Ray Dalio: The World Order Has Unraveled

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**Ed Elson** (1:29)
Today's number, 1.5.
That's how many tons of beans were delivered by Grubhub across America last year, with bean sales up 135 percent from the year before. And in other news, investors are piling into what might be the hot new sector on Wall Street. Air freshener.

**Ray Dalio** (1:54)
If money is evil, then that building is hell.

**Ed Elson** (2:02)
Welcome to Prof G Markets. I'm Ed Elson. It is April 30th. Let's check in on yesterday's market vitals.
The S&P 500 and the NASDAQ were flat, while the Dow declined as the Federal Reserve held rates steady. The yield on 10-year treasuries hit a one-month high, as traders gave up hopes for a rate cut this year. Brent crude hit the highest level since 2022, after President Trump told aides to prepare for an extended blockade. And big tech shares were mixed, as earnings started to roll in. More on that later.
Okay, what else is happening? Earlier this year, legendary investor Ray Dalio declared that the world order had broken down. Since he made that claim, the national debt surpassed $39 trillion to reach a new record. We've also gone to war with Iran, which has cost at least $25 billion so far, and sent the price of oil soaring. And on top of that, new projections show that tariffs are expected to add another $1 trillion to the deficit over the next 10 years. In some, the deficit is expanding, inflation appears to be rising, and meanwhile, the Fed is stuck holding rates at a crucial time of transition. So we wanted to check in on all of these dynamics, so we decided to check in with the man himself, Ray Dalio, global macro investor, founder of Bridgewater Associates and New York Times bestselling author. Ray, thank you so much for joining us again on the show.
I guess we should start with your main investment theme, which is the big cycle and the five main forces that drive the big cycle that you have been warning about for a long time. Could you just remind us what is the big cycle and what are those five forces that are moving markets?

**Ray Dalio** (3:52)
Yes, thank you.
I think it's very important to step back from the day to day and see these cycles and the orders. And so I appreciate your question.
There are five big forces that create the orders that we're talking about. There's a monetary order, there's a debt cycle, there is a political and social order within countries, there is an international geopolitical order, there is acts of nature throughout history, throughout floods and pandemics have been more disruptive, killed more people than wars and can't be ignored as a factor. And number five, technology. And all of those are operating and they operate in a cycle. So on the first, there is a debt cycle that I will describe and people should consider the merit of that. I have done very well in a macro way of anticipating the 2008 financial crisis, European debt crisis and so on by understanding this. Okay. The way it works is that the credit system is like a circulatory system that brings nutrients, buying power to different parts of the economy. And if that money is borrowed and used to create productivity that produces income, then there's debt service and you make the debt service payments and you do better and you make profits and it's a healthy system. And when, on the other hand, debt service, debts and debt service, rise relative to income, it's, you see the debt service is like plaque in the circulatory system in that it squeezes out spending. So in other words, income minus debt service becomes less, and so as a result, it squeezes out spending. And there's a supply and a demand. In other words, right now we have a certain amount of debt. One man's debts are another man's assets. They have those holding them expect to have a good return.