Ray Dalio founder of investment firm Bridgewater Associates (the largest hedge funds on the planet with assets of about $150 billion under management) has publicly expressed his concern that the next recession could trigger unrest in America.

If we do have an economic downturn, I worry we will be at each other’s throats,’ said Ray Dalio during a recent interview with The Wall Street Journal in January.

But it is not the first time that hedge fund titan Ray Dalio (with a personal net worth of 16.8 billion USD in 2017 making him the 100th richest in the world) has red-flagged an economy that is leaving 60% of the US population behind and widening the wealth gap.

It is the two economies that Ray Dalio writes about in his LinkedIn post published on October 23, 2017, entitled Our Biggest Economic, Social, And Political Issue which is widening the wealth gap that could trigger unrest.

“If we do have an economic downturn, I worry we will be at each other’s throats”

RAY DALIO

How unequal is wealth distributed in the US?
“Wealth and income skews are so great that average statistics no longer reflect the conditions of the average man” writes Ray Dalio. Moreover, the wealth of the top one-tenth of 1% of the population is about equal to that of the bottom 90% of the population, which is the same sort of wealth gap that existed during the 1935-40 period. Put another way, Ray Dalio is concern that the wealth gap elasticity is near breaking point and that a recession could trigger unrest.

But wealth inequality in isolation isn’t enough to trigger unrest.

Typically the tipping point comes when a combination of conditions exist such as high unemployment (or underemployment), declining real incomes mixed with a cocktail of other explosive ingredients, a lack of trust in government, a large alienated young male population, ethnic tensions and many empty bellies.

These conditions along with wealth inequality create a high octane environment, they heighten the possibility of social unrest. Moreover, a recession could be the trigger that ignites social unrest.

“Wealth and income skews are so great that average statistics no longer reflect the conditions of the average man”

RAY DALIO

Could Trump’s agenda be a recipe for civil unrest?
The US population is not dissatisfied with the Trump administration, in fact,
Trump is starting 2018 with a polling pop, average that “is best in a long time”.

The average of several polls finds the president’s approval at 43 percent and Gallup has him at his highest point since mid-July.

Trump is probably more popular than what the polling pop indicates and he knows it.

When a leader fears his people the first thing he/she wants to do is disarm the population. The Trump administration doesn’t fear an uprising because it is a populist government. Trump is trying to make it easier for Americans to access guns.

Throughout history, tyrants and despots prohibited their population to own guns. See gun control in Nazi Germany.

Ray Dalio is worried that an economic recession could foment unrest in a polarized America, resulting in segments of the population feeling marginalized in the face of stagnant wages and tax cuts for the wealthy.

However, a US recession could be in the rear mirror.

Trump is starting 2018 with a polling pop, average that “is best in a long time”

US retail sales finally start to improve
The retail apocalypse of 2017 underscores a sluggish US economy.

Nevertheless, the latest 2017 holiday spending did see a pickup. According to a Mastercard SpendingPulse report released on Tuesday—the day after Christmas—U.S. retail spending, excluding the automotive category, was up 4.9% in 2017 compared to the same period last year.

The largest jumps were seen in electronics and appliances (7.5%), jewelry (5.9%), and home furnishings and home improvement (5.1%).

On a less upbeat note, there was also an unexpected loss of 20,000 retail jobs during the holiday season.

US retail sales finally start to improve. The retail apocalypse of 2017 underscores a sluggish US economy

US construction is booming
The construction industry added 30,000 jobs last month, with a big chunk coming from the hiring of more specialty trade contractors, like plumbing and electrical work. Manufacturers added 25,000 jobs. Economist now sees full employment and are forecasting wage increases in the coming months.

The black unemployment rate fell to a record low. The Bureau of Statistics reports 6.8 percent unemployment rate for black workers in December, the lowest in the 45 years the data has been tracked.

If corporate tax cuts spur on productive investment (rather than stock buybacks) then we could see the trickle-down economics at work. Trump’s trillion dollar infrastructure plan would also provide the economy with tailwinds

The construction industry added 30,000 jobs last month

But it is in the hands of the Fed
So the economic data overall suggest that the US economy is gaining traction.
The risk to the economy could come from the Fed exiting monetary accommodation too fast.

Gains could be wiped out if the Fed rates rise too quickly. Moreover, a fast unwinding of the Feds $4 trillion balance sheet could bring an end to “managed markets” and the beginning of true price discovery (a stock market crash) could also send the economy into reverse.

Ray Dalio, next recession could trigger unrest could be true but the anger might be exteriorized into a war.