Why the American Empire Will Continue: Principles for Dealing with the Changing World Order by Ray Dalio

Came upon this interesting Ray Dalio video, in which he discusses the cyclical nature of empires.

(starting at 26:00 it gets more interesting because he discusses how empires decline, which is relevant to the US)

The video alludes to America being in the final stage of its empire, that being the decline. He does not however single out America as being in decline, but he gives some characteristics of empires undergoing decline, and indeed it’s possible to come up with similarities of past declines to the US, or see how it may apply:

-Populism: AOC, Sanders, Trump, DeSantis, etc.
-Wars: Iraq and Afghanistan
-Printing money: Covid, 2008, etc.
-Unrest: BLM protests, Jan 6th, etc.
-Record-high deficits
-Record-high national debt
-Some billionaires having second residences in New Zealand and elsewhere
-High inflation
-Surging commodity prices, especially gold and oil

However, there are some key differences:

Taxes for the rich keep falling. In spite of rhetoric by the left and the constant threat of higher taxes, taxes have not actually gone up, and there is little evidence to suggest they will. MMT is becoming a reality: it is possible to have forever-deficits, a strong dollar, and strong real GDP growth, by taking advantage of America’s reserve currency status. No need to tax the rich, which may hurt the economy, when the Treasury can just print more 0-1% yielding debt, forever.

The US dollar is at multi-year highs even in spite of record-high deficits, money printing, high oil & gold prices, and high CPI-based inflation. The dollar surged in 2021 and continues to do well in 2022 despite high CPI and surging commodity prices. There is no evidence whatsoever to suggest any of this will change. Global unrest only makes the dollar and treasuries more attractive due to the ‘flight to safety’ trade, which goes against Dalio’s thesis of unrest, inflation, and printing being bad for the dollar.

Even if America is in decline, the rest of the world is only further along the arc of decline than the US. Russia collapsed, Turkey’s currency is in freefall. China is weak. South America also has high inflation and weak currencies. Germany and the UK have weaker growth and also more social justice and ‘cancel culture’ (it’s as bad there as it is ‘here’). Every problem that the US has, it’s worse elsewhere.

Despite billionaires having multiple residences, the private sector keeps growing. Mega-sized tech and consumer companies such as Apple, Nike, Google, Microsoft, Disney, and Amazon are more dominant and profitable than ever, which means more US global cultural and economic influence and more tax revenue.

Surging commodity prices does not mean equally high inflation. This is because commodities are only a small amount of the cost of producing a good.

The US has been in involved heavily in expansionary wars or global policing since at least the mid 1800s, and that only has made it stronger. Western powers are also able to collude to bring down a competing power (like with Russia right now).

It’s not so much that there is more unrest now than in the past, but social media and smart phones means that events that generations ago would have been ignored or only mentioned briefly in the local newspaper, are now broadcast worldwide to billions in real time. The mainstream media picks up on stories going viral on social media and reports it as news. Social media puts a megaphone to the loudest and most partisan of voices, so it feels like things are worse than they really are. Yet the success of Joe Rogan is evidence that there is huge demand for non-partisan or alternative discourse.

As bad as Covid was/is, the Spanish Flu was far worse on an absolute and relative basis, this is even after accounting for the counterfactual. (A common argument is that the reason Covid was not worse was because of all the countermeasures, such as masks and social distancing. This is debatable as to how much they helped. The evidence shows that such measures were at best of mixed effectiveness.) The initial data in Jan-Feb 2020 suggested an infection fatality rate (IFR) of 1% for the general population, comparable to the Spanish flu, which would have been pretty bad. But by mid April as more data came in, the IFR was revised by a magnitude 20-100 times lower, making it more like Influenza or a bad cold than a civilization-ending event.

Far more people died during the race riots of the 20th century compared to BLM and antifa riots (although in 2020 there was a lot of property damage). The January 6th protests only had a few deaths (only a single death directly attributable to the event itself, and a few other indirect deaths later), and despite all the media hype of it being an ‘insurrection’, within a few hours was contained and things returned to normal. Trump and his supporters did not ‘destroy democracy’ or ‘overturn the results’ as the media claimed or feared.

But just because things seem similar does not mean the outcome will be the same. Chaos theory shows that differing the inputs by just a tiny amount can produce wildly different outcomes over many iterations even if things otherwise are the same at the start.

America’s dominance relative to the rest of the world is unrivaled compared to past empires. This is probably the most important difference. The British, Russian, Ottoman, French, and Dutch empires were of comparable strength at the time and many coexisted, so it was anyone’s game. But right now, America is head and shoulders above the rest. The Dutch saw its empire peak in 1784 after losing the Fourth Anglo-Dutch War to the British, according to the video, but no such threat or competition of similar or comparable strength exists for the US.

China has no imperialistic ambitions (except for maybe Taiwan and some tiny islands no one cares about, which the media has been hyping for years as a crisis, but that never comes).

Communist countries are not really keen on conquest. That’s more of a staple of American/Western history, going as far back as antiquity. Communist countries generally want to build huge agrarian societies and be left alone (of course, they are plenty keen on killing their own people). North Korea is called the ‘hermit kingdom’ for this reason. However, the Korean and Vietnam wars could be considered exceptions to this, although such expansion was quite limited. Tibet is another possible exception, although Tibet became a part of China 800 years ago, so this is not exactly a new development. After the fall of the Qing dynasty in 1912, Tibet was temporary an independent nation, but in 1951 a treaty was struck peacefully returning Tibet to China, but with Tibet still retaining a high degree autonomy. Whether Tibet is independent is debated.

Russia’s economy has collapsed like a house of cards after merely trying to take over just a part of Ukraine, let alone annexing the whole thing.

South America is…South America. They are doing their own thing.

Afirca..is Africa. Such conflicts are always local/regional.

Turkey…the real life Idiocracy

The Middle East is volatile, but things right now are relatively calm. Anti-Western sentiment in certain areas is self-limited and has not stopped the expansion and strength of the US economy and American culture. Iran does not like the US, but it’s been that way for generations. What else is new.

A Russia-China partnership seems unlikely, and even so, it’s unlikely it imperils America’s dominance.

The vast majority of developed countries would rather trade and grow their economies than engage in conquest. Those that possibly do, such as Russia, are very weak and cannot do much.

Bitcoin is not a threat to fiat currency and very closely regulated.

The collapse of emerging market economies and currencies (like Turkey, Russia, Brazil, Lebanon, etc.) and the strength of the US dollar, is further evidence of the ‘great convergence’ or singularity of America accreting all the capital and power in the world, the opposite Dalio predicts. This trend has only accelerated since Covid.

Overall, like I said before, the belief that empires must cycle or rise and fall is wrong or at least something that cannot be assumed to be true. Just because empires have exhibited cyclicality in the past does not mean it will going forward.

1 comment

Comments are closed.