Ray Dalio Says the U.S. Is Headed Toward ‘Civil War’

Bridgewater Associates founder Ray Dalio has joined a growing group of people who think the U.S. is headed for “some sort of civil war."

Dalio, writing in a LinkedIn Post Thursday, said that financial problems like high taxes and high inflation combined with a “large wealth and values gap” can lead to “some sort of fighting for control (rather than compromising according to the rules).”

“Suffice it to say that we are seeing most of these things happening in degrees that we’ve never seen in our lifetimes before but have happened many times before that prior to civil wars,” he wrote.

In making the civil war argument, Dalio has joined two authors who have been making waves in the media with their books on the topic: political scientist Barbara Walter (How Civil Wars Start: And How to Stop Them) and essayist Stephen Marche (The Next Civil War: Dispatches from the American Future). A number of political pundits have also opined on the topic following the violent insurrection by supporters of former president Donald Trump at the nation’s Capitol on January 6, 2021, and their continued refusal to respect the peaceful transfer of power following President Biden’s victory.

Dalio said he also covers the topic in his book, Principles for Dealing with the Changing World Order, especially his chapter titled “The Big Cycle of Internal Order and Disorder.”

More than other writers on the topic, the hedge fund billionaire looks at the economic conditions that make the U.S. ripe for such an internal conflict. He said that he has looked at “cycles of rises and declines of different historical cases.” 

“By most of the measures that I use, the current financial conditions and irreconcilable differences in desires and values are consistent with the ingredients leading to some form of civil war,” he said.

These conditions “are leading to much greater amounts of populism/extremism and conflicts between the right and the left, which is classic,” he added. Other writers on the topic, however, view civil conflict emanating from the right wing in the U.S., which is heavily armed. As Michelle Goldberg wrote recently in the New York Times, “It’s no secret that many on the right are both fantasizing about and planning civil war.”

Dalio’s book details six stages that lead to civil war, starting with consolidation of power following a conflict or revolution. He said the stages continue “like the progression of a disease.” He believes that the U.S. is in “stage five.”

In his scenario, a country goes from “peace and prosperity” (stage three) to “a period of excess” — which he labels the “bubble prosperity phase” (stage four).

During the period of excess, he said, “Wealth and opportunity gaps are large and resentments between classes emerge.”

The next, or fifth, stage occurs when both the county and its citizens are in “bad financial shape,” and “class warfare intensifies.” (So far, however, clashes in the U.S. have been based more on race than class.)

Dalio expressed concern about the 2022 elections, which he fears will be dominated by extremists from both sides of the ideological spectrum. “Hopefully, but not certainly, we will get through this election with the election rules prevailing without a fight over them. That will set the stage for two more years of fighting that will likely lead to either irreconcilable differences and lack of progress or worse,” he predicted.

But he noted, there will still be problems ahead. “For example, the Supreme Court will make decisions on contentious issues that people are willing to fight over.”

Warned Dalio: “The biggest question is how much the system will bend before it breaks.”