The Economic Collapse No One Wants To Talk About - Ray Dalio

Ray Dalio is the founder of Bridgewater Associates, billionaire investor, philanthropist and an author. The New World Order is a mystical term. Is it a shadowy cabal of evil hooded figures? Or is it a cycle that our world's economy regularly runs on. Ray is here to explain the consequences of shifting global power dynamics, and what that means for the future of America and the rest of the world. Expect to learn why global events aren't getting more chaotic, they're unfolding right on schedule, why there is a regular cycle of empires falling and new ones emerging, how the global economic machine really works, what the next few years of America will look like, what you can do to secure your finances in a turbulent market, Ray's opinion on the role that Bitcoin and cryptocurrencies will serve in a post-dollar economy, the best financial advice for young people and much more... Sponsors: Get 15% discount on Craftd London’s jewellery at https://craftd.com/modernwisdom (use code MW15) Get the Whoop 4.0 for free and get your first month for free at http://join.whoop.com/modernwisdom (discount automatically applied) Get a Free Sample Pack of all LMNT Flavours with your first box at https://www.drinklmnt.com/modernwisdom (automatically applied at checkout) Extra Stuff: Follow Ray on Twitter - https://twitter.com/RayDalio Get my free Reading List of 100 books to read before you die → https://chriswillx.com/books/ To support me on Patreon (thank you): https://www.patreon.com/modernwisdom #raydalio #economics #business - 00:00 Intro 00:30 The Accuracy of Ray’s Predictions 07:43 Impacts of a Decreasing Dollar Value 12:54 Different Types of Leaders for Different Times 15:54 Are We in a Unique Situation? 20:03 How to Be Financially Prepared for the Next Few Years 25:45 The Crisis of Unproductive People 32:28 Ray’s Advice for Young People 35:31 Should We Worry About the Population? 41:07 The Threat of China 45:02 Is a ‘Soft Landing’ Possible? 49:28 Can You Benefit From a Recession? 54:06 Finding Solace in a Tumultuous World 59:52 Where to Find Ray - Get access to every episode 10 hours before YouTube by subscribing for free on Spotify - https://spoti.fi/2LSimPn or Apple Podcasts - https://apple.co/2MNqIgw Get my free Reading List of 100 life-changing books here - https://chriswillx.com/books/ - Get in touch in the comments below or head to... Instagram: https://www.instagram.com/chriswillx Twitter: https://www.twitter.com/chriswillx Email: https://chriswillx.com/contact/

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  We're on the brink of war with China for various reasons. I hope we make it to 2050. The demographics is as I describe it. And by the way, them losing doesn't make us winning. So I think you're in the part of the cycle where you've had the tightening and the dominoes are beginning to fall. And I think that that's going to produce more problems. The most important thing is to have this basic, well diversified portfolio is important.

• 0:29Chris Williamson?

  Two years ago, you made some predictions about the future for America and the global economy. How accurate do you think you've been?

• 0:38Speaker 00

  Uncomfortably accurate, given the whole picture, you know. It's like watching the movie for over and over again. Maybe I should explain.

• 0:51Speaker 00

  For about 55 years, I've been a global macro investor and I learned that many of the things that surprised me never happened in my lifetime before. So when I would see certain things happen that were like that, I would go back in history and study prior periods. Studying, for example, the Great Depression allowed us to anticipate the financial crisis in 2008. Anyway, there are three big things that I observed happening that didn't happen in our lifetimes, but happened during the 1930 to 45 period, and they are the creation of

• 1:32Speaker 00

  enormous amounts of debt and the printing of money to pay for those debts and it having its economic effects on inflation and growth. The second is internal conflicts over the largest wealth gaps we had since then, values gaps, and the rise of populism of the right and the left.

• 2:01Speaker 00

  Those conflicts, again, largest since that 1930 to 45 period. And then the rise of a great power, producing a great powers conflict internationally, with the rise of China as a great power, challenging the United States and with Russia. So the great power conflict, that also is the most that that's happened since the Great Depression. So because those three things are happening now, and I didn't study them. I went back and I needed to study the cycles, what's happened over longer periods of time.

• 2:46Speaker 00

  So I studied the last 500 years because these big cycles take about 75 years and give or take about 50. So, and you know, like the rise and decline of the British Empire, the rise and decline of the debt. And that dynamic I shared in the book, and I also shared it in an animated video, which is called The Changing World Order. And that creates a path. Now, it's not just because they repeat in this way, but one can see the cause-effect relationships that are happening.

• 3:28Speaker 00

  And so that has pretty much transpired according to script. We can get into those pieces, but I'd say those are the three main ones. There were two others that had big effect that I paid more attention to, that I'll mention. One was acts of nature in the form of droughts, floods and pandemics. They were very disruptive when they happened, killed more people and toppled more empires and or orders than others. And then also, of course, over a period of time, there's learning and producing new technologies that raises living standards, you know, it's raised per capita income, life expectancy and so on.

• 4:12Speaker 00

  And so, but those five factors transpire in ways that we've seen before to create this big cycle. And it's if we can look at the cause-effect relationships. That's what I want to pass along because I'm seventy four years old and I'm in a phase in my life that I want to pass along the things that are of value. And I think this is an important thing, but yes, it's transpiring according to script.

• 4:39Chris Williamson?

  Cassandra, yet again, unfortunately. What do you think is the likelihood of the meltdown of the dollar? Is America going to be wiped out at some point soon?

• 4:49Speaker 00

  I don't want, histrionics, you know, just I don't want to overdo it. And I also don't want to just jump to conclusions. My goal here is to show people how the machine works, the cause effect relationship. So I'm going to answer your question by explaining certain things. The dollar is is held by countries in the form of debt. In other words, when you say I'm holding the dollar, you're holding a debt instrument.

• 5:28Speaker 00

  And when we have a problem with the debt instrument, a few problems with it, holding debt instruments. And those problems are that, first of all, as a result of what the United States was in the world, the largest trading country, the dominant empire and so on, there's been a huge accumulation of dollar-denominated debt, and dollars therefore. And there's also been a lot of deficits that had to be funded, which happens by selling

• 6:08Speaker 00

  dollar-denominated debt, which a lot of foreigners and banks and others bought. And so they have a lot of dollar-denominated debt. Now, if you're a creditor, meaning an owner of dollar-denominated debt, you need to have an interest rate that is high enough to more than compensate you for inflation. And so the production now of a lot more debt and them having a lot of debt, and then also sanctions internationally, which means freezing dollar-denominated debt,

• 6:48Speaker 00

  all have created a reduction in the demand for dollar-denominated debt. There's also, you know, concerns in the world about some of the things that are going on in the United States, and that's reduced that. As a result of that, you're seeing more transactions take place in other currencies. And if they take place in other currencies, then others want to save in those other currencies because that's how they pay for it. So if you want to save in what you pay for, you save more in it and less in dollars.

• 7:28Speaker 00

  And so that's the dynamic that is reducing the demand for dollars and dollar debt at the same time as the supply of it keeps coming because we have large deficits.

• 7:42Chris Williamson?

  So the underlying value that those dollars represent isn't increasing, but the number of dollars spread across that is?

• 7:52Speaker 00

  Yeah, so that there's a supply-demand issue. That supply-demand issue, by the way, also exists in European currencies. Okay, they have too much debt and they're financed the same way. And Japanese currencies. And so what you're seeing is the movement.

• 8:12Speaker 00

  All that weight of money and debt is causing prices to go up, inflation. And that's also being worsened by the supply chain deteriorations that are due to the international conflict. So, for example, in the case of, let's say, China and the United States and other countries, as they prepare for the possibility of war, they want to be self-sufficient. And so, as a result, they work on being self-sufficient more than integrated and efficient.

• 8:57Speaker 00

  And so, that dynamic is playing an important role, too.

• 9:02Chris Williamson?

  What do you think the next few years have got in store for us?

• 9:08Speaker 00

  Well, I'm going to take all three of those influences and answer it because they're all related.

• 9:18Speaker 00

  There's a business cycle, or a short-term debt cycle, I call it, that, you know, sort of recession to recession. And the way it works is you have a recession and weak economy. Central banks stimulate credit growth. Credit gives you buying power. You go out and buy, the economy picks up. And then that continues until you start to have inflation. Then they tighten monetary policy. And then it, and then the economy weakens and it goes into the next recession. Since 1945, when the New World Order began,

• 10:00Speaker 00

  in other words, we had the currency and also the American World Order beginning in that. We've had 12 and a half of those cycles. We are, they typically last about seven years, give or take about three. And so, we are now about halfway through this cycle in which they You know, they did the stimulation, inflation rises, they tighten monetary policy. And we're in the phase of the cycle where there's going to be then the cracks occurring and the negative impact on economic activity and the like.

• 10:40Speaker 00

  And it's going to be more difficult than normal because there's so much debt outstanding. And we're, you know, what we just talked about. So that is likely to happen over, let's say, the next year and year and a half, which means that it will take us in through the elections. And what we have is a situation where the second of those influences, the internal conflict influence, is bad. And you have a lot of populism. So populists are people who will fight to win at all costs. They're not compromisers.

• 11:22Speaker 00

  You know, I will fight and I will win for you and the rules be damned, you know, compromising be damned. And so you're going to have a political situation in terms of, you know, that kind of environment. It's a bad time for that, but it'll end up paying an impact on the, on the nature of the elections, I think. And then you have the international conflict. We are much closer to a big conflict, a war of sorts. Either a sanctions and economic war or even possibly a military war with China.

• 12:05Speaker 00

  And because of the politics also, that that will be pushing its limits too. Because there are, the one thing that most Americans are united on, and both Democrats and Republicans are united on, is anti-China. And as a result, you know, and they all want a strong man or woman, strong person on that. And so I think you're going to see pushing of the limits there. And that becomes a dangerous set of circumstances. So I think that if we take the next, you know, let's call it one, two, three years,

• 12:48Speaker 00

  I think that those are going to be riskier years.

• 12:52Chris Williamson?

  I spoke to an evolutionary psychologist and an evolutionary anthropologist a little while ago on the show, and they were teaching me about the values and the type of characteristics that ancestral tribes would have preferred in leaders at different states. And in times of warfare, more dominant leaders were the ones that were preferred. In times of peace, more prestigious leaders were the ones that were preferred. Makes complete sense. If you are facing a scary tribe from the other valley, you want someone that's going to stand firm and is going to not take any shit and they're going to go for it. When in times of peace, that person becomes a bit tyrannical. It's a little bit too much energy when there's not anybody else to fight. And it's so funny how you see this just same dynamic. To me,

• 13:34Chris Williamson?

  it seems play out, no matter how big the populations get, it's essentially the same physics.

• 13:41Speaker 00

  That's right. It's it's happened repeatedly. If you're if you're in a war, what you want is the commander and everybody, you know, to goddamn follow the instructions and just do what you're told. And, you know, it's not like we're going to sit there and argue, debate and so on. So what you see is the breakdowns and particularly you see the breakdowns in also when they're at odds, there's a lot more to argue about. Like now, the populace of the left and the populace of the right. And so in the 1930s, you saw four democracies

• 14:22Speaker 00

  become dictatorships and choose to become dictatorships. They had parliaments that chose to become dictatorships. Germany, Italy, Spain, and Japan chose that because in order to fight, that's what you need. And that your anthropologist friends are right on that.

• 14:43Chris Williamson?

  Yeah, they're consolidating power in an attempt to try and be able to enact more change more easily. It's not, we haven't got time. We haven't got time to get this across the line diplomatically. We haven't got time to get everybody on the same page. We'll have one person who knows what they're doing and they'll push it forward. One thing that I

• 14:58Speaker 00

  And another thing that's common is the foreign enemy.

• 15:03Speaker 00

  When you have a situation where you have internal dispute,

• 15:11Speaker 00

  it's very, very common to try to bring the country together, get support by the leader by having the common enemy. You know, and so we'll all rally around, you know, the leader and you could see, you know, it was like, you know, when nine eleven happened and, you know, the president, you know, Bush gets a standing ovation and we're all behind you in that fight. And so that's, yeah, that's timeless and universal dynamic.

• 15:43Chris Williamson?

  If you can't bond yourselves together over shared love of an in-group, shared hatred of an out-group is a close enough proxy, I suppose, for that interim. Was there anything, over the last two years, that you didn't anticipate? Or is there anything particularly unique about the situation that we're in now? Every, what is it? Every time people say it's going to be different this time? Is there anything that could make things different this time? Or was there anything that you'd been surprised by?

• 16:14Speaker 00

  You know, by and large, I haven't been surprised by, I mean, I didn't anticipate that we were going to have the war with Russia.

• 16:24Speaker 00

  So that, but I did anticipate that we were likely, you know, headed in a war-like environment. It's very much fell with, as expected there. The economic and the financial very much is the same. So I'd have to, you know, but by and large, almost exactly, it's transpired the way described. And that's why, again, look, I did the video for free on YouTube, The Changing World Order.

• 17:02Speaker 00

  What I'm trying to do is to just pass it along for people's consideration, to understand the cause-effect relationship that goes there. But yes, it's unfortunately going according to script. That doesn't mean it's destined. Okay, but it's difficult to take off track. What do I mean by that?

• 17:27Speaker 00

  Each stage is the logical consequence of the stage that preceded it. So let's take the existing situation.

• 17:39Speaker 00

  The United States has a lot of debt and it has deficits. So it has to sell debt. Now, if you say, and others are holding debt. And if you say, um, how do you get healthy? Um, you have to spend less than you earn to get, to not borrow money and get financially strong. That's difficult, and particularly when you have a lot of debt. Cause you have to take a portion of your income and you have to pay the debt. And also you're living in spending more than you're earning.

• 18:23Speaker 00

  And so how do you rectify that? What, cut spending? I mean, it's very difficult to cut spending. Or raise income, that's not easy. So Ray, cut spending? Um, what do you cut? Okay, so we're living in a world now where, um, policymakers don't think, how much money do I have to spend? And what should I prioritize it on? They think, um, how much money, um, you know, how much money do I need to spend? Without regard to how much they have. And then they go spend it. And then they have deficits that, um, central banks can print. It's just like the same as individuals.

• 19:07Speaker 00

  They have the deficit, but what, but in their case, they have the capacity to print the money to pay the deficit. So, um, it's not easy to fix the financial problem. Um, the internal problem, you know what it's like? Can you get people to come together to, you know, say this is a common problem? Let's have the left and the right and people, very difficult. People have big differences in values and conditions. And so, um, it's very difficult to bring them together to deal with the problems. And the same is true internationally, you know, easier said than done.

• 19:50Speaker 00

  So, um, given that dynamic, there is then the stages. And so it's pretty clear normally what comes next.

• 20:02Chris Williamson?

  Given all of these changes, what do you think people can do to best prepare themselves financially for the next few years?

• 20:11Speaker 00

  Well, I think that, um, in saving, um, let's, let's talk about that. Um, there is, I, I, I think of savings in tiers. The first tier is to secure your wellbeing, to own a portfolio of assets that are going to secure your wellbeing. And then after you have that taken care of, then you can go to the next level, take more risk and so on. Um, that wellbeing, that purchasing power has to be viewed in terms of inflation adjusted dollars.

• 20:52Speaker 00

  You know, if you're holding, um, a debt instrument and, you know, a cash paying instrument and it gives you a 2% interest and you have a 5% or 6% inflation, you lose money at 3% a year. So you have to look at that in real dollars. And you have to, uh, hold that portfolio in a way, uh, that is balanced to any kind of economic environment. And then the way I do it, and I, you know, I, I stood, I remember, you know, I didn't have anything. And then I start to acquire, um, money and I start to think, okay, how much, how many weeks do I have? Months do I have?

• 21:38Speaker 00

  Or years that I'm financially safe and what do I hold it in? So, and then, you know, once you got that taken care of, you can go beyond it. And, um, and I wanted it in a very well-balanced portfolio. That, that type of portfolio that does equally well, no matter what happens. Um, I can explain that a little bit more if you want. That'd be good. Okay. Um, there are basically two big influences on markets. Um, the growth rate and the inflation rate.

• 22:23Speaker 00

  Um, like if you know that, um, growth is going to be faster than expected. And inflation's going to be higher than expected. You know, you know that bonds are going to go down and vice versa. So the way I, um, I give that as an example. Um, it, so the way I look at it is there are those two big influences. And then they can, so I have four environments and each one of them can go up or down. So there are four quadrants that I think of.

• 23:06Speaker 00

  Rising growth, falling growth, rising inflation and falling inflation. And I want to have a portfolio that will be 25% of my risk in each one of those. So that I don't have any bias. And so I pick the assets that are going to do well in each of those four quadrants. And I hold them in a balanced way. And I've tested that, you know, going back actually to nineteen hundred and so on. And you'll maintain, you'll actually increase your buying power.

• 23:40Speaker 00

  And so it, you know, that's the kind of thing that I think in the beginning. Then you have to also make provision for, you know, taxes to some extent. So I say, whatever that amount of money is, I want twice as that. So in case it goes in half. And I want to build a portfolio that looks like that.

• 24:02Speaker 00

  For, you know, I don't know, X number of years that I have that. And that's the safe savings. And then when I go beyond that, then I'll take more risk. But I think that being safe, particularly in this kind of an environment, is important. And I would take a perspective of how to do that. That's like the one I'm just describing.

• 24:26Chris Williamson?

  What would be an example of an investment for each of those four quadrants?

• 24:31Speaker 00

  Well, I'm worried that we're going to take a long time to explain it. I've explained it elsewhere, but let me give an example. I'll, I'll take it.

• 24:43Speaker 00

  Like if growth, so there's these four quadrants, growth and inflation. If, if growth is less expect, less than expected and inflation's less than expected, you would like to own bonds.

• 25:02Speaker 00

  Okay, if it's higher than expected, you would not want to own bonds.

• 25:09Speaker 00

  Okay, if, if inflation is higher than expected, you would want to own assets such as commodities and gold and inflation index bonds.

• 25:27Speaker 00

  If growth is faster than expected, particularly if inflation is less than expected, you'd want to own stocks.

• 25:39Speaker 00

  So you get the idea.

• 25:43Chris Williamson?

  One of the things that you brought up earlier on was the changing internal structure. This is driven by a number of factors, but one of them being increasing wealth inequality. At the moment, it seems like there is a decline in praising work ethic, especially in the US. Do you think that that is a symptom or a cause of what we're seeing at the moment?

• 26:07Speaker 00

  Well, I think the, I'm referring to the, let's say, the wealth gap.

• 26:15Speaker 00

  I think that there's

• 26:21Speaker 00

  it's a, there's a lot of particularly unproductive people.

• 26:27Speaker 00

  For example, for various reasons, but I, I live in the state of Connecticut and my wife tries to help students in the poorest neighborhoods have the worst conditions. And I'll give you this example. I

• 26:47Speaker 00

  the state of Connecticut is usually number one, two or three in the richest state in the country. But 22% out of the last survey, it's actually higher than this. 22% of the high school students in Connecticut have either dropped out of high school or have absentee rates of greater than 25% and are in failing classes. And there's a great deal of poverty and the breakup of the families and, and the guidance. There's a cycle that takes place. And so you're seeing the general competitive education levels, the conditions

• 27:30Speaker 00

  in the, in Connecticut. So we operate philanthropically and I'll give you an example. There was COVID and the kids have to get educated. And 60,000 kids didn't have computers or connectivity.

• 27:47Speaker 00

  And no government was going to do anything about it. So, you know, we had to buy sixty thousand computers to give it to kids in order for them to have education. Well, this, and there's hunger, and there's poverty, and there's drugs. Um, I live, it's how the educational system is funded. Yeah, um, education is a state issue by the constitution. And then within a state, it's a tax, typically within a state, it's a tax district issue. So I live in Greenwich, Connecticut, which is relatively, it's a, it's a rich, uh, town.

• 28:30Speaker 00

  And the public education gets about twenty four thousand dollars per student. Last number I looked, it's probably higher than that now. Gets twenty four thousand dollars a student up the road. At Bridgeport, Connecticut, ten minutes up the road, they get fourteen thousand dollars a student. Because there's no tax base. And, um, and they need it more, they need more money because, you know, the expenses of raising a kid are, you also have to get them the computer. You've got to get them the, you know, the food, the clothes, all of those things. And they have less food, less clothes, all those things. So, um, and, well, but in any case, what you can see

• 29:14Speaker 00

  is the education test scores and measures of how we're doing in education relative to other countries have declined. So part of it is, uh, education and circumstances. Part of it is drugs. Part of it is, um, you know, there are lots of parts of it. And then there's, um, a certain element of it, which, uh, let's say because of COVID or other reasons, um, that people, um, have moved around and, and say, you know, I don't have to work as hard anymore. So, you know, just for example, the change in the attitudes of restaurant workers.

• 29:58Speaker 00

  You know, okay, I can, I found another. Way to live and so on, and that's playing a role. Of course, also, people, as the baby boomers are older, you know, they drop out of it or they want to retire earlier, and they do. So there are a number of factors that affect,

• 30:23Speaker 00

  you know, this kind of set of circumstances. The bit, the wealth gap is very much due to a self-reinforcing cycle in which if you earn a lot of money, you can afford to take care of your kid's education. You can raise them in a better way. If you don't earn a lot of money, you don't have that privilege. So, you know,

• 31:00Speaker 00

  so all through history,

• 31:04Speaker 00

  during those such times, wealth gaps have increased.

• 31:09Speaker 00

  So you look at the cycles.

• 31:13Speaker 00

  You have a new, you know, like a new world order, like in the 1850s. You know, you have the civil war and then you have that. And then you have new technologies and inventing. You have the industrial revolution take place and things go great. But what it does is it also increases the wealth gap. Some people make a lot of money, others don't. And it also increases the level of indebtedness. And you make the turn of the century. You, this, then you see big conflicts over wealth. You have the panic of 1907. And so what you see is the industrial revolution

• 31:56Speaker 00

  turns into what's called the gilded age in which there are very rich decadent, you know, while there's poverty and, you know, in the early turn of the century, they are living, people are living very, very lavishly, very decadently at the same time as their, you know, sweatshops and all of that. And then there's kind of a revolutionary reaction to that. So these things happen over and over again for the same reasons.

• 32:28Chris Williamson?

  What would you tell young people then at the moment? What advice would you give them?

• 32:35Speaker 00

  Well, first of all, learn, learn how, say a few things. First, know your nature. Everyone has a different nature, a way, a pull, what's their pull toward.

• 32:54Speaker 00

  I created a personality profile test called Principles You. It's, I put it online for free and it tells you a lot about, you know, what your nature is. And it also shows if you, if you take the test and you do, and you put somebody else's in, they take the test, it'll tell you about your relationship. So you want to know what your nature is, what your pull is going for. And then you go through your journey of learning experiences that, you know, has its ups and downs. And, you know, you learn, you have your, you know, your painful experiences, but I have a principle. Pain plus reflection equals progress. You learn, you get that.

• 33:38Speaker 00

  And, and then to have perspective, to understand that all of these things, events transpire, you know, know the whole cycle, see the whole thing, gain perspective and understand where you are in the cycle. Understand where you are in the life cycle. There's a life cycle, you know, from birth to death. And let's say on average, it lasts about 80 years. And you know that at different parts in that cycle, certain, certain things are going to happen. You're going to, you know, first third of it, you're going to be dependent on others and you're learning.

• 34:19Speaker 00

  Second, third of it, you're going to be independent of your parents and so on. And you're going to be, others will become dependent on you and you're working to be successful. At the various ages, you, you get married, you have kids, you, all of these cycles, there's a life cycle. That happens over and over again. And then there are these other cycles, the cycles of, you know.

• 34:46Speaker 00

  You know, let's call it almost from from war to war. Um, um, whether that's a internal war to changes the internal order or an external war changes the external order. And there's a cycle that has to do with a debt cycle and those others. And, um, and you, you, and you have to know what those cycles are like and kind of where you are in those cycles and you navigate it well. I mean, the main thing, you know, is being strong, smart, capable and adaptable. But, um, that's why I put out these, um, you know, videos and books to try to help people understand that.

• 35:29Chris Williamson?

  You mentioned one of the common life landmarks that people get to is having kids and getting married. At the moment, especially in the West, but also even more so in Asia, birth rates are falling through the floor. We've got naught point seven eight, I think in South Korea. We've got just around about one in Japan. China also looking really bad at the moment. What, how concerned are you about current population decline and future demographics?

• 35:59Speaker 00

  Well, it's a, it's a, it's a real burden. Uh, and also depending on where it is, it's a, a, a real burden. Um, because the young have to take care of the old. So let's say, for example, in China, um, with the one child policy, uh, a married couple has four old adults that they have to take care of. There's not an adequate social program. Um, and that takes, uh, time and money. Um, and it makes it, you know, a, a, a great burden, makes productivity a problem.

• 36:41Speaker 00

  And so, um, you see, you know, like you say, you know, you see this, um, you know, that, that, that is a, these are burdens, costs, because the, well, those who need taking care of, um, and are not earning money, uh, need, um, you know, those resources and it's, and it's sapping. Um, you know, one hopes that productivity increases faster than.

• 37:13Speaker 00

  This burden and that, but then it requires you, you have to, if you raise that, you have to then divide the pie well. So it's a, yeah, it's demographics is a burden.

• 37:27Chris Williamson?

  You are maybe alluding there to stuff like AI, robots, robotized workforces assisting in terms of getting more juice out of the smaller demographics that we do have.

• 37:41Chris Williamson?

  And the potential gains of that accruing to a small number of people that own that organization, you need a relatively small group to be able to, I don't know how many people are in the open AI company, but something tells me it's a significantly smaller number than the amount of impact that it's had and is probably going to have.

• 38:00Speaker 00

  Right. So that's exactly right. So if you, if the society as a whole can do that, what it will do is it'll naturally make the people who, some people very rich and some people very poor, but it can raise productivity enough that it can raise living standard. Let's just imagine robots always work there and you don't have to have people in doing the jobs. Then what you can have, then what you have to deal with is how do you redistribute the wealth and opportunity? Because as I say, it'll be concentrated in some and others

• 38:40Speaker 00

  will lose jobs and there's more productivity for the whole, but you have a distribution issue.

• 38:50Chris Williamson?

  Are you familiar with Nicholas Eberstadt? Do you know him? He wrote Men Without Work?

• 38:54Speaker 00

  No.

• 38:55Chris Williamson?

  He came on the show, he came on the show last week. I think he'd be really interested. The book's very, very short and he's discovered this odd cohort of men that are lurking inside of the unemployment statistics. There's seven million men aged 22 to 55 in the US who aren't working and aren't looking for work. Only 10% of that number are students. From the remaining 6.7 million, about 2,000 hours is the average amount of time.

• 39:23Chris Williamson?

  That they spend watching screens and fifty percent of that time on average is spent whilst on either prescription medication or weed recreational drugs. And two thirds of those men are living in homes that claim at least one disability benefit. So basically lurking inside of the low unemployment numbers is this cohort of prime working age men who don't have a job and don't want a job either. One of one of the potential downstream implications for that is what does this mean for universal basic income? That if these men are able to be supported by social welfare, but they're not they're not going out and enacting poetry, staring up at the stars, you know,

• 40:06Chris Williamson?

  speaking their truth forward and dealing with the existential pain of living in a good way. This doesn't seem like they're flourishing particularly. And given the automation that's potentially coming down the pike, I wonder what that means.

• 40:21Speaker 00

  Well, I think you paint or he paints an accurate picture. And obviously it's not good, you know.

• 40:30Speaker 00

  My as my wife was describing when she's dealing with that population. Now it's very common for kids to come to school high. And, you know, then they have

• 40:43Chris Williamson?

  What what ages?

• 40:45Speaker 00

  Oh, young ages. You know, ten.

• 40:52Chris Williamson?

  Wow, okay.

• 40:53Speaker 00

  Well, marijuana is readily available.

• 40:59Speaker 00

  And so, yeah, we have a number of these issues.

• 41:04Chris Williamson?

  We've brought China up a couple of times. And I think based on what I know about your work, the conflict between the USA and China as China, the ascending new power that may be overtaking the USA. However, we do have this perhaps unprecedented demographic collapse that China is facing. The best predictions that I've seen suggest that it's going to go from about one point one to one point two billion now to about six hundred and fifty to seven hundred million by twenty fifty. So it's pretty much getting chopped in half. Does that change the way that the world orders change moving forward?

• 41:47Speaker 00

  I think the main thing with China right now is, you know, we're on the brink of war with China for various reasons. You know, like, I hope we make it to 2050. So, yeah, the demographics is as I describe it. And by the way, them losing doesn't make us winning. Just so we're looking at that, you know. We hope everyone gets better. And the world economy, we hope everybody has a better way. Nobody, everybody loses in wars.

• 42:29Speaker 00

  And so, you know, that's their set of circumstances and it'll be what it'll be. I think the most important thing is how do we deal with our circumstances? You know, how do we become strong and healthy, financially healthy, productivity healthy, and so on? So, yeah, we could talk about the demographic problem in China, which is just what we talked about before in terms of, you know, does robotics and productivity and all that make up for that? I don't know. But I really think we're projecting too much on the outside world. Okay, what do we do with China?

• 43:13Speaker 00

  Of what relevance? Well, we trade with China. We don't have to go to a military war with China. I mean, let's, why would we? We shouldn't do that. You know? And then if that's the case, you know, what's the problem with them growing? You know, okay, but there's not, it's not very much. You know, okay, let them grow and invent and let us grow and invent and share the inventions. That would be good. Um, but the problems that we're facing are pretty much our own problems. The things we're talking about and the breakdown of infrastructure and, you know, all of that.

• 43:59Speaker 00

  So really, um, I think we should focus on that. And, you know, maybe their demographic, demographics is a big burden or not. You know, they have other big burdens too. We all do, but let's focus on how we can be as good as we can be.

• 44:15Chris Williamson?

  Yeah, as opposed to presuming that this zero sum game is China finds life harder. Therefore, America finds life easier.

• 44:24Speaker 00

  Yeah, that doesn't work.

• 44:26Chris Williamson?

  Yeah, I understand. Um, you might have seen the Restrict Act, which was brought up recently. It's lining up a potential ban for different types of online services. And it seems like one of the potential bases for banning TikTok from America, which again, to me, just

• 44:47Chris Williamson?

  further embeds this them and us. China is enemy. If we can remove that influence from the West as much as possible, then we are going to end up in a better situation.

• 44:58Speaker 00

  Well, that's the dynamic, yes.

• 45:02Chris Williamson?

  What do you think about the Fed's messaging about this soft landing thing? Is that possible? Like historically, I don't think it's, it's really happened, but do they have enough control over the economy to be able to make this work?

• 45:15Speaker 00

  The big issue is that, um, a lot of debt was created. A lot of it is government debt, but it is also corporate to a less extent household debt. Um, um, um.

• 45:31Speaker 00

  So, um, if you look at the Silicon Valley, Valley Bank issue, um, it's not so much their issue as much as a worldwide issue. And what happened? Is that, you know, what's a bank? A bank takes in deposits.

• 45:50Speaker 00

  And then it takes that money and it invests it in things. And so they bought a lot of government bonds that had a higher yield than they were paying out in the deposits. There's a tightness of monetary policy. And those yields went up and the bonds went down in value. And then the amount they have to pay out went up in value. And so they went broke. And that is happening all over. That happens not only through banks, banks as a whole did a lot of that. But insurance companies and so on, all around the world.

• 46:33Speaker 00

  Same sort of thing happened in Europe. Same sort of thing happened with Japanese companies even buying US dollar bonds. A lot. And, and so you have, if you were to mark those to market, you would have a terrible calamity. But what's going to likely happen is they don't want any more of those bonds. And we're going to have to sell more bonds because we're going to have a deficit. So when you have a deficit, you have to pay for it through selling debt. And there's a lesser demand for that debt.

• 47:17Speaker 00

  And I think that that creates, you know, a problem in which either interest rates go up or the Federal Reserve's got to come in and print. And this is a problem that exists also in Europe with the European Central Bank, the Bank of Japan, all of them. So that's where, that's where we are. And it has knock on effects. It's like dominoes that fall. So it will produce less credit. And as it produces less credit, less, less demand, less, less credit, that'll produce less spending. It'll come in certain parts of the economy. For example, commercial real estate. For example,

• 48:04Speaker 00

  Venture capital and private equity. For example, low-grade bonds where they have a heavily indebted company and the interest rate goes up a lot and that causes problems. So I think you're in the part of the cycle where you've had the tightening and then the dominoes are beginning to fall. And I think that that's going to produce more, more problems. So I think when it comes down to it, there's just too much debt and, and we're adding it to it too quickly. And so it's going to, either that debt will be paid off with hard money, in which case

• 48:48Speaker 00

  there's not much printing and so on, or it'll be paid off with printing a lot of money to make it easier to pay off. I think in the end it'll, it's always the case that they print a lot of money and, and make it easier to pay off, but you have the reduced value of money. So that's how it looks to me. You'll have probably a stagflation environment. And because you have that dynamic going on at the same time as you have supply chain disruptions because of the geopolitical, I think it's going to be a difficult environment.

• 49:26Chris Williamson?

  Let's say that we do hit quite an aggressive recession. What are some of the ways that people could even look to benefit financially from that happening? Are there any things that individuals can do?

• 49:44Speaker 00

  The most important thing, as I say, is to have this basic well diversified. And, you know, there are some assets and, and think about different, you know, a small percentage of your money, even in asset like gold or, or, and diversification for countries, you know, to just to create a diversified portfolio is important.

• 50:12Chris Williamson?

  One of the things that did occur, you mentioned Silicon Valley Bank there. There was a big bump in terms of Bitcoin and other cryptocurrencies around about that time, and it seemed like one of the first periods where people genuinely saw crypto as a store of value, as a way to just, I need to put my money somewhere that I feel is safe. And given the last 18 months of what's happened with crypto, considering that as that's the place I'm going to store my assets in order for it to be safe, I think said quite a lot about how people sort of perceived the state of the dollar and the security of banks and stuff at the moment. What's the role of Bitcoin or cryptocurrency in the current economy in your eyes?

• 50:58Speaker 00

  I think cryptocurrency or Bitcoin doesn't move in a reliable way related to almost anything. It moves up and down because of this mood and that move and mood. And unlike gold, let's say, I would prefer gold and I would prefer crypto for various reasons. Crypto, it's very easy to track the owners and transactions in it. It's not liked by the government.

• 51:35Speaker 00

  It doesn't move in a way that's consistent with, you know, kind of any of the environments. And it's a fairly, and it's a small asset class. You know, we talk a lot more about it, but its size is about, you know, 30% of the size of Microsoft, and Microsoft is one stock among many stocks. So it's given probably a lot more attention. I don't know, you know, who knows, maybe, you know, there's some element of it. I don't understand why people are more inclined to go to

• 52:17Speaker 00

  Bitcoin than gold. If you look internationally, gold is for central banks, the third highest reserve asset. First is dollars, then euros, then gold, then Japanese yen. And central bankers are buying gold and they're not buying bonds. And so, and it's timeless and universal, it's been there. So, but, you know, so I'm not, I'm not a big fan of it. As I've said before, you know, having a little bit, I have a little bit of it.

• 53:00Speaker 00

  But if you have a little bit of it, you have to think about those things. And, you know, like I said, you know, you have to be prepared for it to fall a lot. You know, if it goes down 80% or something, but that limits the amount that you can have in it. So I don't know. It's, I don't think a lot of Bitcoin.

• 53:21Chris Williamson?

  I think what's interesting there is holding crypto essentially has a cognitive load on you. Using it as somewhere that you're using for investment as a store of value to just put assets that you've got. It's almost that there is a price that you pay because of the volatility, but the price that you pay is with your own sanity with regards to that, which is something that I hadn't quite considered. There are less sanity sapping forms of investment.

• 53:51Speaker 00

  Yeah, that's a, that's a good way to do it. You know what I mean? I've seen so many people, you know, I've seen people get very rich and I've seen people get very broke with it.

• 54:01Chris Williamson?

  I have friends in both camps. Yeah. So, you know, we've spoken about today, this very quickly changing, highly volatile environment that we're in, whether that be socioculturally, politically, globally, locally, financially.

• 54:19Chris Williamson?

  Where should people go in order to find some solace in this? Given the fact that it is difficult, it's difficult to exist in this world?

• 54:33Speaker 00

  Go to, go to places or spend time where there's not as much of this junk going on, you know?

• 54:45Speaker 00

  I mean, first of all, I think, recognize, let's, let's go to some of the basics.

• 54:52Speaker 00

  What do you really need? You know, you need a bed to sleep in, you need food to eat.

• 55:02Speaker 00

  Most depressions, most people remain employed. Most wars, most people don't get, die or get injured.

• 55:15Speaker 00

  So, you know, let's put, let's calm down and put all this in place. Let's be in places where there's, you know, goodness and harmony and beauty. You know, maybe spend more time in nature or, you know, you go out there and I'd like to meditate. Meditate is, meditation has had a big effect on me. So, yeah, don't get all stressed about it, you know? Navigate it well and, you know, enjoy life, enjoy those things. And I think that that's, you know, I think that's most important.

• 56:00Chris Williamson?

  What would you say to the people that say, how am I expected to enjoy life? When there's all of this chaos going on, there's so many bad news stories and headlines? And what about the financial collapse?

• 56:11Speaker 00

  Well, um, first of all, if it's really having that impact on you, don't get so hung up on the financial stories and you don't, don't, don't watch the television or something, you know, go out for a nice walk and in the nature like all that story, you don't really need all that story. Okay. Now what's going to happen to you? Like I say,

• 56:37Speaker 00

  you know, don't get so hung up on expectations of having the most amount of money or whatever. Just, you know, think about it. Um, like I say, where, what, will you lose where you live? Will you, you know, um, what matters? You know, uh, your friends, your family, your, um, you know, give a bed to, a good bed to sleep in, adequate food, right out into nature. You know, like, uh, my own view is sometimes, you know, like the most luxurious thing I can do is take a tent and be out in a beautiful spot, you know? Um, so, um, you know, the,

• 57:20Speaker 00

  avoid it. Um, you know, no, don't get stressed out, you know, understand it, be prepared.

• 57:30Chris Williamson?

  Redefining success and what happiness means and what we should be aiming for in life, I think is a, a very worthwhile pursuit.

• 57:37Speaker 00

  Right. I'll, I'll tell you, um,

• 57:42Speaker 00

  this idea of success being measured in the amount of money and status you have is really screwed up. Um, um, like if you think about money and, and this is, uh, shown in measures of happiness, um, past a basic amount of money so that you don't have, uh, misery, there is no correlation between the level of money you have and the level of happiness you have. Lots of studies show that. And the highest correlation is do you have a community?

• 58:21Speaker 00

  And that's the highest source of happiness and also longevity. It has a big effect on longevity, stress.

• 58:31Chris Williamson?

  More than smoking, more than stopping alcohol, more than going to the gym and exercising.

• 58:35Speaker 00

  Right, right. And so, and then you think like, what is money for? It has no intrinsic value. It only has a value of what it buys. And so it has a limited marginal ability, you benefit. You, you add more and more to it. And, you know, like, what are you gonna do? Okay, so you're gonna get a bigger house or a bigger car or what, what, you know, okay. And what does that really mean incrementally? Relative to spending time with friends and family and all of those things? You know, most of the good things in life are not expensive, right?

• 59:18Speaker 00

  Friends, family, nature, sex, anything, you know? It's not gonna get better with more money, right? Materially better. And so it seems to me that it then can become an obsession. And that's not healthy. So I think it's, you know, by and large, you handle it well and it's all gonna be okay. It's all gonna be okay.

• 59:52Chris Williamson?

  Ray Dalio, ladies and gentlemen. If people want to keep up to date with the work that you're doing, why should they go?

• 59:58Speaker 00

  My more lengthy writings are on LinkedIn, but I'm on all of the social media. So in various ways and, and if I write something that's longer, it'll be linked to LinkedIn. So, you know, all the major social media I'm on.

• 1:00:20Chris Williamson?

  Ray, I really appreciate you. Thank you for today.

• 1:00:23Speaker 00

  Thank you for your time.