How America Goes Broke — ft. Ray Dalio

32:37In March of 1933, President Roosevelt got on the radio and announced the exact same policy because there wasn't enough hard money, not enough gold. And so that's what it looks like. I would say that you were one of the first people to really popularize this issue, at least in recent years. You were kind of the first one to sound the alarm. I mean, this latest book is about the big debt cycle, how countries go broke. But a lot of your books and a lot of the stuff that you've been writing and talking about is along this theme. and it was my view at the beginning of the year that this was something that people everywhere in America but also and more specifically in Washington cared about and I really thought that because that was part of the Trump platform there was a lot of talk about getting spending under control we had doge and the idea of doge was to get the spending under control, regardless of how one might think all of that was handled.

33:49That was the idea. I thought that people were on board with this issue. I thought that people cared about this. Then I see this big, beautiful bail act, and I learned that it will add$4 trillion to our national debt. $4 trillion is the amount of the estimated increase from what it would have been, the amount of debt, if the tax bill didn't get modified and the tax cuts were rolled over. $4 trillion is that? Yes. No, no, no. The correct number of the amount of debt increase from the$36 trillion that you mentioned before over the next 10 years is about$25 trillion because just look at, like, we run$2 trillion a year deficit.

34:40Okay. And that adds up on the compounded basis to about$25 trillion. So the correct statement to make is that our debt will increase by about, it probably will increase by about$25 trillion, not about$4 trillion. So we increased the debt by$25 trillion. I've also seen, I mean, I think that the higher the numbers, the more confusing it gets. But one statistic that I think is very relevant, as you say, we're going to crowd out our ability to spend money on things that we need. As I said before, we're spending almost a trillion dollars a year just on servicing the debt. But because of the big, beautiful bill, we're going to double that to almost$2 trillion per year by 2034.

35:29In sum, I thought we all cared about this. I thought that people in Washington cared about this. That's what everyone was saying. And yet here we are, this big, beautiful bill has been passed. And it's basically going to do the total opposite of what I thought we all were worried about. And so my question to you as the guy who's been talking about this and who's been sounding the alarm, are you not frustrated by what is happening in Washington right now? And when you go to Washington and you talk to these people and you say, this is a problem, and they say, yeah, yeah, we agree it's a problem.

36:07It's really bad. I'm wondering if you even believe them. First of all, I don't get frustrated. I'm just analytical. Fair enough. I'm just, you know, it is what it is. And different people have different perspectives. And I would say, I think that the problems are very well recognized and that the administration's point of view is that these things are problems. So you have a renovation plan that they have, which is tariffs will bring in tax revenue and they are bringing in big tax revenue and that that will protect American businesses in various ways and help in the budget deficit. And they would say that stimulation is required to raise the incomes to create the tax, just like Scott had mentioned.

37:07The best way to get out of this is through stimulation and taxation. And then leaning on other countries in various ways, partially to pay their expenses, to help to cut our expenses. and to encourage them, with a big E under encourage, them to invest in the United States and buy our debt. So I'm very nonpartisan, okay? I'm just trying to be analytical. And so I convey my pictures of these things as accurately as I can. And I wouldn't do justice to our discussion if I didn't convey that perspective. The key question then is, do you think that that strategy could work? I mean, assuming these issues are being taken seriously and assuming that this is the way that we are to deal with them, do you think it's going to work?

38:18Do you think that could get us out of the hole if we're so far along on this path of, as you say, going broke? Is this going to help us not be broke in the future? I don't think it's going to get us there. I think there are some aspects to it that have a lot of merit, and there are lots of aspects to it that I would disagree with. And I think the real problem of our country right now is the breakdown of the effectiveness of democracy. Could you say more about that? I'm going to preface it with something. I'm a practical guy. I'm not an academic. But I've studied history. The first time that about the 1971 breakdown of the monetary system, I was clerking on the floor of the New York Stock Exchange.

39:11And I thought when Nixon made that announcement that that was going to cause a crisis. I went on the floor of the stock exchange and I saw the stock market up more than it was in decades. And that led me to study the prior devaluations. I never saw one of those before. And I learned that in March 1933, Roosevelt made the same move. And I understood more of the mechanics of all of this. And that also led me to understand how the debt problem existed that allowed me to anticipate the 2008 financial crisis and the 2010 to 15 European financial crisis and do very well during that period. I would say that there are five main forces that interact to drive everything.

40:05We're talking about the debt mechanics. There is also a political mechanics that enters into this, the battle between the left and the right. And when you get into a situation where there are irreconcilable differences, then the system classically creates a type of great internal conflict in which the system itself is in jeopardy. OK, democracy, one of the big problems of democracy is people vote for what they want and you can't maybe necessarily do what's best for them sometimes. And we now have we are now at a stage where we have irreconcilable differences. And so how our system is working and the moves that we're seeing politically to get control, to get control, remind me very much of the 1930s.

41:01As does the Stett situation. The third, as I said, there are five. The third great force that has a big effect is the international geopolitical world order. The way it works is who's in control of the order, the system, the world system. It's always the powerful country. So in 1945, the winners of the war set the rules. and the United States was the dominant power, had 80 % of the world's money, gold, half the world's. Anyway, it set the rules. Then what happens is rising powers challenge the existing powers, and there's no world court that resolves these things. And so you have a great conflict.

41:46And that requires military spending. That requires these actions. So we are, you know as you can see as you watch um in beijing uh xi and and uh putin and modi and the military parade okay this is all part of the picture and there and and so it enters into even the economic policy tariffs one of the purposes of tariffs is to get independence because you need self-sufficiency in a world where you may be cut off or we might be cutting others off in one in certain type of war. And that's financial. So that's the third influence. The fourth influence throughout history has been acts of nature. Droughts, floods and pandemics have killed more people than wars.

42:38And it's a factor. And it's a big factor now. And it's costly. It's estimated that the cost of that will be about eight trillion dollars a year for the world and a world GDP that's 100 trillion. And that's a lot of money. And then number five in the force has always been technology. In other words, man's inventiveness of technologies have been revolutionary and raised living standards as reflected in life expectancy, GDP per capita and so on. And now we can't have this conversation without talking about technology changes on this whole picture. Because now with artificial intelligence and so on, does that create productivity miracles that help to make that money, that problem, less of a problem?

43:25And what does it all mean? So all five of those forces are interacting to create the dynamic that we now have and also raise a lot of question marks because this is not a precise, none of those things really can be thought through so precisely. If you, as you look at the risks to America right now, as you say, your job is not only to analyze these risks, but also to bet on them. And you've had a good track record. And, you know, you've gone through some of those risks. We have this debt crisis, an impending debt crisis. We've got internal political conflict. We've got external conflict with China.

44:05one of the most geopolitical precarious times probably in the last 50 years many many risks what is your number one risk what is the thing that you are most worried about what do you think is the biggest threat to america and to america's dominance in 2025 first human nature can we rise above our own selfish, fighting, possibly self-destructing or mutually destructing tendencies to find the common solutions or the compromises to be able to not have the worst of what is possible. I mean, so that's number one. Number two is in each country being strong and in it together. Okay? I believe if the United States is very strong and healthy, that's the best thing it can do.

45:23Okay. It's the safest thing to be doing, but I think that that can only come about by a us not fighting with each other so much and, um, and a strong middle and a strong middle. I mean, policies that truly are effective in creating improvements, like in education. Like, we have a problem. 60 % of all Americans have below a sixth grade reading level. So anyway, we have a problem with that. If you want to make a society successful, there are very few things you have to do. I think that we can't do it with fighting with each other. We have to have a strong middle. Strong means also being able to enforce the things that need to be done that may be unpopular.

46:21Okay, like dealing with this budget situation and the like. I don't know. These are long shots, by the way. These are the things that are necessary. Stay with us.

46:46As marketing channels have multiplied, the demand for content has skyrocketed. But everyone can make content that's on brand and stands out with Adobe Express. You don't have to be a designer to generate images, rewrite text, and create effects. That's the beauty of generative AI that's commercially safe. Teams all across your business will be psyched to collaborate and create amazing presentations, videos, social posts, flyers, and more. Meet Adobe Express, the quick and easy app to create on-brand content. Learn more at adobe.com slash express slash business.

47:22The Jack Welch Management Institute at Strayer University helps you go from I know the way to I've arrived with our top 10 ranked online MBA. Gain skills you can learn today and apply tomorrow. Get ready to go from make it happen to made it happen and keep striving. Visit Strayer.edu slash Jack Welch MBA to learn more. Strayer University is certified to operate in Virginia by Shev and as many campuses, including at 2121 15th Street North in Arlington, Virginia. Tuesday on NBC, Jimmy Fallon and Bozema St. John host the highly anticipated new competition show. I hired 10 creatives from all walks of life.

48:01They will be battling it out to see who can impress the world's biggest brands. This is a huge opportunity. This is the battle for the next big idea. This is not play play. We're spending millions of dollars. I'm so excited to embark on this adventure with all of you. Make the best idea win! On brand with Jimmy Fallon. Series premiere Tuesday on NBC.

48:28We're back with Prof G Markets. Ray, we've been drawing parallels between the current situation in the United States, the United States in the 30s. And I actually see as strong or stronger parallels. I'm curious if you see the same comparison between the U.S. now and 30s Germany. And that is economic anxiety. We don't have a Weimar-like collapse. We have a collapse in the middle class. Political polarization. inflation, income inequality, populist strongman appeal, that speaks for itself, all the scapegoating of, quote-unquote, the enemies within. We're not worried about Russian soldiers pouring over the border in Ukraine or the CCP.

49:07We're worried about your neighbor or universities or immigrants, media and information chaos. There was a lot of that back then, same now. And I used to hold out hope, well, our institutions are stronger and and our leaders don't have their own private armies. And those two things now seem as if they've been compromised. So am I catastrophizing here or is a deficit problem, quite frankly, small ball compared to what could happen here? You can't separate the financial from the political, which you're talking about, internal political. And I agree with that from the other three that I also mentioned.

49:48They're all reinforcing. Yes. We won't use the terms because they're evocative. But yes, Germany had an economic crisis. And before Germany, there was Italy and places were not run on time. They said to make the trains run on time that we needed, you know, will somebody make this thing work well? And so you had out of that the autocratic leaders. Four democracies in the 30s. Four democracies chose to have autocracies or dictatorships, however, because of the great disorder and the great infighting. And so you saw that in Germany, Italy, Japan, and Spain. And so we are at a time where Americans are saying, will somebody gain control of this situation?

50:57And so when you look at whether it's Washington, D.C. and the National Guard going into Washington, D.C. and other things, there is an appeal to a lot of people about that. And when we're dealing with how this is working with democracy and the loss of trust in our legal system, that is a belief that almost everything has been politicized, that you're on one side or the other and you have to pick inside and fight for it. That is where we are. So I don't think what you're saying is incorrect at all. Ray, one of my takeaways from your insights is almost that this is inevitable. I mean, when we talk about the idea of cycles, the fact that this happens to many countries over and over again, and here we are again, we're in the big debt cycle once again.

52:03And the thing that you describe of we're all on the ship, we're headed towards the iceberg and people say, no, we've got to go left. The other people know we're going to go right. And ultimately we just crashed into the iceberg. That's kind of where I'm beginning to land on this debt issue and also on the dominance of the American empire itself. I'm starting to think, you know, this is kind of just the way it is. And we can say that we're going to get spending under control. We can say that we're going to get down to three or four percent as you put forward. But ultimately, this stuff is too difficult.

52:42Humans are too selfish. There is too much conflict. and the way things shape out is the cycle just happens over and over again. And so in a lot of ways, maybe we just resign to that. I mean, I'm not sure I want to go that far right now, but that's kind of where I land on this. I'm wondering if you would object to my landing there. And if you think that's kind of the situation we're in, what do we do about that? What do we do about that as investors, as young people, as professionals? What do we do about that? I think that we are most probably headed in that type of a direction, but we also know that there are things we can do and there are things that are happening that should make us not view that as a surety.

53:38what we should do is continue to use my measures, our measures that show these things and deal with it well. And that's, by the way, what we should do, I think, is inject some understanding and worry into the situation, which we're doing now today. I have a principle. If you worry, you don't have to worry. And if you don't worry, you need to worry. Because if you worry, then you will take care of the things that you're worrying about. I agree. And we have the capacity today to deal with all of these things. If the parties involved can worry enough and rise above their self-interests to be able to deal with them well, that's a reality.

54:28There's still choice. However, I agree with what you said. It's not likely. And then there are possibilities. You know, what does AI do? What do the other things do? Okay. So the answer to the last part of your question is what does a person do? Okay. I think what a person does is, first of all, they know how to diversify well. In other words, I'd say whatever success I've had in life has been more due to my knowing how to deal with what I don't know than anything I know. And so for that reason, I would say you don't want to concentrate bets. You want to have certain proper diversification of your bets.

55:17That's a whole other subject. One of the aspects of that is, yes, you do want to have a certain amount of gold in your portfolio or the equivalent of an alternative money, but not so much that it's your big dominant bet. But it diversifies your portfolio in an effective way because if the things we're talking about happen, it also will mean that the other assets in your portfolio that you're holding, which won't do well, will be protected by that position. So you can structure your portfolio well. Now, that's a whole other session to discuss, you know, how to structure a portfolio that's well diversified in many things.

56:04And I would say very importantly is, you know, what is money as a storeholder wealth? What money do we have as a storeholder wealth and give consideration to that? And how do you protect yourself to have a real after-tax return? As for young people who are just sort of starting their careers right now, I would like to get your advice. I mean, you are one of the great legendary investors of our time, but also a founder. I mean, you started Bridgewater. You built it into the largest hedge fund in the world. And it's a very interesting time for young people right now. You mentioned the AI and how technology is impacting us.

56:45Just a new study that we've been looking at, which I will just read off you right here. Entry-level workers aged 22 to 25 in occupations most exposed to AI have seen a 13 % relative decline in employment since 2022. So basically, young people who are entering the workforce right now, they are losing their jobs to AI more than anyone else. I'm just wondering what your advice to those people would be, and what would your advice be to young people who are starting their careers in general right now? There's a polarity that exists where if you're among the best and the brightest, nothing matters other than your talents.

57:30To be successful, any business, those with the most amount of money, their power is not even in the amount of money they have. their power is in identifying the most talented, capable people and enabling them. Because think about where all this stuff has come from. There was no NVIDIA. There was no any of this. That all came from talented people enabled. And it's really 1 % of the population, 3 million people out of a country of 330 million people, there was really like that 1%. If you're in that 1 % or even the 10 % that's around them, that you can do things together and take full advantage of intelligence and capabilities.

58:25Do everything you can to be close to them or be part of that, because that is where all things good happen. including how to navigate the world we're talking in. You know, you can navigate it because it's not happening everywhere. Not all countries are going to be at war. Not all countries are going to have this. There'll be places and things to do in all of those environments. And so be able to be intelligent and be around those who are doing those things. Take full advantage of AI. Wow. It can answer almost any of your questions and so on, but you have to do it well. It sounds like you believe that the success of Bridgewater, at least Bridgewater's greatest edge, was you recruited a great team.

59:12Yeah. People, culture, and then one other thing. Every decision that I made, I always thought, what were the criteria for making that decision? and I wrote them down as principles. I've written literally like thousands of principles. And then I had them put into computer code. And then I tested them back to see how they would have worked in the past. So I'm executing a game plan. And so I've been doing AI in its various forms, but to be able to use that power too. So I have experienced it. Yes, who you're around, people and culture, that's destiny, meaningful work and meaningful relationships where you're on a mission to be the best with people who are on that mission with you and you have the meaningful relationships.

1:00:06But to do that, to achieve the highest level of excellence, and then, yes, use the AI. So what are you up to in the next 24 months? What do you want to accomplish professionally and personally. What are you focused on? I'm at a stage in my life where I want to pass along whatever I've learned and is benefit to others. I'm 76. So I want to pass along whatever I have that could be a benefit to others. That's everything that I'm doing. That's why I wrote the book about the mechanics of the debt so people could study the mechanics. I love playing my investment game. I'm now doing it for my family office and that.

1:00:45And then I'm making a platform for that everybody can do that sort of thing. That would be my aspiration. That's what I'd like to accomplish in the next 24 months. And of course, family, grandkids, savoring life. I hear you, brother. Ray Dalio is founder of Bridgewater Associates and ran it for most of its 50 years, building it into the largest hedge fund in the world. He is a long-running New York Times bestselling author of several books, including his most recent work, How Countries Go Broke, The Big Cycle. He received an MBA from Harvard Business School in 1973 and has been married to his wife, Barbara, for 46 years and has three grown sons and seven grandchildren.

1:01:28He is an active philanthropist. He joins us from, where are you, Ray? In Greenwich, Connecticut now. Nice. Well, we always, I think you're now a four-time guest. On your fifth, you get a jacket, so we'll have you back soon. Oh, yeah. What a thrill, right, Ray? Really appreciate your time and good that you're getting into good trouble. Thank you. Bye-bye. That was great. Thank you, Ray.

1:01:57Scott, what'd you think? Well, you know, by virtue of the fact he's been on four times, we obviously think a lot of Ray and his accomplishments speak for himself, but I think he's very civic-minded. I like how he grounds, you know, he tries to build frameworks, kind of the five influences. I always enjoy hearing from him, trying to figure out how we move to the action part of the program. Like what can he put – he has so many resources and such a big platform. You know, could Ray potentially put forward bills and initiatives or ballot initiatives? Could he find 30 moderate candidates and quite frankly just bankroll them the way Peter Thiel has?

1:02:39I mean, what we need is we need a Peter Thiel that looks like and sounds like and behaves like Ray Dalio. I've agreed with his concerns for many years. One thing that I did find interesting, and I kind of get it because I think that he wants to, I think he wants to make things happen. And he, I think he probably believes that he needs to be sort of friends-ish with both sides. But it was interesting to me that, you know, he said, I don't, we don't want to be evocative. we don't want to say things that would be that was the word he used evocative um and i don't know i just find that i i found that notable that ray i think is doing a lot of work to explain the actions of the administration and again fair enough if you want to get stuff done you can't just go around alienating everyone and making people your enemy but he was certainly doing a lot of work to steel man that side i mean the notion that the big beautiful bill here's the argument as to why it could actually bring down the deficit to me it just doesn't hold water at all and who knows maybe he does think that it does have merit i don't really buy it and i think it's notable that he's he's putting in that work probably to stay friends i hope he doesn't get mad at me for saying that, but that's my read on it.

1:04:04I think it's an accurate depiction and he's, he kind of comes across as his very statesman. Like I just, my view is, and again, I don't know if this is my anger talking, I think the reaching across the aisle just hasn't worked and trying to understand the other side and what Trump voters are thinking and what the rationale is and what if things go right. I just don't think it's working. And it's not, and by the way, it's now, As far as I can tell, it's never reciprocated. So it's like, look, this is – war is the wrong word, but this is a conflict and battle lines have been drawn. There is a vision of America that is shared by most Democrats and what I would argue is most traditional Republicans.

1:04:45This is no longer a nation controlled by the Republican Party. It's controlled by a MAGA movement. And in some ways, it's a greater insult or more contrary to traditional Republican ideals. Keep in mind, the initial founding fathers and the Constitution were largely sort of what you would call traditional Republican ideals, making sure there were checks and balances, the government couldn't move too fast, the government couldn't intervene too much, that small government by virtue of three co-equal branches of government. So from a purely theoretical or constitutional standpoint, what's going on here is more of an insult and more contrary to Republican ideals and Democratic ideals.

1:05:23And it feels to me that we aren't going to have moral clarity around what has happened here, the violation of the Constitution, the weaponization of the Department of Justice, the violation of people's rights, the shipping of innocent people to black sites. It's the incredible, absolutely, first time in history we've been removing people's rights, the grift, the corruption. I think there needs to be more moral clarity about this. And I think that these people need to pay a price. And I'm not one of these people that's like, lock them up. But I think the level of criminality here has been normalized.

1:05:56And that we aren't going to get back to a sense of a great institutions and a more resilient society and economy until we reconcile that. I don't think it's trying to understand them or reaching across the aisle and feeling their pain. Fuck that. This is war. And I use that word. This is war. At a certain point, we can do everything we can to try to understand their argument. But at a certain point, it just looks like lying. I mean, I do not believe that any of the policies that we have seen enacted in 2025 have been any attempt to reduce the deficit and to reduce the national debt. There is nothing that has been done that would indicate to me that that is a priority of any interest or of any meaning to this administration.

1:06:43And to be clear, they said it was. So we can try to explain away and try to figure out how to justify, oh, maybe if you look at it from this angle, maybe that makes sense. Or you could just conclude they lied. They lied to get votes. And that's where I land on this. and I'd be interested to know what Ray really thinks. Maybe it is what he really thinks. I just, I was a little skeptical. I wonder if this is the price we pay for something you said really struck me when that was 60 % of US adults can't read at a sixth grade level. I mean, have we not purposely created a populace that are, it cracks me up when elected officials say, you know, but the American public are smart.

1:07:24No, they're not. No, they're not. The average American can't read above. I like to believe that America is smart, but maybe you're right. I think we're innovative and I think we're hard working but I'm not sure if the average American can't read above a sixth grade level I think it would be difficult to call us to call us smart. We'll get to the bottom of this. Something's afoot. I don't want to get to the bottom. I want to get to the other side. What's on the other side and I'm ready. All right. This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer. Our research team is Dan Shallan, Isabella Kinsel, Kristen O'Donoghue, and Mia Silverio.

1:08:07Drew Burrows is our technical director, and Catherine Dillon is our executive producer. Thank you for listening to Prof. G Markets from the Vox Media Podcast Network. If you liked what you heard, give us a follow and join us for a fresh take on markets on Monday.

1:08:30You have me in kind reunion As the world turns And the dark flies in love

1:09:01Every minute your finance team spends wrestling with data is a minute lost. Insight Software's AI-powered insights instantly move you from complexity to clarity. Automated analysis, real-time reporting, strategic recommendations, all at your fingertips. Transform how your finance team works and watch your business grow. Stop wasting time. Start making smarter decisions. Learn more at insightsoftware.com slash AI.

1:09:31Yo, this is important, man. My favorite Lululemon shorts, the ones you got me back in the day, I think they're called pace breakers, the ones with all the pockets. I just got back from vacation, and I left them in my hotel room. And, dude, I need to replace these shorts. I wear them like three times a week. Could you send me the link to where you got them? Oh, also, my birthday is coming up soon. So, anyways, thanks, bro. Talk soon. Looking for your newest go-to's? Lululemon What's New Gear drops on Tuesdays, every Tuesday. Head to lululemon.com to shop what's new gear.