US hedge fund billionaire Ray Dalio has issued a stern warning over the current global conflicts, noting that financial markets are misreading the situation.
In a detailed X post on Tuesday, Dalio said: “Most people tend to have this short-term perspective, they now expect, and the markets are pricing in, that this war won't last long and that when it ends we will get back to ‘normal.' Virtually nobody is talking about the fact that we are in the early stages of a world war that isn't going to end anytime soon…”
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Dalio warned that current global conflicts are not isolated events but part of a broader, long-term world war already underway. In his post, he argued about the existence of multiple interconnected wars, which resemble past world war dynamics "without any clear start dates or declarations of war.”
According to Dalio, most people are missing the big picture while focusing on the near term events. Besides the presence of a broader war, understanding “how the sides are lining up and what their relationships are is very important,” he pointed, referring to the emergence of a new world order.
He said that the world leaders' actions appear to follow a historic sequence leading to major wars. He also listed a sequence of 13 key events that happen in such situations and noted that the world currently might be at step 9.
Step 9 involves multi-theatre conflicts occurring simultaneously. At this stage, within countries, “loyal support for the country's leadership is demanded and opposition to the war and other policies is squashed…”
The subsequent steps may involve direct military combat between major powers. Dalio said that this will likely be followed by governments increasing taxes, issuing debt and creating money.
“There are big increases in taxes, debt issuance, money creation, FX controls, capital controls, and financial repression to finance the wars. In some cases, markets are shut down,” he said.
Following Step 9, the conflict escalates until one side prevails, establishing indisputable control over a new global order, which is designed by the winning side, he explained.
Dalio said that the world is already moving from a US-led rules-based system to a fragmented “might-is-right” order. One of the reasons, as studied in history, is because the US is already overextended due to its expansive military bases and has commitments that have led to “expensive vulnerabilities all over the world.”
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“This dynamic might lead one to expect that other countries watching the dynamic with the US and Iran might change their calculations and behaviors in ways that will reshape the world order,” Dalio said.
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