The Simplicity of Meme History: The Ray Dalio and Impending Civil War Edition
Ray Dalio, the multibillionaire and chief investment officer of Bridgewater Associates, posted this nice little chart on Facebook the other day about the decline of America. And while I agree with it to a degree, I felt the immediate need to criticize it.
It’s just, well, way too simplistic.
The United States would be at #14; printing money on the way to civil war.
The logical implications of this seem rather obvious. If Ray Dalio actually believed the United States was one step removed from an internal conflict (more so than the street fights we see nowadays from time to time) and then lose the reserve currency and fall into civil war, it would about be time to get the Hell out.
A quick look at the holdings of Bridgewater Associations doesn’t give the impression that that is what’s on Dalio’s mind, though. Vanguard (an index fund heavily investing in US stocks) is first. At #4 is the S&P 500 (all US stocks). #5, 6, 8, 9 and 10 are Walmart, Proctor & Gamble, Johnson and Johnson, Coca Cola and Pepsico respectively; all US companies.
Admittedly two emerging markets ETFs are #2 and 3 and Alibaba is #7. Still, their portfolio looks pretty heavily tilted toward the United States.
Now don’t get me wrong, the United States has some serious problems. The debt is out of control, we’re overextended militarily, inflation is running rampant, the partisan divide is becoming untenable, etc. etc.
Sooner or later, I’ll review Peter Turchin’s great book The Ages of Discord. He predicted, and I agree, that the 2020s are going to be wild (and mostly bad). Policy wise, particularly regarding Covid and foreign policy, our leaders have all but lost their minds. The US is clearly in decline. But then again, Britain was in decline after World War II. It lost it’s empire and fell several rungs down on the list of most powerful nations. But it had no economic collapse nor civil war. None of this stuff is inevitable.
In some ways, it reminds me of the “Strong men make good times” meme that’s been floating around social media for some time now.
Sure, there’s truth to this. Strong men build, conquer and defend. Weak men negligent, surrender and flee. But it’s way to simple for anything more than, well, a meme.
The Roman Empire, for example, had become notoriously corrupt and decadent by the time of its collapse. But even this explanation is insufficient. Most scholars agree that Rome did not collapse because of decadence (i.e. weak men).
Decadence contributed, sure. But the most decadent of all was Caligula and his reign was several centuries before Rome fell. Decadence was basically a permanent feature of Ancient Rome. Instead, the Volkerwanderung, invading barbarians, unwisely allowing the Goths to enter Roman territory and serve in the army, difficulties governing a vast territory, religious tension with the growing Christian movement, a bunch of lead pipes slowly poisoning the entire empire and a host of other things did them in.
Same goes for Dalio’s chart. The world is just far too complicated for a simple graph such as what Dalio provides. After all, the US printed enormous amounts of money after the financial crisis in 2008, yet that didn’t lead to a loss of the reserve currency. The US did the same thing during World War II and the Vietnam War/Great Society, yet no loss of reserve currency nor a no civil war.
There were consequences though. There was a lot of inflation after World War II and Nixon closed the gold window as the US went into a decade of stagflation after the “guns and butter” of the 1960s.
But the US recovered both times and had mostly good economic decades with relatively little political strife in the 50s and 80s respectively.
This time, I suspect it will be worse, unfortunately. Indeed, my prediction is the US will enter a nasty 70s-style inflation with even more political instability as my brother and I outlined in this video.
But that’s a far cry from civil war and revolution. Indeed, the American civil war didn’t follow a period of mass money printing nor even a major recession. So the reverse isn’t true either.
History is a guide but not destiny. We are not obliged to have some sort of 4th turning with massive bloodshed and upheaval. We aren’t at the catastrophic end of some inevitable cycle.
The 2020s will be rough. But I doubt they’ll be anywhere near as rough as that chart predicts. And judging by the holdings of Bridgewater Associates, I suspect Dalio believes agrees with me even if it doesn’t get as many clicks to say so.