Ray Dalio on U.S. Decline: Debt, Division, and Disorder

A Legendary Investor on How to Prevent America’s Coming “Heart Attack”

Original authors: Emily Holzknecht and Sophia Alvarez Boyd, The New York Times

Peggy, BlockBeats

Editor’s Note: Amid soaring U.S. fiscal deficits, escalating geopolitical tensions, and renewed scrutiny of the dollar’s credibility, discussions about the United States are shifting from whether it remains the world’s strongest economy to whether the institutions, debt, and international order underpinning its dominance are still stable.

But when both “America remains strong” and “America is descending into chaos” hold true, a more critical question emerges: Is America facing a routine cyclical adjustment, or is a long-standing order beginning to unravel?

This article is compiled from an interview with Ray Dalio on The New York Times podcast "Interesting Times." Dalio, the founder of Bridgewater Associates, has long observed shifts in the macro order through the lens of debt cycles, reserve currencies, and the rise and fall of empires.

In this conversation, Dalio breaks down America’s problems into a set of more fundamental structural variables: how debt accumulates, how politics has fractured, how the international order has failed, and whether technology can still deliver new productivity outlets.

First, the debt cycle is altering national capacity. In the past, the United States relied on strong fiscal credibility and the dollar’s status as the global reserve currency to finance itself over long periods at low costs, sustaining military spending, welfare programs, and global commitments. Now, expenditures have consistently exceeded revenues, causing debt and interest burdens to rise continuously and squeezing fiscal space. This means that debt is no longer merely a number on a balance sheet—it is increasingly becoming a constraint on national action: the ability to continue protecting allies, maintaining welfare, and bearing the costs of war will be limited by fiscal realities.

Second, domestic political polarization is increasingly tied to issues of money allocation. In the past, political divisions in the U.S. were partially absorbed by debates over growth, taxation, and expansion of welfare; although different groups had conflicting interests, they still shared a common trust in institutions. Now, income inequality, value conflicts, and left-right ideological divides are overlapping, making any deficit-reduction plan inevitably confront the question of “who pays more taxes and who receives less in benefits.” This means fiscal adjustment is no longer merely a technical issue, but a matter of political legitimacy—the more reform is needed, the harder it becomes to reach consensus.

Third, the international order is shifting from rules back to power. After 1945, the United States led the creation of a global order centered on multilateral institutions, a rules-based system, and the credibility of the U.S. dollar. In the past, even during the Cold War, the U.S. maintained overwhelming dominance in finance and institutions. But now, geopolitical conflicts, realignment of blocs, and concerns over supply chain security are undermining the stability of this order. Analogies to Iran, the Strait of Hormuz, or even the Suez Crisis all point to the same issue: when rules cannot be enforced, markets will ultimately reassess the relationship between power, credibility, and security.

Fourth, pressure on the U.S. dollar does not automatically mean the renminbi will directly take its place. Dalio’s assessment is more nuanced: the renminbi may become a medium of exchange in more trade scenarios, but this does not imply that Chinese debt will become the world’s most important store of value. The real question is: in an environment where fiat currencies generally face depreciation pressures, what assets will capital seek as safe havens? The renewed prominence of gold in central bank reserves is precisely a reflection of this uncertainty.

Fifth, AI may both alleviate and exacerbate crises. In the past, technological progress was often seen as a crucial outlet for the U.S. to address its debt and growth challenges; if AI significantly boosts productivity, it could indeed improve income, growth, and debt repayment capacity. However, AI is also generating new forms of wealth concentration, job displacement, and security risks. It could serve as a buffer against fiscal pressure—or become a new amplifier of social division and geopolitical competition.

If this conversation were condensed into one assessment, it would be this: America’s problem is not a single crisis, but rather debt, politics, the international order, and technological factors all entering a period of reassessment simultaneously.

In this sense, the subject of this article is no longer merely whether the United States is in decline, but a larger structural issue: how markets, nations, and individuals should reinterpret "security" and "credit" when the old order still functions, but its underlying conditions are eroding.

The following is the original content (slightly reorganized for easier reading and understanding):

Image source: The New York Times

Dalio's core judgment is that the U.S. is not merely experiencing short-term weakness, but is entering a downward phase of a long-term cycle.

The real risk in the U.S. is not a lack of money, but excessively high debt, which will gradually erode the nation's capacity.

Deficits are the hardest to resolve because they ultimately become political conflicts over who pays and who bears the cost.

The underlying cause of political division in the United States is not just differing values, but an imbalance in the distribution of wealth and interests.

The post-war rules-based order dominated by the United States is breaking down, and the world is returning to power politics.

The U.S. dollar will not be immediately replaced by the renminbi, but the global market will place greater emphasis on safe-haven assets such as gold.

AI may rescue growth, but it could also further fracture employment, wealth, and security systems.

Whether the U.S. can be repaired depends not on the market, but on education, social order, and avoiding war.

I feel that we may currently be at a moment marking the end of the American empire.

Partly because the conflict in Iran has reached a stalemate; partly because Donald Trump is pressuring America’s alliances; and partly, I believe, because of a growing sense that China, America’s foremost competitor, is watching calmly and standing still, waiting for its collapse.

This week’s guest has long been focused on this issue. He has a sweeping historical theory predicting that the United States is heading toward decline. In some ways, he is an atypical “Cassandra” figure—constantly issuing warnings, yet not always taken seriously.

Ray Dalio founded Bridgewater Associates, one of the world’s largest hedge funds, from scratch. But now, what he most wants to discuss is no longer just markets and investments—it’s the decline of the American empire and whether we still have a chance to pull the “American Empire” back from the brink.

Below is the edited transcript of an episode of "Interesting Times." For the full experience, we recommend listening to the original audio. You can tune in via the player above, or on The New York Times app, Apple, Spotify, Amazon Music, YouTube, iHeartRadio, and other podcast platforms.

Ross Douthat (host): Ray Dalio, welcome to Interesting Times.

Ray Dalio (founder of Bridgewater Associates): Thank you. It’s certainly interesting to be a guest on "Interesting Times" during interesting times.

Douthat: Everyone says that. You’ve spent your career making bets, and over the past several decades, many of your judgments have paid off. Recently, you’ve been saying that the United States at this moment may not be a particularly good bet.

So, if someone is currently observing the United States and trying to determine whether to bet that the "American Empire" will maintain its dominance throughout the 21st century, what key forces or factors should they pay attention to?

Dalio: I’d like to correct this statement first. I’m not saying that the U.S. is a bad bet or a good bet—I’m simply describing what’s happening.

Over my approximately 50 years of investing, I’ve learned that many events which seem highly significant to me have never occurred in my lifetime before—but they have happened many times throughout history.

So, I began studying the past 500 years of history to understand the reasons behind the rise and fall of reserve currencies and the empires behind them. You repeatedly see a certain pattern. There is indeed a “big cycle,” and its beginning is often marked by the formation of a new order.

There are three types of order: monetary order, domestic political order, and international world order. These are three evolving forces of great importance.

First, consider the first force: the monetary order. There exists a debt cycle. When debt relative to income continues to rise, and debt service payments relative to income also continue to rise—whether for nations or individuals—

Douthat: Still an empire.

Dalio: This applies to any entity!

Douthat: Yes.

Dalio: This will squeeze other spending. That’s the problem. For example, the U.S. currently spends about $7 trillion annually and receives about $5 trillion in revenue, meaning spending exceeds income by approximately 40%. This deficit has persisted for some time, so the U.S. has accumulated debt equivalent to about six times its revenue—here, revenue refers to the actual money the government receives.

That's correct. But the result is that the currency itself becomes devalued. This is how the mechanism works. It is precisely because of this that long-term debt cycles, short-term debt cycles, currency cycles, and economic cycles exist—they drive the economy from one recession to overheating, and then to the next recession.

Related to this are domestic political and social cycles, which are closely tied to monetary issues. When significant wealth disparities and value differences emerge within a society—

Douthat: You mean the gap between the rich and the poor?

Dalio: The gap between the rich and the poor, and among groups with different values. When these differences escalate to an irreconcilable level, political conflict arises—and such conflict can become severe enough to put the entire system at risk.

So, I believe the first cycle is underway. I also believe the second cycle is occurring—the irreconcilable divide between the political left and right. We can explore these in more detail later.

Douthat: How do international factors come into play?

Dalio: The same logic applies at the international level. After a war, a dominant power emerges and establishes a new world order. This "order" refers to a system—the current one began in 1945.

Douthat: That's true for us. The United States was the dominant force in establishing this system at the time.

Dalio: That's correct. The United States established a system that was largely modeled after its own institutions, because it was intended to be representative. For example, the United Nations is a multilateral world order in which different countries can operate, and theoretically, there should be a rules-based system in place.

But the problem is that without an enforcement mechanism, this system cannot truly be effective. It is an idealistic system—and indeed, a beautiful one—while it can still be maintained. However, we no longer have a truly multilateral rules-based system today.

We are returning to the state that existed before 1945 and characterized most of history: geopolitical divisions will continually emerge, such as the situation currently unfolding around Iran.

How are these disagreements resolved? You don’t submit them to the International Court, wait for a ruling, and then wait for enforcement. In the end, it’s power that matters.

Douthat: That's correct. However, even during the peak of what we understand as the "rules-based international order," the United States was, for much of that period, in conflict with the Soviet Union.

Dalio: That's right.

Douthat: So, the Cold War has been ongoing. The window period during which the system operated independently, free from great-power conflict, was actually relatively short. And even during that period, U.S. power remained the decisive force, right?

Dalio: Of course, because the Soviet Union did not have real power. It had military strength, but at the end of World War II, the United States controlled about 80% of the world’s monetary wealth, accounted for half of global GDP, and was the dominant military power. Thus, we had the ability to provide funding abroad, and those who received it highly valued that money. In contrast, the Soviet system was only a very limited part of it. Financially, it was nearly bankrupt and certainly not a significant force.

Douthat: In other words, the balance of military power is real, but when it comes to financial power, the United States essentially calls the shots.

Dalio: That's right. Fortunately, under the doctrine of mutually assured destruction, we never actually deployed that level of military power. Still, I remember the Cuban Missile Crisis—I was a child then, watching the situation unfold, unsure whether nuclear confrontation would occur. But in the end, it didn't escalate to that point, and later the Soviet Union collapsed.

Douthat: In your cyclical view of history, what role do random events play?

Dalio: All events will occur in sequence. I think the key question is: Will they lead to conflicts? And in a world without a court system to resolve disputes—whether domestically or internationally—how will these conflicts be resolved?

For example, the current events in the Middle East, particularly the situation involving Iran. There is conflict there, which has since escalated into war, as there is no other resolution. Now, the entire world is watching: Can the United States win this war, or will it lose?

When we look at this issue, we almost measure it with a black-and-white standard: Who will control the Strait of Hormuz? Who will control nuclear materials? Can the United States win this war?

We should also recognize that there are underlying alliances at play—Russia and Iran tend to support each other, just as there are opposing blocs offering their own support on the other side.

Douthat: To reiterate, isn't what makes this moment most unique compared to the past several decades the fact that the opposing side's strength has increased?

Dalio: It’s a shift in relative strength and the breakdown of the existing order. Additionally, massive debt-credit relationships become entangled. For example, when the U.S. runs large deficits over a long period, it must borrow money—and this becomes extremely dangerous during times of conflict. The same applies to interdependence.

In other words, in a riskier world, you must be self-sufficient, because history shows that you could be cut off at any moment—any party could be disconnected.

Douthat: Yes. I’m very interested in how these factors interlock. Suppose the ultimate outcome of the Iran issue is that people believe the United States lost the war, or at least failed to achieve its objectives. Perhaps the Strait of Hormuz remains open, but the Iranian regime stays in power, and a perception takes hold that the U.S. tried something but did not succeed. Do you think this perception could, in turn, affect how people judge the credibility of U.S. debt repayment?

Dalio: I just spent about a month in Asia, meeting with leaders and other figures from different countries. The impact of this is enormous, similar to the effect when Britain lost the Suez Canal—because Egypt took control of it. That was seen as a symbol of the end of the British Empire. In other words, this is a very significant development.

Douthat: Yes, that was in the 1950s.

Dalio: Exactly. And that’s precisely when people stop wanting to hold assets like UK debt. Now, countries around the world are asking themselves: Will the U.S. still protect us? Or has the U.S. already lost the capacity to protect us? Because the American public doesn’t want to engage in a prolonged war, so any conflict must end quickly, at a low cost, and—

Douthat: It also has to be popular, right?

Dalio: Be popular.

Douthat: And now our wars are generally not very popular. But I’d like to stay with the Suez analogy for a moment because I find it interesting—I’ve heard many people using this comparison. During the Suez Crisis, Britain, France, and Israel essentially attempted to regain control of the Suez Canal after Egypt nationalized it.

So it’s clearly similar to Iran: a critical chokepoint in global trade, around which a Western superpower and a regional power clash. But in my view, the key point of the Suez incident was that Dwight Eisenhower and the United States essentially told Britain: no, you cannot do this.

Thus, the crisis of confidence in the British Empire, the pound, and everything else stems in part from the recognition that, as you just said, this is the post-World War II order, with the United States as the dominant power.

So, is it now also necessary for China to play a similar role? Is a similar moment required before people truly lose faith in the United States? Must people see a new hegemon emerge before they abandon the old one?

Dalio: By the way, I don’t believe China will ultimately become a hegemonic power in the traditional sense. We can explore this issue in more detail later.

Douthat: I'm very interested in this.

Dalio: But what I want to say is that it was the combination of Britain’s debt issues and its obvious loss of power. Britain’s decline had already begun well before the Suez Crisis, as people recognized that the United States was not only a global superpower but also in a stronger fiscal position.

Douthat: So, if this analogy holds any value, what is the contemporary equivalent? If people come to believe that the United States is no longer as trustworthy as we once assumed—that its ability to repay debt has diminished, and so on—perhaps this also ties into your earlier point about China and whether it will become the new hegemon—would people turn to China? Would they abandon the dollar as a reserve currency? If confidence in the United States erodes, where would the money flow?

Dalio: I’ll share my perspective, but first I want to say that this is a typical pattern in every cycle. For example, when Britain replaced the Netherlands, the process was similar. Britain was financially stronger and had greater overall capabilities. The Netherlands lost, leading to a shift from the Dutch Empire to the British Empire; at the time, the Netherlands held the reserve currency and debt. Similar events have repeatedly occurred in the same way.

So, you don't necessarily need a specific individual, like President Eisenhower—

Douthat: No, but you need a successor power. That’s exactly what I’m asking about.

Dalio: So, I think what will happen next—answering your question about where money and wealth will flow—is that a country can still be a dominant power while simultaneously experiencing serious financial problems.

For example, when the monetary system collapsed in 1971, the United States was still the dominant power. In 1971, the U.S. had accumulated so much debt that it could no longer honor its promise to deliver gold, leading to the collapse of the monetary system. This was followed by stagflation in the 1970s. A similar scenario could still occur.

Douthat: So that’s one scenario: you have a crisis but no successor power. The Soviet Union did not replace the United States in the 1970s.

Dalio: That's right.

Douthat: The United States has merely gone through about a decade of very difficult times.

Dalio: Your financial situation will still be poor. And that means holding bonds is not a good way to store wealth. To answer your question, money has two functions: a medium of exchange and a store of value.

I think you’ll now see that, for multiple reasons, the Chinese currency is increasingly becoming a medium of exchange. However, I am highly skeptical that Chinese debt or similar assets will become a serious store of value, as historically, they have not been good at preserving wealth.

Douthat: Yes.

Dalio: And I don't believe any fiat currency will be an effective store of wealth.

Douthat: Explain to our audience that fiat currency refers to money issued by nation-states but not backed by gold or other assets, correct?

Dalio: That is, currency they can print themselves.

Douthat: They can print money.

Dalio: So, when we look back at history, we find that during all similar periods, all fiat currencies have depreciated, while gold has risen. Today, gold is already the second-largest reserve asset for central banks worldwide. In other words, the dollar is first, followed by gold, then the euro, and then the yen.

So I believe the real question is: What kind of currency can serve as a store of value? Gold has become the primary candidate largely because it was the only viable option—it has proven itself as the winner over thousands of years of history.

Douthat: So, alternatives to the U.S. dollar would become more attractive, but that doesn’t mean we’d immediately switch to “let’s just buy Chinese debt”?

Dalio: From a trading perspective, traditionally, when countries begin conducting transactions in a particular currency, they gradually build up reserves of that currency. It’s like their cash account—they need to have sufficient cash on hand to pay for goods or services they’ve just purchased. Therefore, I expect these reserves to increase.

The problem is that storing wealth in these debt assets presents a challenge. We are entering a new world where everyone is asking: What constitutes a safe store of wealth?

Douthat: For the average American, if they look at the cycle you’ve described and think, “Well, this has happened before, and it’s happening again. We’re going through a period of spending beyond our means, and an adjustment is inevitably coming”—what do you expect that adjustment to look like?

One possibility is the 1970s scenario: high inflation and sluggish growth, known as stagflation. Another possibility is the Great Depression model: a financial market crash triggering a crisis that leads to poverty and deflation. Under current conditions, which of these should we be most concerned about?

Dalio: I think what everyone should be most concerned about is what they don’t understand about the future, okay?

Douthat: I understand. I'm also concerned about this, which is why I asked you to let me know.

Dalio: So what I mean is: we don’t know what the world will look like in three to five years. There is far more that we don’t know than what we do know. I believe what we can be certain of is that we are entering an era of increasing disorder—and that is where the greater risks lie.

So, I think the answer should be: knowing how to build a well-diversified investment portfolio that can generally withstand this kind of uncertainty.

In simple terms, if you ask, “What should my typical investment portfolio look like?” it would include stocks, bonds, and investments in other countries—diversification is a good thing. I can’t go into the exact allocation details here, but I believe any portfolio should allocate 5% to 15% to gold, because when other assets truly struggle, gold often performs best. In any case, this is also one of the reasons gold has been a strong investment over the past few years, as the market has been moving in this direction.

So I would say: Maintain balance and learn to diversify your portfolio well to hedge against other risks.

Douthat: As an investor, I do want to hear investment advice. But as a commentator, a columnist—whatever exactly I am—I’m more interested in describing or anticipating reality. Even if we can’t know the future with certainty, if history really offers these lessons, if these cycles truly recur, and if we’re heading toward some kind of bottom or reset—perhaps followed by a rebound—I just want to understand: in your view, what does life at the bottom of a cycle look like? Is it more like prolonged stagnation and persistent discontent, or more like a crisis erupting with street clashes? Because the 1970s and the 1930s seem like two very different examples. That’s my question.

Dalio: I can tell you what I’m concerned about. I believe we are currently facing several major issues: monetary issues, domestic political and social issues, and international geopolitical issues. According to the timeline, we are approaching the midterm elections. I think the Republican Party is likely to lose control of the House. After that, you’ll see further escalation of political and social tensions, particularly in the period between that election and the 2028 presidential election.

I’m concerned that these divisions may become irreconcilable. I don’t know how things will unfold, or whether respect for rules, laws, and order can still uphold law and order.

I’m concerned—but not predicting—widespread violence. Widespread violence could indeed occur. The number of firearms in the United States exceeds its population.

Douthat: Population—

Dalio: I'm not making a prediction—let me finish what I'm saying.

Douthat: Okay.

Dalio: I simply saw these possibilities. I believe everyone can observe what’s happening around them and form their own judgment. Overall, to answer your question, my response is: we are entering a more chaotic period. I believe the risks are greater than in the past, and things are moving along that trajectory. We’re discussing this in words now, but I usually visualize these patterns on charts, and these developments are aligning with those historical patterns.

You asked me this question, and I gave you my answer. Precisely because of these reasons, I believe people should maintain a well-diversified portfolio and remain vigilant about such matters.

Douthat: Please discuss how, in your view, the landscape of debt interacts with the political and social landscape. Because if you were to ask people today what they are divided over, they typically wouldn’t say it’s interest payments on the national debt. They would list a long series of other issues on which they disagree.

I’m just curious: what economic forces are at play when rising interest expenses crowd out other forms of investment, and how do they interact with social instability?

Dalio: Their disagreement essentially revolves around "who owns how much money and who gets to receive it," which is closely tied to fiscal deficits.

I recently wrote a book that explains this system through 35 case studies, titled "How Nations Go Bankrupt." I’ve also been in ongoing discussions with senior figures from both the Democratic and Republican parties, and everyone agrees on the mechanisms themselves.

When I sat down with them and said, you must reduce the fiscal deficit to 3% of GDP through some combination—raising taxes, cutting spending, controlling interest rates—because mechanistically, that’s the only way it can be done.

Then they’ll say, Ray, you don’t understand. To win the election, I must make at least one of these two promises: “I won’t raise your taxes,” or “I won’t cut your benefits.”

The country's division is evident, for example, between the billionaire class and those struggling financially, between the left and the right, and within populism and other movements—all of which involve monetary and financial factors. Thus, budget deficits and monetary issues are a crucial part of social conflict.

Douthat: So when you talk to politicians about this, and they explain to you that we can’t raise taxes or cut spending, I imagine they’ll go on to say that people will see these issues as threats to opportunity or equality. Those who rely on Medicare and Social Security view them as safeguards for equality, while those who depend on low taxes to start businesses see them as safeguards for opportunity.

If you want to convince these people to reduce their budget deficit to 3% of GDP, what would you tell them this is meant to protect them from?

Dalio: Save them from a financial crisis.

Douthat: What would a financial crisis in the United States look like? What exactly would happen?

Dalio: A financial crisis means the government’s ability to spend will be severely limited. In other words, you won’t be able to afford military spending, social welfare programs, and other expenditures, leading to significant fiscal constraints. As demand fails to match supply, interest rates will rise, suppressing borrowing and dampening markets, among other effects. This, in turn, forces central banks to attempt to restore balance by printing money, resulting in currency depreciation and the creation of a stagflationary environment.

Douthat: Got it. So it sounds like the worst-case scenario is a crisis similar to 2008, eventually turning into 1970s-style stagflation? Sorry, I’m not trying to push you for an answer—

Dalio: No, no, I'm happy to answer as much as possible.

Douthat: I just want to give you some context: I’m 46 years old, and virtually my entire life has been lived under the shadow of predictions that U.S. fiscal deficits are unsustainable. The first presidential election I truly remember was Ross Perot’s 1992 campaign, which was largely centered around these very themes.

But like many Americans, this also means I tend to automatically tune out arguments about budget deficits. For the first time since the 1990s, I felt that deficits and overspending were truly impacting the average person’s wallet during the inflation surge in the early years of the Biden administration.

So I think it’s helpful for both me and the audience to clearly understand why the 2030s, or the late 2020s, will be different from the past 20 years—after all, we’ve had these deficits throughout the past two decades.

Dalio: Thank you for your curiosity! And I feel I must answer this question. It’s like plaque gradually building up in the arteries. As you said: “I haven’t had a heart attack yet.”

Douthat: "I feel pretty good."

Dalio: Then I can say, "Alright, I understand—you haven't had a heart attack yet. But could I show you an MRI so you can see the plaques building up in your system? Can you understand what these plaques mean—that if they continue to grow, you will have a heart attack? Do you understand? Do you grasp what these numbers mean and where you stand right now? Listen, this is your life, and it’s your choice. Ask yourself: 'Is this right, or is this wrong?' This is something you must do for your own well-being."

Douthat: In your narrative, combining this diagnosis with your— and my—assessment of how the current U.S. political system operates suggests that, before any real change occurs, the United States will first experience at least a mild “heart attack.”

You initially said that, despite framing the question this way as a podcast host, you're not actually shorting the U.S. So do you optimistically believe the U.S. might experience what could be called a "minor heart attack" and then recover?

Dalio: I believe we are entering a more chaotic period because several forces are converging: monetary issues; irreconcilable domestic social and political divisions; and problems with the international world order. I will add two more factors. One of them is the recurring natural force throughout history—

Douthat: For example, the pandemic.

Dalio: Droughts, floods, and pandemics. And if you look at how most people view climate change trends, they are not improving but worsening. Then there is technology and AI.

We must include technology and AI in this discussion because they will play a role—and they will do so in three ways. First, they may significantly boost productivity, helping to alleviate some debt issues—perhaps. We can continue discussing this point. But I don’t believe it will happen that quickly.

Douthat: I do often hear this from people in the AI field. They say that, at best, if AI merely increases GDP growth by X percentage points and boosts productivity growth by X percentage points, it would alleviate the issues you initially mentioned.

Dalio: Yes, yes.

Douthat: It will make debt more manageable.

Dalio: That's exactly what I mean. Because it can generate income, and that income can help repay debt principal and interest, and so on. So this is one of the three impacts of AI.

The second impact of AI is that it is creating massive wealth disparities. Those benefiting from it are now approaching the question of who will become the first trillionaire. Wealth inequality has already widened significantly, and AI will replace a large number of jobs. So this is the second factor. Regardless of how we address it, these gaps will become problems. They must be addressed, and this will likely become a political issue—but it is indeed a problem.

Third, the technology itself can also be used to harm others—it wields tremendous power. It can be used by other nations, by those who wish to cause harm, and by those who seek to steal funds. It can be used to inflict damage.

Douthat: Yes. But according to your model and your cycle theory, from this final point, technology could exacerbate geopolitical tensions. It could reinforce Cold War–style dynamics and intensify domestic tensions.

Dalio: That's right.

Douthat: But it could also alleviate fiscal pressure.

Dalio: Yes, it could lead to productivity gains.

Douthat: But if it brings some negative effects, it's likely to bring some positive ones as well.

Dalio: The key is how these impacts ultimately offset and balance each other.

Douthat: Yes.

Dalio: We don’t know what the future will look like because human capabilities are insufficient to predict what the world will be like three to five years from now. Over the next five years, these five forces will converge, causing the entire world to experience a kind of temporal distortion. Massive changes will occur in the next five years as all these forces come together. Once we emerge from this period, the world on the other side will be almost unrecognizable—it will be vastly different, a time of intense transformation and upheaval.

So, what should a person do? Since I know it’s impossible to truly predict the future, my approach—and my advice—is to learn how to balance your positions.

Douthat: However, politicians hearing this might think: Well, I know Ray Dalio wants us to reduce the fiscal deficit to 3% of GDP, but he also believes we’re undergoing a five-year “time distortion” unlike anything in human history. Maybe we should just wait and see what the world looks like in five years before painfully restructuring healthcare and Social Security.

Dalio: I don't think they care what Ray Dalio thinks. (Laugh)

Douthat: Hmm, that's not what I meant. But—

Dalio: I think they care more about what the ballot box thinks.

Douthat: Yes, absolutely. I’ve spoken with some people in Washington, D.C., where there has long been genuine concern about budget deficits, and indeed, some have been trying to take action.

What I’m truly curious about is that in your narrative about the rise and fall of empires—such as the Spanish Empire, the British Empire, the Dutch “mini-empire,” and so on—there doesn’t seem to be any example of a major power going through this cycle, falling to the bottom you described, and then rebounding to begin a new upward cycle. Or does such an example exist?

Because, you see, as Americans, this is exactly our goal. If someone accepts your narrative, they’ll say: Well, history isn’t deterministic. We can make choices and choose to enter a different cycle, right?

Dalio: Yes. I believe it’s possible. But something must happen—and history suggests this as well. Plato once spoke of this cycle—

Douthat: Yes.

Dalio: In "The Republic," he discusses democracy and its problems, because people do not always vote for what is truly in their best interest or what would truly strengthen the nation. About 60% of Americans have reading skills below a sixth-grade level, and there are also issues with productivity and other areas. Yet they vote and largely determine the outcomes.

The question is: How does such a change occur under a democratic system? In Plato’s view, ideally, this requires a “benevolent despot”—someone capable of taking control, sufficiently strong, and willing to sacrifice for the state. In a sense, this person can reunite the people.

No matter how it happens, you need a strong leader from the center who recognizes that partisan division and conflict are inherently problematic, but who also has enough strength to make people and the entire system function as needed. Only then can some form of debt restructuring occur, the education system improve, and structural reforms for greater efficiency be advanced.

Running a large company is already difficult. Imagine how much harder it would be to govern a country and do it well. That’s why you need an extraordinary individual with immense strength, along with strong leadership that can be followed—not constantly undermined by any side.

Douthat: So are you looking for a Franklin D. Roosevelt, or perhaps a Ronald Reagan-like figure, in this particular crisis?

Dalio: Hmm, I think it's harder now than ever before.

Douthat: Because we've gone further—

Dalio: Everyone has their own opinions. Do you know how hard it is to lead? (Light laugh) I mean, can you imagine it? Can you bring people together toward the center, unite them, and get them willing to do difficult things?

Douthat: Yes. But in these discussions, I often think of one thing: we are also genuinely wealthy. Today’s America is even wealthier than it was in the 1980s, and vastly wealthier than during the Great Depression. Although people may feel the pressure of inflation or struggle when unemployment spikes suddenly, this wealth itself acts as a stabilizer.

You might also see another scenario, such as Japan. Japan is a country that has long carried massive debt, and I wouldn’t say it has handled it very successfully. Its economic vitality has declined, and it has become more stagnant, no longer the Japan of the 1980s or 1990s that was thought to potentially “take over the world.” But it has also maintained a stable, affluent, aging society. Do you think this could be a possible scenario for the United States?

Dalio: I think you've raised two questions, which are related to each other, but I'd like to address them separately. The first question concerns a higher standard of living and America becoming wealthier. This has always been true throughout history, including all periods before World War II. The truly critical question is how people treat each other.

Douthat: You mean that when debt peaks, empires are often wealthier than ever before?

Dalio: Yes. If you look at per capita income, many indicators—life expectancy, any measure of well-being—and plot them starting from the 15th century or the Dark Ages, you’ll find that these metrics were relatively flat early on. That is, at every historical moment, looking at the world as a whole and society as a whole, we have been wealthier than in the past. Your point is valid.

But this did not prevent World War II, nor did it prevent debt issues or other such events. The most important question is how people treat each other—can they work together to address these challenges? Realistically, what if, as part of a healthy adjustment, our standard of living decreased by 10%?

I’m almost done, but I want to make this point clear. So here’s the first one: Wealth does not alleviate debt issues, nor does it resolve the struggles over “who is in control”—

Douthat: But perhaps it could alleviate it somewhat. For example, in the 1930s—

Dalio: No, no, no. Wait a minute. I didn’t interrupt you just now. Please don’t—

Douthat: Alright, please continue. Sorry.

Dalio: Let me finish first, then you respond. As for Japan—do you want me to answer this question first, and then talk about Japan?

Douthat: Japan, hold on a moment. I just want to ask one more thing about the previous question: If you look at the 1930s, the 1970s, and the period after the 2008 financial crisis, they were all periods of economic crisis, but things seem to have improved. The 1930s were worse than the 1970s, and the 1970s were worse than the 2010s. So perhaps, because we’ve become wealthier, things can stabilize to some extent, right?

Dalio: Yes. If you look at per capita income, life expectancy—any standard of living or similar metric—you’ll see a curve—

Douthat: I just meant that even social conflicts in the 1970s weren't as severe as those in the 1930s. That's all I was trying to say.

Dalio: Hmm, I won't emphasize this too much.

Douthat: Okay.

Dalio: In other words, based on multiple metrics, I would say it now resembles the 1930s. If you look at the severity of debt and internal conflict—I have lived through these periods—and I would say—

Douthat: So you think our current situation is worse than in the 1970s?

Dalio: Our debt situation is worse.

Douthat: That's true.

Dalio: America's dominant position in the world order, along with related conflicts, is also worse than at that time.

Douthat: Understood.

Dalio: So I believe this is an objective fact. I'm not deliberately painting a pessimistic picture; I'm simply trying to analyze, because my job is to make accurate bets.

Douthat: Alright. So what about our "Japanese future"? Will we have a Japanese future?

Dalio: There are two key points about Japan’s situation, and they’re very interesting. Japan’s debt is primarily domestic. In that specific case, the approach was for the central bank to print large amounts of money and purchase the debt. That’s exactly what they did. The result was a depreciation of the yen. Due to the decline in the value of money and debt, Japanese households experienced a significant loss in wealth.

So yes, we might also see something similar happen. But our situation is different: one-third of U.S. debt is held by foreign entities. That’s not the same. As a nation, we owe money to other countries.

Douthat: Here I want to—

Dalio: If you think that's a good outcome (chuckles)

Douthat: No, I don't think so. Well, I think—

Dalio: It’s like the decline of the British Empire. You might experience a process similar to the decline of the British Empire. It’s more or less the same situation.

Douthat: No, I don’t think that’s a good outcome. I’m interested in it because, in Japan’s case, it resembles more of a sustainable stagnation than a crisis or collapse. But I think I would agree with you on one point: for various reasons—beyond the scope of this conversation—Japanese society seems more likely than American society to accept a decline in living standards. In that sense, it’s probably not a suitable model for the United States.

Let me end with a comment about my own optimism: I’ve spent my entire life in a world where people constantly worry about deficits and deficit spending. I agree with you that the absence of a crisis doesn’t mean you won’t have a heart attack tomorrow—that’s entirely reasonable. So I fully expect the issues you’ve described to have significant negative impacts on the United States.

At the same time, I do feel this is a strange moment: if you look at certain indicators, the U.S. appears vulnerable; yet in many ways, it remains incredibly strong. Over the past 10 or 15 years, U.S. GDP growth has clearly outpaced Western Europe, Canada, and other comparable economies. We still host the world’s most profitable and innovative technology companies. We still possess the most capable military on the planet. Socially, we certainly face many challenges—but are there other major powers better than the U.S. at absorbing immigrants, maintaining higher birth rates, or being geographically distant from major wars and refugee flows? I’m not sure there’s a more compelling bet than the United States.

If I look ahead 50 years, within the context of the global order, isn’t the United States still a place where one can maintain a certain level of confidence? What do you think?

Dalio: I believe we cannot frame the issue in the way I initially opposed—such as asking whether the U.S. will win or lose.

I believe we know what it means to be healthy. Throughout history, any country seeking to remain healthy only needs to do three things. First, educate children well, equipping them with skills, high-quality productive capacity, and civic literacy. Second, allow them to grow up in an orderly nation where people can collaborate effectively, generate productivity, and achieve broad increases in productivity and shared prosperity. Third, avoid war—neither civil war nor international conflict. That’s all you need to do.

Then you can examine these fundamentals: Have we educated our children well, equipping them with productivity and skills, and enabling them to coexist peacefully? Do we have a citizenry with civic literacy? Do we have an environment that enhances productivity and fosters harmonious coexistence among people?

I think our current situation is very dire. I live in Connecticut, and my wife has been helping the most disadvantaged children complete high school. Educational gaps, as well as disparities in these areas—including civic literacy—are real issues. So I believe that, ultimately, the problem really comes down to these matters.

But these are all the most basic things. Is your income higher than your expenses? What does your income look like? What does your balance sheet look like? These are fundamental questions. You know these basic questions. So if we can have these foundations—yes, I thank God I grew up in America, because, wow, that was truly incredible. This was once a place where anyone from anywhere in the world could truly become a citizen, so it really did have that genuine meritocracy. I was born into a lower-middle-class family. My father was a jazz musician. I was able to attend a good school and carve out a path for myself, you understand? I think of that creativity, those wonderful things—the broad education, the middle-class society—we once had a middle class, and we once had those things.

So, I’ve seen the differences. I understand what fundamentals are. I look at various indicators, and these make me concerned.

Douthat: Good. Ray Dalio, thank you for joining us on the show.

Dalio: Thank you for inviting me.

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