Ray Dalio believes the world resembles the ‘pre – 1945 era’ as we approach the end of his ‘Big Cycle’

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Good morning. What effect will AI have on Ray Dalio’s economic forecast? The Bridgewater founder released an article in over the weekend, asserting that we have entered stage 5 of his “Big Cycle” framework. (The global macro investor has analyzed the six phases of major empires’ ascent and decline, with stage 5 representing the phase preceding downfall.)

Dalio states that “there is no doubt that current events bear greater resemblance to the pre-1945 era than the post-1945 period we’ve grown accustomed to, which skews most people’s expectations and leaves them surprised by unfolding developments.”

Among the hallmarks of stage 5:

“Substantial and swiftly growing national debts combined with geopolitical tensions that spark worries about monetary value and security, particularly regarding reserve currencies, prompting a shift away from fiat money toward gold.” (Gold has surged 70% in the last year.)

“Significant disparities in income, wealth, and values within nations that fuel both right-wing and left-wing populism, creating unbridgeable divides that cannot be settled through compromise or legal processes.” (The wealth divide has widened and, as is evident, the situation speaks for itself.)

“The transition from a global system led by a single dominant power with relative stability to one characterized by conflict among major powers.” (Iran might deliver the ultimate strike against the WTO-centered international system.)

Additional factors may either disturb or hasten the Big Cycle: AI is triggering a massive redistribution of wealth and threatens to eliminate jobs on an unprecedented scale. Artificial general intelligence could fundamentally alter monetary systems and growth patterns while generating more rapid and turbulent cycles. Another consideration arises from an intriguing conversation at the Explorers Club last Friday with NYU glaciologist David Holland concerning Antarctica’s “doomsday” Thwaites glacier: the quickening rate of climate change, unless tackled, might push that desired stage 1 even farther out of reach.

Reach CEO Daily through Diane Brady at diane.brady@.com