a win at all cost? and as that win at all cost and

cost? and as that win at all cost and what that means um it is there rules is there playing by the rules you know that

dynamic so this thing is repeated it's not easy to get to that point because you have to deal with you know um how do we stop fighting with each other and how

do we do the right things to get strong that's and that's a that's a great challenge in history so where are we now given the five factors that you outlined where is the

United States or even really the west will include Europe in this very familiar cycle of rise and fall.

Um uh in my book I um show 18 measures of health having to do with education, military

um um reserve currency, a number of measures that show strength. Okay, what

is the level of strength? And uh the United States is the strongest power which has been in relative decline and

experiencing these conflicts. Um and

that's measured if if you go in the book uh how uh principles for dealing with the changing world order you'll see a number of charts. So I don't want to just pronounce it that way. I just want

to say that um like if you were to take education and you take um scores, piece of scores and so on in statistics you will see that there is a r there are

rising powers there declining powers there are large wealth and values uh differences and we are in what is what I

call stage five which means uh we are sort of at the brink but not over the brink in other words we're not um

there's the capacity um to um uh it's before um a period of great disorder when there can be a monetary breaking

down uh of the system you know what is money we should talk at some point what is money and can I can money be an effective storehold of wealth and what

happens if it's not and so we are at what I would call stage five in a six stage cycle six The sixth stage is when

there's a breaking down of these orders.

We're not there yet, but we are um close to there and headed in that type of direction. What does a breakdown look

direction. What does a breakdown look like? What does stage six look like?

like? What does stage six look like?

Well um from the monetary point of view um it is that um there the the demand for

the reserve currency um is not sufficient to meet the supply.

So what that means is you uh see a supply demand problem. Uh you produce a lot of supply and the demand's inadequate and all things being equal

there will be a rising long rate while the central bank is trying to hold that from down by easing the short rate and

and low shortening the maturity of the debt that it sells. Okay, that dynamic and that then the currency

um um the these debts and the currency falls relative to the non fiat currencies. In other words, like gold.

currencies. In other words, like gold.

In other words, you you you are seeing a movement by central banks as and countries to um hold gold

um as an alternative reserve currency partially because of that supply demand situation and partially because they u

worry that um there may be a payments problem and the payments problem like um it happened in Japan Prior to World War

II, you had an economic problem and the United States um um sanctioned essentially um didn't pay the the the

Japanese uh their debt the money in terms of that like a debtor creditor problem and they didn't make those payments much like Russia you know you u

they they basically took control because they have the ability to take control of the treasuries and other things and so

there is becomes more of a uh reluctance to hold that money as that and a movement more into um the non-fiat

currency which is is gold. That's

so in other words other countries perceive a risk in holding dollars because well for lots of reasons but one of them is like if the United States government at the time doesn't like you

they can grab your dollars.

That's right.

So it's not worth it.

Right. And it it's a it's a risk that both the debtor and the creditor have to each other. So think about a China.

each other. So think about a China.

And if you were thinking China, how do you feel about holding Treasury bonds?

Okay. So you may not feel secure about holding Treasury bonds both for for two reasons. Because you could be sanctioned

reasons. Because you could be sanctioned or you also because there's a supply demand problem. So you start to see the

demand problem. So you start to see the movement in that direction. And then of course it's also uh also in that situation governments want to control

their supply demand. So they might establish foreign exchange controls.

They might do certain things like that.

Uh but they also feel vulnerable. the

United States c can feel vulnerable if they can't sell enough of those bonds to others in that if the demand isn't because then interest rates would have

to rise because the supply demand too much supply relative to demand to make it more appealing to buyers.

Yes. But and also to cut the demand for credit. In other words, if the price

credit. In other words, if the price rise then people will borrow less and so on. And that then has the effect of

on. And that then has the effect of mechanically slowing down the economy that produces that result which so then what happens is then the central bank

comes in and it prints money and it buys the debt which depreciates the currency.

That's the mechanics that's of the debt part of it that is related to the political and the geopolitical part of it that I'm answering.

May I ask you something? So, if foreign countries don't want to buy your debt and your central bank decides we're going to print more money and buy our own debt with it, which is what what

we're doing, wouldn't the people doing that stop and say, "Wait a second. This

sounds like an electric windmill. Like,

what are we doing here? This sounds

crazy."

They're stuck.

They're stuck. They're st they're stuck because um they have a deficit and the deficit will be there unless

they raise taxes and cut spending or something and that's bad for the economy and it's politically bad. Yes.

Okay. Um or or you print the money and you make up the difference. And so since the breakdown of the monetary system in 1971, that was when there were too many

claims on gold and we had a system attached to gold. And because they were in August 15th, 1971, I remember well I was clerking on the floor of the New York Stock Exchange

after my after college before I went to graduate school. Richard Nixon gets on

graduate school. Richard Nixon gets on August 15th, Sunday night. He gets on the television and he says, um, we're

not going to, uh, allow the conversion of that paper money into gold and we're not going to, you won't get your gold.

And I walked on the floor of the stock exchange the next morning. I thought,

this is a big crisis. And, uh, what they did is they essentially printed it. And

then we had the stagflation of the 70s.

But I was very surprised. And I found out um I didn't never threw anything like that before. I studied history. I

found out they did the exact same thing in March. Roosevelt did the exact same

in March. Roosevelt did the exact same thing in March of 1933 right after he got inaugurated.

Right. Okay. For the same reasons. Okay.

Because your choice is to have a lot of defaults and a debt problem or to do that. All right. That's how it works.

that. All right. That's how it works.

That's how the machine works. So um and at the end of the day since 1971 when we went off the uh gold standard and we

went to a fiat monetary system we have always done that and you know and you know the Fed put and um you know that's that that that's the way it is. So, and

it's kind of worked for 55 years, but it's showing signs of Well, what it does is um it's like

uh using what uh was the hair of the dog that bit you.

Oh, it's the hangover cure.

I'm familiar with that.

Okay. Me, too.

For sure. Um it it's um what you do is you give more money in credit and what happens is to get out of it and because

then you make it easier to pay the debt you make like in um 2008 or 2020 you give the money okay and you give the

credit and you and you fund it and you make that but that makes the debts go up again okay until then you

reach the point where the debt is squeezing on the expenditures and you have the supply demand. So that's why you have these big debt cycles. You

know, when we started this company, we promised that we would only partner with other companies that share our values.

We didn't want to advertise products made by people who hate us or for that matter you. So with that in mind, it is

matter you. So with that in mind, it is a pleasure to announce that we're working with Charity Mobile. It is a pro-life phone company. Charity Mobile

holds a view on abortion that almost every single major US company disagrees with. They think it's completely wrong.

with. They think it's completely wrong.

It is sad. And celebrating it is one of the darkest things this country's ever done. We agree completely. So, when you

done. We agree completely. So, when you switch your cell phone service to this American company, they'll donate a percentage of your monthly price plan to a pro-life, pro-f family charity that

you choose. There's no better way to

you choose. There's no better way to prove what their real values are than doing that. No one would do that unless

doing that. No one would do that unless they meant it. All their plans are under 50 bucks and you can keep your existing number and your existing phone if it's compatible. Charity Mobile is a pro-life

compatible. Charity Mobile is a pro-life company serving pro-life customers and supporting pro-life causes and has done it for more than 30 years. Visit

charitymobile.com/tucker.

Use promo code Tucker to get a free phone with free activation, free shipping, and a free gift with every new line of service. So I think every even people who are not really interested in

monetary policy or macroeconomics feel like there is a point at which this doesn't work anymore. It just breaks.

It is it's happened all in all.

So what does that look like specifically the debt crisis people keep talking well I I um uh because of that my uh last book my most recent book put out

about a little less than a year ago um is called how countries go broke. Yes.

The big cycle. And what I wanted to do and is to just show 35 cases of it. That

is just the mechanics to show how it works. Okay. But it is that dynamic of

works. Okay. But it is that dynamic of the squeezing on the spending and the supply demand and then you start to see it where as I was saying the long rate

um goes up while the short rate comes down because the central bank's pushing the short rate down and then they shorten the maturities of the debt and then the central bank buys that and then

the central bank now it's owns all these treasuries and then the central bank starts losing money cuz they own the treasury. ries and then they and they're

treasury. ries and then they and they're going up. So they have to produce the

going up. So they have to produce the money and credit to to keep that uh rate down and they lose more and more money

and that dynamic then doesn't stop the the change in the capital flows. That's

why you and then traditionally in all of these cases you see a move to the hard money, the move to gold. Okay, as we're seeing, you see that dynamic in terms of

that move to gold and um and then it starts to run its course. So, it's very much like think about what happened from 71 through the 70s produces more

stagflation and then at some point the inflation problem or the devaluation of money problem becomes such that the central bank then tightens money and and

so on. And then the vuler years the

so on. And then the vuler years the vulkar years 1979 80 8182 right um so the pendulum swings think about it this way um in order to have a balance a

successful economy uh or successful capital market since one man's debts or another man's assets

you have to keep interest rates um not so high that they crush the debtor

right without having them so low that they um are bad for the creditor.

Right?

So you see these cycles when we had uh zero interest rates and negative real interest rates. What you saw was massive

interest rates. What you saw was massive creation of credit and and money and borrowing and so on. And then you had that that cycle. So uh that's what the

cycle looks like if you have losses and then you also have under those circumstances classically um the uh weakening of the central

bank's control the you or I should say the strengthening of the central bank the central government's control over the central bank in other words when

these things happen then there is um they can't be at odds okay and so there is greater under control by the central government of this and um

are you writing the news?

No, I've just seen this movie before.

It's like this exactly what's happening.

I I know but that's what I'm saying because it must happen in in in in that in the nature of that dynamic when you have um imagine the fight between the

central bank and the central government in the middle of a crisis and so on. So

there there is this control because there's a monetary thing because there has to be right what happens if if you're the president of the United States or you are the leader in that country and you

are in this kind of a monetary crisis it's like anything uh any fight you don't want the internal fight you want to get control and there's a fight for control so we're living in a world today

in which there are fights for control right who has the power and the fights for control so again So at what point do we know the

system is just broken and this this experiment which began post war 1945 is like reached its end and we need something um pretty much almost only in

retrospect.

What what what what happens if you if if you're really close up and you've you say when did they know that

there was a breakdown or when did they know that there was uh let's say the French Revolution there's a day that they say storm the best deal uh right and there's that day and they

said it they didn't know that no they didn't just like some prison got raided or something they didn't Yeah. I

know that's right.

Okay. So, when it it's not like they announce it or it becomes clearcut, right?

You slip into those things. There's

never that clear moment.

But what happens next? Like we heard Chairman Shei 3 days ago say, "Hey, by the way, China should hold the world's reserve currency." And that seems very

reserve currency." And that seems very far away now, I guess. But maybe.

Uh, so you're asking me what I think about China's having. Well, the only reason I'm putting it I have no idea if that's possible.

I I can respond. Tell me. Okay. I don't

think China is going to have a There are two purposes of a currency.

Yes.

Medium of exchange and storehold of wealth.

Right.

Okay. Medium of exchange. It's logical

that uh China is going to uh have much more of a medium of exchange type of reserve currency because it is right now the world's largest trading country,

right?

And so people um um central banks want to hold some reserves in the things that they're trading in course and so on. Um

and so they the Chinese have intentionally um in order to minimize that conflict have not pushed that thing and now they're going to operate in in

moving in that way. As far as storehold of wealth though, who's going to trust the Chinese uh with your wealth and and capital controls and so on? I think that

all fiat currencies have a problem.

Okay. So um uh there they they have the history of of foreign exchange controls.

They have a would you trust it's anti-wealth protection. You know this is

anti-wealth protection. You know this is not um that's not their great track record of having I'm going to protect your wealth. You even private property

your wealth. You even private property and how it works in China is a new concept relatively and it's something that they're you know wrestling about.

They don't you can't own land you know you can't own property. So the storehold of wealth element is going to be very tough for them to sell. So the world

does not have what you want as a currency as a reserve currency other than gold. I mean it's just a default

than gold. I mean it's just a default right because it's a debt and and gold is the you know what like they say it's the one asset you can have that's not somebody else's liability meaning you have to get money from somebody else to

do so I asked you last year off camera I'll never forget it. I've always been a gold buyer, but then I don't know anything. I

just it just instinctively seemed like it made sense, but I've always been a little bit embarrassed about it. And so

I asked you, is it crazy to, you know, take some money and buy some gold? And

you said it's not crazy at all. And I

remember feeling vindicated, but also wondering like, why don't more people say that? It almost feels like there was

say that? It almost feels like there was a conspiracy in the financial press. all

around not only in not only in um related to gold but all of the things I I think people get used to

what's credible to them is what they experience and the norm that they have at that time and so much see that's happening you I

hear people say I'm shocked by but the only reason they're shocked is because they become used to that right?

If you if you were traveling through time and you went and before 1971 and so on and you saw history and you saw the

univers universality of um money and gold and how the whole system worked repeatedly over time, you would understand there's that dynamic

that's taking place. But yes, people think they misunderstand. They think

it's a a metal to speculate on, right?

They don't realize that actually it's a money.

Okay. Central banks second largest money.

Okay. So when you're it's almost like when you look at the world through that money, you can see what things cost through that lens. Exactly. people are

looking at it instead like through a dollar lens and they see um gold go up.

Okay. But that's

or you could look you could look at the world through a gold lens and see money go down. Okay. So all I'm saying is

go down. Okay. So all I'm saying is because of their experience and what it is, it's implausible. It's like, you know, the the the tooth fairy or Santa

Claus, you know, you it you you believe in these things and so on and then you you realize through the cycle and that's why surprises take place. That's why it

seems implausible.

Um, but if you read history, it's almost, you know, it's it's logical.

Most security systems operate like old-fashioned cable internet. They're

installed in one place. are tied to one address and if you move or your job moves, you got to start over. But that's

not how other people do it. Construction

sites, ranches, large properties, they have a better way. They need cameras that are portable, not tied down to one location. Defend security cameras are

location. Defend security cameras are the perfect solution for ordinary people to do this. With Defend, you own the camera. You're not renting it like a

camera. You're not renting it like a modem from a cable company, and you're not locked to a building or a Wi-Fi network. The job moves. Well, then the

network. The job moves. Well, then the camera moves with it. That's a better way to do things. No power lines or infrastructure of any kind is required.

These run on cellular, like your phone.

They're perfect for watching job site equipment overnight, livestock at your ranch, long driveways, out buildings on your property. You mount it where you

your property. You mount it where you need it. You open the Defend app and you

need it. You open the Defend app and you are set. You got clear footage, night

are set. You got clear footage, night vision alerts straight to your phone.

Defend never sells any data to anyone.

Not tech companies, not the government, not China. Plans start at about five

not China. Plans start at about five bucks a month. There's no contract. You

can cancel at any time. Visit

defendellcam.com today. defend cellcam.com. So, um, you

today. defend cellcam.com. So, um, you don't seem surprised at all by anything that's happened or is happening right now. Um, what are a few other things you

now. Um, what are a few other things you would not be surprised to see in the near future? For example, let's just

near future? For example, let's just start with gold. What would you not be surprised to see the spot price of gold per ounce in like 5 years?

Uh um I don't want to um you know that's one of those headline presuming I let me say it this way.

Yes.

I think people pay too much attention to the spot price of whe is the spot going to go up or down or whatever. And what

they don't do is think if I didn't have any view on gold, what amount should I have in my portfolio? In other words, if you did a portfolio construction

exercise right?

And you said, um, what is an effective diversified portfolio and what assets should I have and what amounts in that?

Because gold is a a very effective diversifier and also a protector of this. During very bad times, gold does

this. During very bad times, gold does very well. When the rest of your

very well. When the rest of your portfolio does poorly because let's say the 70s being a good example or the 30s being a good example, during those times

it's a diversifier.

Okay? So the optimal amount to have for um an individual or a central bank might be different but a but an individual would be depending on what's in their

portfolio between five and 15% of a portfolio. And so what I would say is if

portfolio. And so what I would say is if you approach that question that way and you think what should I have you should have what I what we talked about before

when my a year ago I guess and so on you should have that particular amount somewhere in that neighborhood depending on what your portfolio is like and uh

because it's an effect of diversifier and it is a money okay when the traditional money does badly this money does well when the traditional money

which gives you an interest rate then it's the reverse so you so that's the thing that I would try to convey to people you know okay do you have some of

that what's the amount that's your comfort level you know but have some so um what if you were running the United

States or a country like the United States in its current position what would you need to do to protect your country in the midst of these changes, some of which are inevitable, some of

which maybe aren't. Like what are the steps specifically that you would take to help your country?

Um, I would be dealing with achieve uh something like a 3%

budget deficit, not more than a 3% budget deficit.

Um, I would try to get financial I I try to minimize or eliminate but minimize the risks of that dynamic I was talking about.

So you would get the budget deficit to 3%.

Yes. Um, and I I I would say um to every I've said to legislators, I go down to Washington and you know, leaders of both

parties um and I said um um it's like um being on a ship and um everybody on the

ship is headed to a rock and that and everybody knows that if you have a deficit of six or 7% of GDP, you're

going to have a supply demand problem. I

and I have the conversations and by and large this is the agreement. And I don't care whether you turn left or you turn right in terms of that, but do not hit

the rock. And what if I would do is I

the rock. And what if I would do is I would take a 3% pledge. In other words, say I will get it down there. And if I can't agree on how, I would do it proportionately with three things. I

would u proportionately with taxes spending in other words um um if you raised taxes by 4% if you cut spending

by 4% and you lowered and which would lower interest rates because it would improve the supply demand and it would also convey the message that it's being dealt with. you would also lower the

dealt with. you would also lower the interest rate on the debt and those two things would begin to get it to approach

about a 3% budget deficit and so on. Um

um but doing that uh would require uh would be politically impossible. So I I have these conversations and the answer is um you know like Rey, you don't

understand the world of politics. If I'm

um uh uh there I have to give at least one of two pledges.

Um the pledge is and probably both. Um

the pledges is I won't raise your taxes and I won't cut your benefits.

Okay? You don't raise the taxes, you know. So the there's a big move here

know. So the there's a big move here primarily to uh try to grow your way out of it. In other words, again, you know,

of it. In other words, again, you know, stimulate fiscal and monetary stimulation and hope that that produces perhaps with the new technologies and so

on. That's the idea. Enough income

on. That's the idea. Enough income

growth and so on so that uh this moves toward that 3%. Um which is uh in my opinion a um not likely occurrence. Why

is it not it's not likely that technology will turn out to be so uh beneficial and lucrative that it I think that the techn that the

artificial and technology miracle is a is a is a great miracle. Okay. I mean

very uh very beneficial. Um and I've gone through studied great miracles. the

invention of electricity. I mean, wow.

Well, imagine where we'd be without that. But if you anyway, you I could

that. But if you anyway, you I could describe what the 20s would like and 2000s and like and so on. Um the ability to convert that to enough of a

productivity miracle um is is not I think probable in the also the time frame that we're dealing

with. So this is an issue. The debt is

with. So this is an issue. The debt is and that dynamic uh remains an issue.

And then of course what there is is the dynamic of of how that prosperity and productivity is shared. In other words, there's the um it's it creates a uh

great wealth gap.

You know, you're seeing um this we'll talk about wealth. Um I'm going to come back and talk about wealth, but um you're seeing great um increases in

wealth on some populations on you know wow trillionaire okay and that kind of thing and then there's 60% of Americans have below a sixth grade reading level

so that you take that sixth grade and okay now how are you going you still have to deal with the nature of that dynamic of how it comes so the question is what is the amount of productivity

converted into income. How does the government get that income to deal with its debt so the holders of the debt get a effective real return and don't have the problems? How does that happen you

the problems? How does that happen you know in a politically acceptable way?

There are lots of things that make that um you know uh very very difficult. I

want to say something about wealth and wealth taxes which is I think um worth understanding.

Um there's a big difference between wealth and money and I want to just highlight it. Okay. Um

highlight it. Okay. Um

uh wealth is it it is is very easy to create because it's almost

um accounting. Let me what I mean by

um accounting. Let me what I mean by that is um I could uh put out a um raise $50 million or individuals can raise $50

million at a billion dollar valuation and they will call that that that's that person's a billionaire and that there's a billion dollars more wealth.

Okay. It's not literally that you have to have those transactions. And wealth

is not worth very much unless you convert it to money. In other words, you have all of that wealth, but you can't spend wealth.

You can't pay for dinner with it.

Right.

Right.

You have to sell it, sell some of it in order to get money, in order to pay it.

And so when wealth rises a lot relative to money, you have a risky situation.

Okay? Now the other thing about why is that a risky situation?

Because when there's a movement, the the bubbles pop, right?

When there's a movement that I need to get money. Now that quite often is I

get money. Now that quite often is I need to get money because it's a debt service payment. you know in other words

service payment. you know in other words let's say what quite often people borrow to buy wealth okay so there's a lot of borrowing now

um not only in in buying stock but companies themselves buying to create wealth and when you need to get the money like in the in all the stock

market bubbles there was a lot of borrowing to buy the wealth when the the need for money came along they had to sell some of that wealth

to get the money and then that produces a dynamic. Well, you don't tax wealth.

a dynamic. Well, you don't tax wealth.

Okay. So, because you don't tax wealth and then there is this political issue of of of wealth. Are you going to tax wealth? What is going to happen in

wealth? What is going to happen in California? What is going to happen in

California? What is going to happen in elsewhere in terms of taxing wealth? If

you tax wealth, then imagine what happens.

You have to sell wealth to pay taxes.

Okay. So there's a dynamic understanding and that lowers the value of it, right?

And that's what pops bubbles, right?

So this the wealth issue is um is a political issue. The wealth

gap issue is a political issue and it's a market issue. Um and it's important issue to understand. Is it inevitable

that you would see given the way our wealth is allocated across 350 million people that that you would get the rise of wealth taxes? Isn't could this have been predicted?

It it it seems like it it's such an obvious headline um seemingly

um logical thing to do, right? In other

words, everybody would say, "Wait a second. All these people are having all

second. All these people are having all the wealth and they're not paying any taxes on their wealth while this is going on. Okay, we need to go where the

going on. Okay, we need to go where the money is." Right.

money is." Right.

Right.

So we so it seems like that without then you know the full understanding of of those things and how to do it in a you know managed way. But so it's anyway

it's upon us certainly and what will happen I mean that's I think a referendum in California.

So well I think what's what's happening is and we're seeing it around the world um

in many different ways people are um people in California moving and and it's not the it happening it's the fear of it happening.

Right. Right.

So you're you know you're seeing that dynamic. I'm just a you know like I'm a

dynamic. I'm just a you know like I'm a mechanic of I get it. You're not judging other way. You're just describing what's

way. You're just describing what's happening but because that is happening and people are moving and not just within the country but outside the country. Do you have any guesses as to

country. Do you have any guesses as to or observations about where people are moving? So clearly in the country it's

moving? So clearly in the country it's Texas, Florida but Wyoming but in the world where are people moving? um there

generally speaking they're moving to where there's um civility and opportunity and there's not much fighting there, you know, they want to

be in places that um have a um uh they go to places that have lower taxation but also vibrancy. you know,

they go Texas and Florida as you say and um here in the Middle East or in um you know, places that um are also vibrant

and things are happening. And so you could see the patterns of those kinds of movements. And then the the problems

movements. And then the the problems that that creates is a hollowing out in those places, the other places because when they leave the tax base um

is um you know um roughly speaking, you know, the top 10% um pays about 80% of 76% or something of

the taxes. And so when you lose let's

the taxes. And so when you lose let's say half of them you lose a big amount of tax revenue and um then that becomes a you know a dynamic. So

could you see given all the factors you've described um like democracy representative democracy continuing in a in a country like ours?

I um I you know I just I hope so.

Oh, me too. I'm not just and um and I just don't know. I think

um I I think we I I think deep in us we want most Americans really really want that and so on. Um and then at the same

time there are unreconc irreconcilable differences and um I think it was um a recent poll something like 25% of the um

population said that they would fight violently for their side. I mean some significant percentage. Yes. And um so

significant percentage. Yes. And um so and it only takes a relatively small amount. So I I don't think we can take

amount. So I I don't think we can take it for granted. In other words, there's a lot we can't take for granted. And I

think we want to cherish those things.

We want to put those things above everything else, but you can't take it for granted.

When you hear people speaking lightly of civil war, what's your which they are, what's your reaction?

Um I I have a principle. If if you worry, you don't have to worry. And if

you don't worry, you need to worry because if you worry, pro worry.

If you worry, then you're more inclined to prevent the thing that you're worried about.

So I think that the greater worry about some of these things is a good thing.

You know, in other words, okay, now we we won't take it for granted. We worry about these things. So what are we going to do

these things. So what are we going to do about it? I see people not worrying and

about it? I see people not worrying and sort of blindly blindly throwing it out like almost like the way they talk about some foreign policy operations was go in and you know kill these guys put these guys in it'll be fine. That same

attitude I hear a lot about the United States like well we're going to have to fight it out at some point. You've taken

a close look at civil wars throughout history. What are they like?

history. What are they like?

Well, civil wars and um and um international wars are so horrendous that every the the

most bold people who were, you know, the trumpets blaring and and going into that um and so on, everyone came out of it

with deep regret. I mean, we can see while we see it on the um news and you can see that, but just imagine uh what

how how horrendous um the wars are. Um so um I I think it's a cycle, you know. Um your confidence

and your boldness um is increased by the distance that you have to your last wars, you know, right?

Um what is the difference? You you were saying earlier there's a difference between uh

money and wealth and wealth you said is um not necessarily easily convertible to money.

In a society like ours, where is the money? Who has the money? Is it the same

money? Who has the money? Is it the same people who have the wealth?

Um no, no, no, no, no. Many people have a lot of wealth and don't have much money. They have illlquid assets. Yes.

money. They have illlquid assets. Yes.

Okay. Uh me money is the is that what you can transact currency short-term deposits that you can assuredly and quickly turn into money. You know,

that's what uh money is.

Yes.

And um um and the central bank really controls the money. Um and then you could look at who has that increasingly

like you could look at um M0M1 and you could see money market accounts and you could see um those very liquid you know

money safe money treasury bills those kinds of things and um so that um you know it's but ultimately it's the central bank because they control the

supply demand. So I mean if in a period

supply demand. So I mean if in a period of volatility it would seem like the central bank would clamp down on the money supply circulating among people.

Well, it faces the tradeoff, right? The

tradeoff is like in um let's say co right uh

or in 1971 when there's too many claims and so on. Um

there the trade-off is that um people need money and they may need money to pay debt and they may need money for

whatever reasons and so they are tempted therefore to create money and so you see the coordination between fiscal policy

and monetary policy. So you saw two big waves of large budget deficits and large

supports of central banks um uh uh first um under Trump when the uh co began and then under Biden when they got in and

because he also wanted more universal basic income and both of those cases the government sent out lots of checks and that's also a popular thing to do.

discipline, financial discipline is not what the population typically likes.

Send out those checks, but where does the money come from and then the central bank cooperates by buying the government bonds and um produce, you know, print

money and then buying those bonds. So,

it's um when they're in the middle, you know, austerity is not an easy thing to have right?

What happens if the government is digital currency? Like what does that

digital currency? Like what does that mean?

Well, digital currency is right. You're

talking about um central bank digital currencies. Yeah. Okay. And that um um

currencies. Yeah. Okay. And that um um there's a great deal of appeal because of uh the fact that it's easy and so on,

but it's um and I think uh it'll it'll be um it'll be done. A lot happens.

You think it will be done? Um yeah I think it's and but what happens in the digital currency um of course it's easy to transact and

so on um almost the and it'll be like money market funds I think um the question will be first uh will they be able to offer interest

so there's a debate now as to whether they will be interest if they're not able to offer interest and they there will be a debate probably they won't be,

but then they're not an effective vehicle to hold it in because you'll have the depreciation. You'd rather hold it in a money market fund or a bond. But

that's debate. There will be no privacy and it's a very effective controlling mechanism by the government. What I mean is all the transactions will be known.

All transactions done with digital currencies will be known. um which is good for illegal activities, getting control of legal activities, but it also means that the government has a great

deal of control. For example, they can they can tax that way. They can take your money. they can establish foreign

your money. they can establish foreign exchange controls and the like and that'll um so that's something that uh will be an increasing issue particularly

for international holders of that currency because they might feel let's say if you're a Frenchman and they wanted to have sanctions they could take

your money course you know and and so on so there's the privacy issue uh of that um so uh and if you're politically disfavored you could be shut politically dislavered,

you could be shut off. Yes. Um so those kinds of issues enter into it. For those

reasons, I don't and and they're very tiny. Um I don't think that you're going

tiny. Um I don't think that you're going to see the development of central bank digital currencies to be of a magnitude

that it's going to be um um you know that that big of a deal. Um I I I think that doesn't mean it won't grow, but I don't think it's going to be um a big

deal. Um so

deal. Um so so my last question is given um your description of the United States as in stage five in a process that only doesn't mean it's inevitable.

Of course, but it there only six stages in the process you describe. So it's

toward the terminus.

It's it's the time that it's time to worry. So you go to Washington, you try

worry. So you go to Washington, you try to convince policy makers, members of Congress people administration here's what you need to do. You've described

the reception you get as like, hey, you don't understand politics. We can't do that. So that's, you know, not a lot of

that. So that's, you know, not a lot of headway made obviously for obvious reasons.

Do you have advice for people watching who are not policy makers, who are just Americans as to what they can do to prepare for whatever comes next?

Uh well, you know, there's the there's the basics, you know, uh well, earn more than you spend,

try to save, diversify your portfolio, h including about money

and those um that's those things are of paramount importance. Um,

paramount importance. Um, think about the country, the opportunities. Where are the

opportunities. Where are the opportunities?

People have migrated from one place to another. Follow the opportunities. And

another. Follow the opportunities. And

most importantly is raise your children well.

um you know so that they're well educated and able to be productive and also civil so that they can be um uh be

effective and as I say there are only three things a country needs to do and that's the same for the individuals you know raise your kids well uh so that

they're well educated and can earn um an income um and operate go to places that work well so that they there's civility

and productivity and there's opportunity and stay out of uh civil wars and international wars.

Those seem pretty obvious that I you do those things well. I mean

really almost everything else takes care of itself. Really?

of itself. Really?

Yeah.

Ray Dalio, thank you very much for that.

It's always a pleasure.

Thank you.