The Tucker Carlson Show - Ray Dalio: How to Survive the Coming Civil War and Plot to Use Debt and CBDCs to Enslave You

Episode Date: February 9, 2026

Ray Dalio on how to prevent another American civil war. (00:00) The Cycle of Civilizations (26:53) Why Gold Always Survives System Failure (46:09) The Difference Between Wealth and Money (53:17) Should We Worry About Civil War? (55:26) Who Actually Controls the Money? Paid partnerships with: Defend: Enter code "Tucker" for 20% off your purchase at https://defendcellcam.com Dutch: Get $50 a year for vet care with Tucker50 at https://dutch.com/tucker Charity Mobile: A pro-life company serving pro-life customers and supporting pro-life causes for 30 years. Use promo code TUCKER to get a free phone with free activation, free shipping, and a free gift with every new line of service at https://charitymobile.com/Tucker Learn more about your ad choices. Visit megaphone.fm/adchoices

Ray Dalio, thank you very much. We spoke last year in exactly this place, and you outlined in part the cycle that you see in civilizations vying for supremacy of the world. And not everyone, I think, kind of bought into your views on this, and you were derided as, you know, Jeremiah is scaring people and everything. A year later, you have a new summary of ideas that you've been formulating for a long time out this week. and about 18 people have sent it to me. And so I think we've reached a moment where people are ready to hear what you're saying. So if you wouldn't mind outlining in whatever detail you like,

the cycle that you see the countries go through and where our country, the U.S. is in that cycle. Gladly. Yeah, so there's a cycle. There are orders. There are systems, right? So there's a monetary order. How does the economy work?

You put in money, creates credit. People with credit, do things with that. They borrow if they can earn enough money to pay back. The system works well. They create productivity. They create opportunities, the capital markets and so on. That's the monetary system. And the way that works in the cycle is that when there's no debt, such as in 1945,

we start a new monetary order. There's no debt. There's a system. And it builds up over a period of time. and it's a mechanics that when income, when debt service payments rise relative to incomes, it squeezes out other spending, the way it would do for you as an individual, the way it would do for companies, except governments can print money. But that squeezes out spending, and that becomes a problem.

And then you also have a supply demand problem. So when you have a new monetary system, which the United States had the new, monetary system and the dollar was the world's reserve currency, then you can sell a lot more of the debt. So there's a supply and a demand, right? And so when that builds up and everybody's one man's debts or another man's assets and they build up holding a lot of dollars-nominated debt, and then they sell a lot more debt, then there's a mechanics of that supply demand.

And then when you have politics and world politics, geopolitics enter into it, that monetary system is more at risk for those reasons. We'll get into that. But the first force of these five forces is the mechanics of this process, which is the monetary system. The second is there's a domestic political order. All countries have an order, a system, and all these orders change and they evolve. And of course, that is connected to the economic system. And so when you get large wealth and values differences, and there's a sense that the system isn't working for them

and there's greater polarity, there's the emergence of populism, like in the 30s, you know, the left and the right. And that populism gets to the point that there are irreconcilable difference. In other words, the lack of willingness to compromise the lack of willingness to accept loss, losing one's vote and so on. But fight and win for me at all costs. Like in the 30s, four democracies chose to be autocracies because the polarity was so great

and the willingness to go along with that democracy system ceased to exist. So that dynamic has happened throughout history. And then the third is the geopolitical order. countries were relative to each other. What's the system? And after World War II, we created a system, a multilateral system in which it was in some ways naive, but it was very different than existed before in that by being multilateral, having United Nations, a world trade organization, a world health organization, a world court, and all of those, the idea of being representative, and

they would make decisions in a certain rule-based system was the path. And, of course, the problem of that is that any system has to have its enforcement. And if the system as a whole, a multilateral system is not consistent with the interests of those who are the most powerful, you know, power rules. And so you have the dynamic of the breaking down of that order, right? So we're breaking down the monetary order in a very classic way. We're breaking down the political order in a very classical way. We're breaking down the geopolitical order.

So those orders, we have to recognize throughout time, all of those orders have changed. There's never to have been a time that they haven't changed and haven't broken down in their issues. And they're getting back to how they were in some ways in the past. Number four is acts of nature. Drought floods and pandemics have killed more people than wars. You can't ignore it as a big influence. And number five is the inventions of new technologies, particularly, you know, fabulous new technologies come about. And they're important not only for prosperity, but they're important in wars.

You know, whoever wins the tech war wins also the economic and the geopolitical war. And so there's that dynamic. And that dynamic is when there's rising powers, challenging and existing powers, there's no court to go to. There's no way of resolving that. There are tests of these powers, and we're in a power type of dynamic. Now, when you understand that that dynamic works through time, and you get down to its individual symptoms, in other words, there's, in my book, principles for dealing with the changing world order, which I wrote about five years ago,

I took, and I broke that cycle into five parts of the, six parts of the cycle, and like a disease, you can see the symptoms in those parts, and you can see it progress, and you can see the choices that exist at those stages. So when you're in a different stage, the leadership has a different stage. And all I wanted to do, whether it's in that book or in our conversation here today,

is to try to let people see that. And I'm just a practical, investor, right? I've been a 60 years, I've been a macro investor. So I have to bet on what the future is going to be like. I place financial bets on that. And now I'm at a stage

in life that I want to pass that along. So I hope that we could talk about or look at that in a dispassionate way to say, how does the machine work to produce that dynamic? That's exactly right. And you're not casting judgments here. You're just acknowledging what

has happened and what therefore is likely to happen. I just go back. I don't want to let this pass. In the second factor that you described in this, the political factor, you pointed back to the very fraught decade of the 1930s, and you said you had four democracies become a revert to autocracies because of the partisanship that became unworkable. They couldn't reconcile, and so they became autocratic. Is that a consistent principle, do you think?

Yeah. You can look at it through Chinese dynasties. you can look at it through Rome. Like, who was in control, right? But they, you know, Caesar and the Senate and being stabbed in the Senate. Plato wrote about this. I think it was like 350 BC. He wrote about the cycle in the Republic. In other words, democracies.

And the challenge of democracies where you vote and so on. But then there's the wealth gaps and the rich gaps. Yes. And then who has the money? And then they're not willing to vote. then there's the power that changes, yes. So partisanship becomes gridlock, becomes irreconcilable, just mass, and then that evolves by necessity into autocracy.

Right. When I'm no longer willing to accept that the system, the rule of the system, because everybody thinks it's rigged, okay? The Supreme Court is it rigged? Because that partisan has more appointees, and it won't be fair. And so I remember when the Supreme Court was kind of the Supreme Court, and we lived in at a time where we said the system is fair. The legal system, when you go in and you're convicted, okay, is the legal system fair? And so on.

And then you believe in that system with its imperfections and so on. When that ceases to be the case, when the causes that people are behind are more important to them than the system, the system is in jeopardy, right? Yes. Of course, by definition. And all of this is relevant to where we are now. So tribalism, whether it's political or ethnic, but when people square off into tribes and they have no common ground and they have no hope of reconciling or compromising, then you're getting a new system.

And you see it, it's so interesting. It's like watching a movie over and over and over again because then you see how it is they make stereotypes of the other. Right. The stereotype of that personality, the stereotype of that type. type of that type, whether it's an ethnic or economic or whatever it is. Oh, they're one of those and I'm one of these. And now it becomes the stereotypes that are fighting, right?

Which are non-human, right? So it's easier to... There's no empathy. Of course, because it's not a human being, it's a stereotype. It's the fight. Right. And so then you have to pick a side. I mean, one of three things, you have to pick aside and fight for it, or you keep your head down and hope you don't get shot or flee. That's it? Throughout history. Yeah, and that's what's happening. Hey, to brag, but we're pretty confident this show is the most vehemently pro-dog podcast you're ever going to see.

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In other words, you're quiet because you don't want to get into the fight. You're going to get injured, right? A lot of people are scared now, right? People you'd imagine never would be scared. Right? Right? They don't want to speak up as something. So you keep your head down. You either get in the fight and fight, pick aside and fight for it. Throughout history, this is true, pick aside and fight for it, or keep your head down, or in some cases, flee. You know, people leave. They go from, you know, immigration. Think about how all the immigration largely has taken place. There's some hell taking place in there, and then they move to someplace else where there's not. Here we are in. the UAE, okay? A lot of people are coming to the UAE

because they're fleeing in a sense. So there's that dynamic. And so you can see many, many, many symptoms. Like there are things, you know, when it gets violent and when you get killing too many people,

then you start to cross the lines. You know, like maybe in Iran. Okay, do we cross the line? And then where you, you know, there are these symptoms and there's financial, you know, how do you pay? So, I'm rambling. No, you're not rambling. But just back to the political, one last question. Is it ever resolved?

Does the system ever stay intact when you get to a point where people just don't want to compromise at all or even live in the same place? Have you seen any example of where people sort of decide, wait a second, let's enter into power share? and pull back before this gets violent or we get a king? In some places, sometimes in dynasties and so on, but they're not often. What happens is there's a reversal or a fixing by somebody who can not, who's strong enough to deal with the issues. For example, we have a debt issue.

We have all of these other issues and can bring people together. But there needs to be almost, Plato would say, the benevolent despot. Yes. And that's in his cycle. In other words, there's somebody who can stop the fighting and be smart and impose the disciplines that are necessary. For example, there's a financial discipline. How do we deal with the debt and all the supply demand and so on? Can we raise taxes?

Can we cut spending? What are we going to do to bring about a budget balance or not a budget balance, let's say a deficit of 3% of GDP, which would sustain the set of circumstances? What is that financial discipline? What is that way of working together so we do not do each other harm? Because we are at a point, let's say as we come to the next midterm elections, you know, and there's a significant probability that the Republicans would lose the House and talk of even could be the Senate. Okay.

Now when you go after that and you imagine what the conflict can be like, How will that conflict work? Will it be rule of law or will it be a win at all cost? And as that win at all cost and what that means, is there rules? Is there playing by the rules? You know, that dynamic. So this thing is repeated. It's not easy to get to that point because you have to deal with, you know, how do we

stop fighting with each other and how do we do the right things to get strong? And that's a great challenge in his... So where are we now, given the five factors that you outline, where is the United States, or even really the West, will include Europe, in this very familiar cycle of rise and fall? In my book, I show 18 measures of health having to do with education, military, reserve currency, a number of measures that show strength. Okay, what is the level of strength?

And the United States is the strongest power, which has been in relative decline, and experiencing these conflicts. And that's measured, if you go in the book, how principles for dealing with the changing world order, you'll see a number of charts. So I don't want to just pronounce it that way. I just want to say that, like if you were to take education

and you take scores, pieces of scores, and so on in statistics, you will see that there are rising powers, they're declining powers, there are large wealth and values differences, and we are in what I call stage five, which means we are sort of at the brink, but not over the brink. In other words, we're not, there's the capacity to, it's before a period of great disorder when there can be a monetary breaking down of the system.

You know, what is money? We should talk at some point. What is money? And can money be an effective storehold of wealth and what happens if it's not? And so we are at what I would call stage five in a six-stage cycle. The sixth stage is when there's a breaking down of these orders. We're not there yet, but we are close to there and headed in that type of direction. What does a breakdown look like?

What does stage six look like? Well, from the monetary point of view, it is that the demand for the reserve currency is not sufficient to meet the supply. So what that means is you see a supply demand problem. You produce a lot of supply, and the demand's inadequate, and all things being equal, there will be a rising long rate while the central bank is trying to hold that from down by easing the short rate and shortening the maturity of the debt that it sells. Okay, that dynamic.

And that then the currency, these debts and the currency, falls relative to the non-fiat currencies, in other words, like gold. In other words, you are seeing a movement by central banks and countries to hold gold as an alternative reserve currency, partially because of that supply-demand situation. and partially because they worry that there may be a payments problem. And the payments problem, like it happened in Japan prior to World War II, you had an economic problem, and the United States sanctioned, essentially,

didn't pay the Japanese their debt, the money in terms of that, like a debtor, creditor problem, And they didn't make those payments. Much like Russia, you know, they basically took control because they have the ability to take control of the treasuries and other things. And so there becomes more of a reluctance to hold that money and a movement more into the non-fiat currency, which is gold. So in other words, other countries perceive a risk. in holding dollars because, well, for lots of reasons, but one of them is, like, if the United States government at the time doesn't like you, they can grab your dollars. That's right. So it's not worth

it. Right. And it's a risk that both the debtor and the creditor have to each other. So think about China. Yes. And if you were thinking China, how do you feel about holding treasury bonds? Okay. So you may not feel secure about holding treasury bonds, both for two reasons, because you could be sanctioned, or you also, because there's a supply demand problem. So you start to see the movement in that direction. And then, of course, it's also in that situation, governments want to control their supply demand,

so they might establish foreign exchange controls, they might do certain things like that. But they also feel vulnerable. The United States can feel vulnerable if they can't sell enough of those bonds, to others, if the demand isn't, because then interest rates would have to rise because of the supply demand, too much supply relative to the man. To make it more appealing to buyers.

Yes, and also to cut the demand for credit. In other words, if the price rise, then people will borrow less and so on. And that then has the effect of mechanically slowing down the economy that produces that result, which then what happens is then the central bank comes in and it prints money and it buys the debt which depreciates the currency. That's the mechanics that's of the debt part of it that is related to the political and the geopolitical part of it. That I'm answering your question. May I just ask you something?

So if foreign countries don't want to buy your debt and your central bank decides we're going to print more money and buy our own debt with it, which is what we're doing, wouldn't the people doing that stop and say, wait, second this sounds like an electric windmill like what are we doing here this sounds crazy they're stuck they're stuck they're stuck they're stuck because um they have a deficit and the deficit will be there unless they raise taxes and cut spending or something and that's bad for the economy and it's politically bad yes okay um or you print the money and you make up the difference. And so since the breakdown of the monetary system in 1971, that was when

there were too many claims on gold and we had a system attached to gold. And because they were in August 15th, 1971, I remember, well, I was clerking on the floor of the New York Stock Exchange after college before I went to graduate school. Richard Nixon gets on August 15th, Sunday night. He gets on the television and he says, we're not going to. to allow the conversion of that paper money into gold, and you won't get your gold. And I walked on the floor of the stock exchange the next morning, I thought this is a big crisis.

And what they did is they essentially printed in, then we had the stagflation of the 70s, but I was very surprised, and I found out, I never threw anything like that before. I studied history, I found out they did the example, same thing in March, Roosevelt did the exact same thing in March of 1933. Right after he got inaugurated. Right.

Okay. For the same reasons. Okay. Because your choice is to have a lot of defaults and a debt problem or to do that. Right? That's how it works. That's how the machine works. So, and at the end of the day, since 1971, when we went off the gold standard and

we went to a fiat monetary system. We have always done that, you know, and, you know, the Fed put. And, you know, that's the way it is. And it's kind of worked for 55 years, but it's showing signs of breaking down. Well, what it does is it's like using the hair of the dog that pit you. Oh, it's the hangover cure. Yeah. I'm familiar with that.

Okay, me too. For sure. It's, what you do is you give more money and credit. And what happens is to get out of it. And because then you make it easier to pay the debt. You make, like in 2008 or 2020, you give the money, okay, and you give the credit and you fund it and you make that. But that makes the debts go up again, okay? until then you reach the point where the debt is squeezing on the expenditures and you have the

supply demand. So that's why you have these big debt cycles, you know? When we started this company, we promised that we would only partner with other companies that share our values. We didn't want to advertise products made by people who hate us or, for that matter, you. So with that in mind, it is a pleasure to announce that we're working with Charity Mobile. It is a pro-life phone company. Charity Mobile holds a view on abortion that almost every single major U.S. company disagrees with. They think it's completely wrong.

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And what I wanted to do is to just show 35 cases of it. That is just the mechanics to show how it works. But it is that dynamic of the squeezing on the spending and the supply demand. And then you start to see it where, as I was saying, the long rate goes up while the short rate comes down because the central bank's pushing the short rate down. And then they shorten the maturities of the debt. and then the central bank buys that, and then the central bank, now it owns all these treasuries,

and then the central bank starts losing money, because they own the treasuries, and they're going up. So they have to produce the money and credit to keep that rate down, and they lose more and more money, and that dynamic then doesn't stop the change in the capital flows. That's why you, and then traditionally in all of these cases, you see a move to the hard money,

the move to gold, okay, as we're seeing. You see that dynamic in terms of that move to gold, and then it starts to run its course. So it's very much like think about what happened from 71 through the 70s, produces more stagflation, and then at some point the inflation problem or the devaluation of money problem becomes such that the central bank then tightens money and so on. The Volker years. The Volker years, 1979, 80, 81, 82, right? So the pendulum swings.

Think about it this way. In order to have a balance, a successful economy, a successful capital market, since one man's debts or another man's assets, you have to keep interest rates not so high, that they crush the debtor without having them so low that they are bad for the creditor. So you see these cycles.

When we had zero interest rates and negative real interest rates, what you saw was massive creation of credit and money and borrowing and so on, and then you had that cycle. So that's what the cycle looks like if you have losses. And then you also have, under those circumstances, classically, the weakening of the central bank's control,

or I should say the strengthening of the central government's control over the central bank. In other words, when these things happen, then they can't be at odds. And so there is greater control. by the central government of this. Are you writing the news? No, I've just seen this movie before. It's exactly what's happening.

I know, but that's what I'm saying. Because it must happen in the nature of that dynamic when you have, imagine the fight between the central bank and the central government in the middle of a crisis and so on. So there is this control because there's a monetary. There has to be. Right. What happens?

If you're the president of the United States or you are the leader in that country and you're in this kind of a monetary crisis, it's like anything, any fight. You don't want the internal fight. You want to get control and there's a fight for control. So we're living in a world today in which there are fights for control, right? Who has the power and the fights for control? So again, though, at what point do we know the system is just broken? and this experiment which began post-war, 1945, is like reached its end and we need something.

Pretty much almost only in retrospect. What happens if you're really close up and you say, when did they know that there was a breakdown? Or when did they know that there was, let's say, the French Revolution? There's a day that they say. Storm the Bastille. Right. And there's that day and they said it. They didn't know that. No, they didn't. Just like some prison got raided or something. They didn't, yeah, no, that's right.

Okay. So when it's not like they announce it or it becomes clear cut, right? You slip into those things. There's never that clear moment. But what happens next? Like we heard Chairman Xi three days ago say, hey, by the way, China should hold the world's reserve currency. And that seems very far away now. I guess, but maybe... So you're asking me what I think about China's having the reserve currency? Well, I just... The only reason I'm putting it, I have no idea if that's plausible. I can respond to it.

You tell me, yeah. Okay. I don't think China's going to have a... There are two purposes of a currency. Yes. Medium of exchange and storehold of wealth. Right. Okay.

Medium of exchange, it's logical that China's going to have much more of a medium of exchange type of reserve currency because it is right now the world's largest trading country. Right. And so people, central banks, want to hold some reserves in the things that they're trading in. Of course. And so on. And so the Chinese have intentionally, in order to minimize that conflict, have not pushed that thing, and now they're going to operate and moving in that way.

As far as storehold of wealth, though, who's going to trust the Chinese with your wealth and capital controls and so on? I think that all fiat currencies have a problem. Okay. So they have the history of foreign exchange controls. They have a – would you trust it's anti-wealth protection? You know, this is not – that's not their great track record. I'm going to protect your wealth. Even private property and how it works in China is a new concept relatively,

and it's something that they're, you know, wrestling about. They don't, you can't own land. You know, you can't own property. So the storehold of wealth element is going to be very tough for them to sell. So the world does not have what you want as a currency, as a reserve currency, other than gold. I mean, it's just a default, right? because it's a debt and gold is the one, like they say, it's the one asset you can have that's not somebody else's liability,

meaning you have to get money from somebody else to do it. So I asked you last year off camera, I'll never forget it. I've always been a gold buyer, but then I don't know anything. I just instinctively seemed like it made sense, but I've always been a little bit embarrassed about it, and so I asked you, is it crazy to, you know, take some money in by some gold? And you said it's not crazy at all. And I remember feeling vindicated, but also wondering, like,

why don't more people say that? It almost feels like there was a conspiracy in the financial press. I think all around, not only in related to gold, but all of the things, I think people get used to. What's credible to them is what they experience and the norm that they have at that time. And so much that's happening, I hear people say, I'm shocked by,

But the only reason they're shocked is because they've become used to that, right? If you were traveling through time and you went before 1971 and so on, and you saw history and you saw the universality of money and gold, and now the whole system worked repeatedly over time, you would understand there's that dynamic that's taking place. But yes, people think, they misunderstand, they think it's a metal to speculate on. Right. They don't realize that actually it's a money.

Okay. Central banks second largest money. Okay. So it's almost like when you look at the world through that money, you can see what things cost through that lens. Exactly. People are looking at it instead, like through a dollar lens and they see gold go up, okay? But that's not what they're looking at. You could look at the world through a gold lens and see money go down.

Exactly. Okay. So all I'm saying is because of their experience and what it is, it's implausible. It's like, you know, the tooth fairy or Santa Claus, you know, you believe in the. things and so on, and then you realize through the cycle. And that's why surprises take place. That's why it seems implausible. But if you read history, it's almost, you know, it's logical. Most security systems operate like old-fashioned cable internet. They're installed in one place. They're tied to one address. And if you move or your job moves, you've got to start over.

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or is happening right now. What are a few other things you would not be surprised to see in the near future? For example, let's start with gold. What would you not be surprised to see the spot price of gold per ounce in like five years? I don't want to, you know, that's one of those headline presuming, let me say it this way. Yes. I think people pay too much attention to the spot price, is the spot going to go up or down and whatever? And what they don't do is think, if I didn't have any view on gold, what amount should I have in my portfolio? In other words, if you did a portfolio construction exercise and you said, what is an effect of diversified portfolio and what assets should I have and what amounts in that because gold is a very effective

diversifier and also a protector of this during very bad times gold does very well when the rest of your portfolio does poorly because let's say the 70s being a good example or the 30s being a good example. During those times, it's a diversifier. Okay, so the optimal amount to have for an individual or a central bank might be different, but an individual would be, depending on what's in their portfolio, between 5% and 15% of a portfolio. And so what I would say is if you approach that question that way and you think, what should I have, you should have what we talked about before when my a year ago yes and so what you should have that particular amounts somewhere in that neighborhood depending on what your portfolio is like and uh because it's an effect of diverse fire and

it is a money okay when the traditional money does badly this money does well when the traditional money which gives you an interest rate that it's the reverse so so that's the thing that i would try to convey to people, you know, okay, do you have some of that? What's the amount that's your comfort level, you know, but have some? So, um, what, if you were running the United States or a country like the United States in its current position, what would you need to do to protect your country in the midst of these changes, some of which are inevitable, some of which maybe aren't? Like, what are the steps specifically that you would take to help your country? I would be dealing with achieve something like a 3% budget deficit,

not more than a 3% budget deficit. I would try to get financial, I try to minimize or eliminate, but minimize the risks of that dynamic I was talking about. So you would get the budget deficit to 3%. Yes, but, and I would, I would say to every, I've said to legislators, I go down to Washington and, you know, leaders of both parties. And I said, it's like being on a ship. And everybody on the ship is headed to a rock.

And that, and everybody knows that if you have a deficit of six or seven, percent of GDP, you're going to have a supply demand problem. And I have the conversations, and by and large, this is the agreement. And I don't care whether you turn left or you turn right in terms of that, but do not hit the rock. And what if I would do is I would take a 3% pledge, in other words, say, I will get it down there. And if I can't agree on how, I would do it proportionately with three things. I would proportionately with taxes spending, and a In other words, if you raised taxes by 4%, if you cut spending by 4%, and you lowered, which would lower interest rates because it improved the supply demand and it would also convey

the message that it's being dealt with, you would also lower the interest rate on the debt. And those two things would begin to get it to approach about a 3% budget deficit and so on. but doing that would require, would be politically impossible. So I have these conversations, and the answer is, you know, like, Ray, you don't understand the world of politics. If I'm, I have to give at least one of two pledges. The pledges, and probably both. The pledges is, I won't raise your taxes.

and I won't cut your benefits. Okay, you don't raise the taxes, you know, good. So there's a big move here primarily to try to grow your way out of it. In other words, again, you know, stimulate fiscal and monetary stimulation, and hope that that produces, perhaps with the new technologies and so on, that's the idea, enough income growth and so on, so that. this moves toward that 3%, which is, in my opinion, a not likely occurrence. Why is it's not likely that technology will turn out to be so beneficial and lucrative that it raises these problems?

The artificial and technology miracle is a great miracle, okay. I mean, very, very beneficial. and I've gone through studied great miracles. The invention of electricity I mean wow, imagine where we'd be without that. But if you, anyway, you know, I could describe what the 20s would like and 2000s and like and so on.

The ability to convert that to enough of a productivity miracle is not, I think, in also the time frame that we're dealing with. So this is an issue. The debt is, and that dynamic remains an issue. And then, of course, what there is is the dynamic of how that prosperity and productivity is shared. In other words, it creates a great wealth gap. You know, you're seeing, we'll talk about wealth.

I'm going to come back and talk about wealth. But you're seeing great increases in wealth on some populations. You know, wow, trillionaire, okay? Yeah. And that kind of thing. And then there's 60% of Americans have below a sixth grade reading level so that you take that sixth grade. And okay, now, how are you going, you still have to deal with the nature of that dynamic of how it comes. So the question is, what is the amount of productivity converted into income?

how does the government get that income to deal with its debt so the holders of the debt get an effective real return and don't have the problems? How does that happen in a politically acceptable way? There are lots of things that make that very, very difficult. I want to say something about wealth and wealth taxes, which is, I think, worth understanding. There's a big difference between wealth and money. and I want to just highlight it, okay? Wealth is very easy to create because it's almost accounting.

What I mean by that is I could put out a raise $50 million, or individuals can raise $50 million at a billion dollar valuation, And they will call that that person's a billionaire and that there's a billion dollars more wealth. Okay. It's not literally that you have to have those transactions. And wealth is not worth very much unless you convert it to money. In other words, you have all of that wealth, but you can't spend wealth. You can't pay for dinner with it.

Right. Right. You have to sell it, sell some of it, in order to get money. in order to pay it. And so when wealth rises a lot relative to money, you have a risky situation. Okay. Now, the other thing about... Why is that a risky situation? Because when there's a movement, the bubbles pop. Right. When there's a movement that I need to get money. Now that quite often is I need to get money because it's a debt service payment. In other words, let's say quite often people, borrow to buy wealth.

Okay, so there's a lot of borrowing now, not only in buying stock, but companies themselves buying to create wealth. And when you need to get the money, like in all the stock market bubbles, there was a lot of borrowing to buy the wealth. Well, when the need for money came along, they had to sell some of that wealth

to get the money, and then that produces a dynamic. Well, you don't tax wealth. Okay? So because you don't tax wealth, and then there is this political issue of wealth, are you going to tax wealth? What is going to happen in California?

What is going to help in elsewhere in terms of taxing wealth? If you tax wealth, then imagine what happens. You have to sell wealth to pay taxes. Okay, so there's a dynamic. understanding. And that lowers the value of it, right? And that's what pops bubbles. Right. So this, the wealth issue is a political issue, the wealth gap issue, is a political issue, and it's a market issue, and it's important issue to understand.

Is it inevitable that you would see given the way our wealth is allocated across? 300,000 million people, that you would get the rise of wealth taxes? Because couldn't this have been predicted? It seems like it's such an obvious headline, seemingly logical thing to do, right? In other words, everybody would say, wait a second, all these people are having all the wealth, and they're not paying any taxes on their wealth, while this is, going on. Okay, we need to go where the money is, right? Right. So it seems like that without then, you know, the full understanding of those things and how to do it in a, you know, managed way.

But so it's, anyway, it's upon us, certainly. And what will happen? I mean, that's, I think, a referendum in California. So. Well, I think what's, what's happening is, and we're seeing it around the world, in many different ways. People are, people in California moving. And it's not the it happening. It's the fear of it happening. Right. Right.

So you're seeing that dynamic. I'm just a, you know, like I'm a mechanic. Of course. I get it. You're not judging the other way. You're just describing what's happening. But because that is happening and people are moving and not just within the country, but outside, country do you have any guesses as to or observations about where people are moving so clearly in the

country it's texas florida but wyoming but in the world where are people moving um there generally speaking they're moving to where there's um civility and opportunity and there's not much fighting they're you know they want to be in places that um have a um they go to places that have lower taxation but also vibrancy, you know, Texas and Florida, as you say, and here in the Middle East or in, you know,

in places that are also vibrant and things are happening. So you could see the patterns of those kinds of movements. And then the problems that that creates is a hollowing out in those places, the other places. Because when they leave, the tax base

is you know, roughly speaking, the top 10% pays about 80% of 76% or something of the taxes. And so when you lose, let's say,

half of them, you lose a big amount of tax revenue. And then that becomes a, you know, a dynamic. Could you see, given all the factors you've described, like, representative democracy continuing in a country like ours?

I, you know, I just, I hope so. Oh, me too. I'm not, of course. And I just don't know. I think, I think we, I think deep in us, we want, most Americans really, really want that and so on. And then at the same time, there are unreconcilable differences. And I think it was a recent poll, something like 25% of the population said that they would fight violently for their side. I mean, some significant percentage, yes.

And so, and it only takes a relatively small amount. So I don't think we can take it for granted. In other words, there's a lot we can't take for granted. And I think we want to cherish those things. put those things above everything else, but you can't take it for granted. When you hear people speaking lightly of civil war, which they are, what's your reaction?

I have a principle. If you worry, you don't have to worry. And if you don't worry, you need to worry. Because if you worry... You're pro-worry. If you worry, then you're more inclined to prevent the thing that you're worried about. So I think that the greater worry about some of these things is a good thing, you know?

Yes. In other words, okay, now we won't take it for granted. We worry about these things. So what are we going to do about it? I see people not worrying and sort of blithely throwing it out, like almost like the way they talk about some foreign policy operations was go in and, you know, kill these guys, put these guys in, it'll be fine. That same attitude I hear a lot about the United States. Well, we're going to have to fight it out at some point. You've taken a close look at Civil Wars throughout history.

What are they like? Well, Civil Wars and international wars are so horrendous that the most bold people who were, you know, trumpets blaring and going into that and so on. And everyone came out of it with deep regret. I mean, we can see while we see it on the news and you can see that, but just imagine how horrendous the wars are. So I think it's a cycle, you know, your confidence and your boldness is increased by the distance that you have to your last wars, you know? Right. What is the difference you were saying earlier?

There's a difference between money and wealth. And wealth, you said, is not necessarily easily convertible to money. In a society like ours, where is the money? Who has the money? Is it the same people who have the wealth? No, no, no, no. Many people have a lot of wealth. have much money they have ill liquid assets yes okay um money is the is that what you can

transact currency short-term deposits that you can assuredly and quickly turn into money you know that's what money is yes and um and the central bank really controls the money and then you could look at who has that increasingly like you could look at M0, M1, and you could see money market accounts, and you could see those very liquid, you know, money, safe money, treasury bills, those kinds of things. And so that, you know, but ultimately it's the central bank because they control the supply demand. So, I mean, if in a period of volatility, it would seem like the central bank would clamp down

the money supply circulating among people. Well, it faces the tradeoff. Right? The tradeoff is like in, let's say, COVID. Right. Or in 1971 when there's too many claims and so on. The tradeoff is that people need money, and they may need money to pay debt, and they may need money for whatever reasons.

And so they are tempted, therefore, to create money. And so you see the coordination between fiscal policy and monetary policy. So you saw two big waves of large budget deficits and large supports of central banks. First, under Trump when the COVID began, and then under Biden when they got in. And because he also wanted more universal basic income. In both of those cases, the government sent out lots of checks, and that's also a popular thing to do. Discipline, financial discipline is not what the population typically likes.

Send out those checks, but where does the money come from? And then the central bank cooperates by buying the government bonds and, you know, print money and then buying those bonds. So it's when they're in the middle, you know, austerity. is not an easy thing to have, right? What happens if the government issue is digital currency? What does that mean? Well, digital currency is, right, you're talking about central bank digital currencies.

Yeah. Okay, and that, there's a great deal of appeal because of the fact that it's easy and so on. But it's, and I think it'll be, and it'll be none. A lot happens. You think it will be done? Yeah, I think it's but what happens in the digital currency

of course it's easy to transact and so on, almost and it'll be like money market funds, I think. The question will be first will they be able to offer interest? So there's a debate now as to whether they will be interest. If they're not able to offer

interest and they there will be a debate probably they won't be but then they're not on effective vehicle to hold it in because you'll have the depreciation of the depreciation of course you'd rather hold it in a money market fund or a bond but that's the debate there will be no privacy and it's a very effective controlling mechanism by the government what I mean is all the transactions will be known all transactions done with digital currencies will be known which is good for illegal activities, getting control legal activities, but it also means that the government has a great deal of control.

For example, they can tax that way, they can take your money, they can establish foreign exchange controls and the like. And that'll, so that's something that will be an increasing issue, particularly for international holders of that currency, because they might feel, let's say if you're a Frenchman and they wanted to have sanctions, they could take your money. Of course.

And so on. So there's the privacy issue of that. And if you're politically disfavored, you could be shut off. Politically disfavored, you could be shut off. Yes. So those kinds of issues enter into it. For those reasons, and they're very tiny, I don't think that you're going to see the development

of central bank digital currencies to be of a mass. magnitude that it's going to be, you know, that big of a deal. I think that doesn't mean it won't grow, but I don't think it's going to be a big deal. So my last question is given your description of the United States as in stage five in a process that only... Which doesn't mean it's inevitable. Of course, but there are only six stages in the process you describe. So it's toward the terminus. It's the time that it's time to worry.

So you go to Washington, you try to convince policymakers, members of Congress, people in administration, here's what you need to do. You've described the reception you get as like, hey, you don't understand politics, we can't do that. So that's not a lot of headway made, obviously, for obvious reasons. Do you have advice for people watching who are not policymakers who are just Americans as to what they can do to prepare for whatever comes next? Well, you know, there's the basics. You know, well, earn more than you spend. Try to save. Diversify your portfolio, including about money.

And those things are paramount importance. Think about the country, the opportunities. Where are the opportunities? People have migrated from one place to another. Follow the opportunities. And most importantly, is raise your children well, you know, so that they're well educated and able to be productive and also civil so that they can be effective. And as I say, there are only three things the country needs to do.

And that's the same for the individuals. You know, raise your kids well so that they're well educated and can earn an income and operate, go to places that work well so that there's civility and productivity and there's opportunity and stay out of civil wars and international wars. Those seem pretty obvious. You do those things well? I mean, really, almost everything else takes care of itself. Really? Ray Dalio, thank you very much for that. It's always a pleasure.

Thank you.