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119 sats \ 0 replies \ @Solomonsatoshi 22h \ on: Ray Dalio - It's Too Late: The Changes Are Coming econ
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Here's what Ray says-
'It's Too Late: The Changes Are Coming
Some people believe that the tariff disruptions will settle down as more negotiations happen and greater thought is given to how to structure them to work in a sensible way. However, I am now hearing from a large and growing number of people who are having to deal with these issues that it is already too late. For example, many exporters to the United States and importers from other countries that trade with the U.S. are saying they have to greatly reduce their dealings with the United States, recognizing that whatever happens with tariffs, these problems won't go away, and that radically reduced interdependencies with the U.S. is a reality that has to be planned for. Most obviously, American producers and investors in China, Chinese producers and investors in China that deal with Americans, American producers and investors in the United States that deal with Chinese, and Chinese producers and investors in United States that deal with Americans must now go about making alternative plans, regardless of what the next round of trade negotiations are like. While this need to minimize U.S. - China interdependence and worry about conflict is now broadly recognized, this view is now becoming more commonly believed by most people in most countries who are dealing with most issues related to trade relations, capital markets relations, geopolitical relations, and military relations with the United States.
Though not yet fully realized, it is also increasingly being realized that the United States' role as the world's biggest consumer of manufactured goods and greatest producer of debt assets to finance its over-consumption is unsustainable, so assuming that one can sell and lend to the U.S. and get paid back with hard (i.e. not devalued) dollars on their U.S. debt holdings is naive thinking, so other plans have to be made.
Said more simply, enormous trade and capital imbalances are creating unsustainable conditions and major risks of being cut off, so they must come down -i.e., excessive imbalances + deglobalization = smaller trade and capital imbalances.
More broadly, what I am saying is that, based on many of my indicators, it appears that:
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we are on the brink of the monetary order, the domestic political and the international world orders breaking down due to unsustainable, bad fundamentals that can be easily seen and measured,
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the progression of events leading to these increasing disorders is similar to those that have progressed many times throughout history, so this one looks like a contemporary version of the old story of how monetary, domestic political and social, and international geopolitical orders change,
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there is a growing risk that the United States, imposing these challenges to deal with, will increasingly be bypassed by a world of countries that will adapt to these separations from the United States and create new synapses that grow around it, and
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if these circumstances are managed in the best ways, the outcomes will be much better than if they are managed in the worst ways
In my opinion, what would be best is calm, analytical, and coordinated engineering and implementation, with the imbalances and the needs for self-sufficiencies treated as shared challenges, to produce the “beautiful" deleveragings and rebalancings that need to take place. For example, as explained in my new book, How Countries Go Broke: The Big Cycle, there is a "3-Part, 3-Percent Solution" to dealing with the U.S. government debt problem that would lead to much better results than the path that we appear to be on. Unfortunately, thus far we haven’t seen the better ways and have instead seen disturbing fighting and volatility that are teaching lessons that are leading to irreversible bad consequences.
For these reasons, I fear that we are moving beyond the ideal time to be knowledgeable about and properly plan for these big changes in the world order, and believe that investors, policy makers, and other decision-makers need to stop undulating their views and positions in reaction to the day-to-day market moves and policy announcements and instead deal with these big fundamental changes in the world order calmly, intelligently, and, ideally, cooperatively.
The views expressed here are my own and not necessarily those of Bridgewater.'