"Don't Make the Mistake of Thinking That What's Now Happening is Mostly About Tariffs"
by Ray Dalio
April 7, 2025
Some excerpts:
At this moment, a huge amount of attention is being justifiably paid to the announced tariffs and their very big impacts on markets and economies while very little attention is being paid to the circumstances that caused them and the biggest disruptions that are likely still ahead.
The far bigger, far more important thing to keep in mind is that we are seeing a classic breakdown of the major monetary, political, and geopolitical orders. This sort of breakdown occurs only about once in a lifetime, but they have happened many times in history when similar unsustainable conditions were in place.
More specifically:
1. The monetary/economic order is breaking down because there is too much existing debt, the rates of adding to it are too fast, and existing capital markets and economies are supported by this unsustainably large debt.
2. The domestic political order is breaking down
3. The international geopolitical world order is breaking down because the era of one dominant power (the U.S.) that dictates the order that other countries follow is over.
4. Acts of nature (droughts, floods and pandemics) are increasingly disruptive, and
5. Amazing changes in technology such as AI will be highly impactful to all aspects of life
Changes in these forces and how they are affecting each other is what we should be focusing on.
For that reason, I urge you to not to let news-grabbing dramatic changes like the tariffs draw your attention away from these five big forces and their interrelationships, which are the real drivers of Overall Big Cycles changes.
...think about the interrelationships that are critically important.
As you do this, it’s helpful to keep in mind that what is happening now is just a contemporary version of what has happened innumerable times throughout history. I urge you to study the actions that policy makers took in analogous past cases in which they found themselves in similar positions to help you build a list of things that they might do—things like suspending debt service payments to "enemy" countries, establishing capital controls to prevent the free flow of capital out of the country, and imposing special taxes.
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