Ray Dalio warns conflict gauge is in the red zone.
Ray Dalio’s interpretation of US-China tensions over Taiwan is that escalations could easily flare up.
Ray Dalio is a famous macro investor and founder of Bridgewater Associates, the world’s largest hedge fund.
Despite Ray Dalio’s warns conflict gauge pointing to red, Dalio wrote that an all-out war is still considered improbable.
But Ray Daio’s conflict gauge that he used to track the probability of a conflict breaking out between the two major powers has surged.
So exhibit, entitled US-China conflict Guage shows Ray Dalio warning conflict gauge deep in the red zone.
Since the rise of China’s importance economically and geopolitically over the last two decades, we can see the conflict gauge rising towards the red zone.
“Ray Dalio’s interpretation of US-China tensions over Taiwan is that escalations could easily flare up”
WEALTH TRAINING COMPANY
The gauge that Ray Dalio uses to track the conflict between the two countries has surged to a record since US House Speaker Nancy Pelosi’s visit to Taiwan earlier in August 2022
So Ray Dalio warns conflict gauge is in the red zone, comparable to previous global wars.
How does Ray Dalio warns conflict gauge pointing to 1.2 (US Vs China) today compared with other geopolitical tense periods in history?
The conflict gauge maximum reading was taken 12 months before the war broke out.
WW1 (UK Vs Germany) the conflict gauge registered 1.3, WW2 (Germany Vs the US) 3.2, WW2 (US Vs Germany) 2.2, The Cuban Missile Crisis (US Vs USSR) 0.9, Peak during the Cold War (US Vs USSR) 1.9
So the US Vs China conflict gauge pointing to 1.2 is higher today than during the Cuban missile crisis.
“the US Vs China conflict gauge pointing to 1.2 is higher today than during the Cuban missile crisis”
WEALTH TRAINING COMPANY
Ray Dalio warns conflict gauge is in the red, underscores geopolitics having a significant impact on future investing
A post-unipolar world, or a bipolar world, doesn’t mean war is inevitable. The world order cycle moved from bipolar during the cold war to unipolar happened without a kinetic war breaking between the great powers. Nevertheless, Ray Dalio noted that tit-for-tat escalation could easily get out of control, as has often happened in history.
“Bridgewater Associates’s Dalio conflict gauge indicator factors in changes in military spending and public perception each country has of each other” – Wealth Training Company
Regarding US House Speaker Nancy Pelosi’s visit to Taiwan, the market interpreted it as more noise than anything significant. But for Bridgewater Associates’s Dalio, the “fourth Taiwan Straits crisis” is not something to be taken lightly, and the situation is “very similar” to the environment immediately before the two world wars.
Bridgewater Associates’s Dalio conflict gauge indicator factors in changes in military spending and public perception each country has of each other.
Another measure for gauging the likelihood of conflict between two great powers is capital flows. China is currently the second largest investor in US treasuries, holding over a trillion Us dollars of treasuries. So, a country is unlikely to declare war on a country when it invests in its sovereign debt and will most likely use diplomacy to resolve disputes.
Perhaps that is why Ray Dalio thinks a confrontation is unlikely.
But geopolitical tensions between great powers need to be monitored because when the superpower goes to war, it is potentially apocalyptic.
Let’s hope it doesn’t come to that, but as Ray Dalio said, hope is not a strategy.