Over the next 20 years, US influence will diminish

2022-06-01 0 By

Ray Dalio, founder of Bridgewater Partners, has a cyclical model that has changed over the course of his career, helping him successfully predict and bet on numerous economic upheavals.In his latest book, Principles: Coping with a Changing World Order, Dalio argues that “history has a similar rhyme”, which rhymes because the most important events repeat themselves, albeit in different ways.Starting in the summer, when he was 22, when President Richard Nixon announced that the U.S. would no longer honor its promise to convert paper money into gold and the STOCK market was rising instead of falling, Dalio realized he had to model his own cycle to find historical patterns for more debt crises and market upheavals to come.Now dalio, shuttling back and forth between the U.S. and China, is once again in new territory — and for the first time in his lifetime, the U.S. has a real competitor. China has become a competitor in many ways.How does Dalio see the sino-US conflict heading this time around?How will the resulting changes in the world order evolve?In an exclusive interview with global Times, Dalio elaborated on the above issues one by one.Dalio: The U.S. is not going to have any debt crisis because it has the ability and willingness to print money and provide it to debtors to pay off its debts, and the biggest of those debtors is the U.S. government.But holders of U.S. debt would almost certainly encounter a crisis because of low real returns on their debt assets and inflation that sapped purchasing power.The price of anything is equal to the total amount spent divided by the total number sold.Thus, inflation occurs when the increase in spending power is due to an increase in the amount of money and credit given to consumers that is greater than the increase in the prices of goods, services, and investment assets.And that’s what’s happening around the world right now.In my view, most governments in the world, especially those with the most debt, find it difficult to increase spending to desired levels without increasing debt and capital, monetising that debt heavily, and raising prices and inflation.