In his latest article titled – Reflections on the 4th of July, Ray Dalio discusses a number of his reflections including the world order and how it’s changing. Here’s an excerpt from the article:
As far as the changing world order due to the great powers conflict, there are three things that I (and some important government leaders) expect to learn by watching how the conflict in Ukraine is going. They are:
- Whether Russia will “win or lose.” As previously explained, by win I mean a) controlling the eastern part of Ukraine, b) not having intolerable declines in Russian economic conditions (i.e., a 10 to 15% of GDP would be tolerable while a 30 to 40% decline would not) and c) Putin staying in power and remaining on the world stage (e.g., attending the G-20 meeting). Thus far, it looks like Russia is winning, though maybe “lesser loser” would be a better way of describing Russia’s position, which has also been terribly damaged by the war. Also, because the devastation in Ukraine has been so much greater than it has been in Russia, and because this will be economically costly to Ukraine and/or those countries that will pay to have it rebuilt, the war looks like it will be even more costly to NATO countries, so that also will be relative win for Russia.
- The Powers and Cost of American-Led Sanctions Another question I had before and still have to a lesser degree is a) would US-led sanctions inflict intolerable harm on Russia and cause it to abandon its goals (the answer appears to be no) and b) how costly would it be to the US, NATO countries, and the rest of world due to disruptions in markets (like oil, gas, other commodities, shipping, etc.) that the sanctions would create? My tentative answer is that America-led sanction have been moderately costly for Americans and for non-sanctioned entities because of inefficiencies that are worsening stagflation and weaponizing the dollar and American capital markets.
- How Would the Sides/Countries Line Up, and Would the United States Use Secondary Sanctions to Try to Pressure Other Countries to Take More Pro-NATO and Anti-Russia Actions. I explained how this lining up is happening before by country (you can find the explanation here), so I won’t repeat it. However, I will say in summary that it appears that few countries are lining up strongly against Russia and behind NATO countries, and it appears that support within NATO countries for war is weakening due to its relatively high costs. It also looks less likely that the US will impose significant secondary sanctions because of the very high costs they would have.
In summary, by and large, it appears that actual developments are broadly continuing to follow the archetypical Big Cycle template, and I hope that we will cherish and take care of what we are celebrating today. As I learn more, I’ll pass it along. But for now, I hope that you are savoring and reflecting on the July 4th holiday.
You can read the entire article here:
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