It's hard to remember now, but Ray Dalio once held out hope that the Trump administration would usher in a fairly ordinary period of business-Republican policies, free of major catastrophes. After a few months of watching Trump's America in action, however, Dalio's outlook began graduallydarkening, to the point where he now recommends adding gold to your portfolio on the logic that the gangs of half-mutant survivors roving the post-apocalypse wastes might happen to value shiny stuff.
So at this point Dalio is less concerned with whether things will go south than how quickly they'll go south, how deep to bury his fall out shelter, whether nuclear winter will benefit his meditation practice, etc. In his most recent LinkedIn musing Monday, Dalio took a crack at the question of the American social fabric and how far it is from tearing asunder. His conclusion:
History has shown that democracies are healthy when the principles that bind people are stronger than those that divide them, when the rule of law governs disputes, and when compromises are made for the good of the whole --- and that democracies are threatened when the principles that divide people are more strongly held than those that bind them and when divided people are more inclined to fight than work to resolve their differences. Conflicts have now intensified to the point that fighting to the death is probably more likely than reconciliation.
Democracy, Dalio says, is a social lubricant designed to help the frothing lunatics on each political extreme unite under the shared assumption that no one's throats should be wrung over, say, a routine funding bill, and then bring these two parties to a compromise suitably disappointing to each. But given the current state of political distemper, Dalio doubts that democracy is still up to the task. Should that be the case:
While I see no important economic risks on the horizon, I am concerned about growing internal and external conflict leading to impaired government efficiency (e.g. inabilities to pass legislation and set policies) and other conflicts.
The interesting point here is that, in Dalio's mind, it's not the current administration that would bring us back to dark days of 1937 or thereabouts, but rather the polity itself. That makes solutions a little trickier. An administration can be changed a little more easily than an electorate. So where should we turn? Dalio:
I believe that this is a time when it is especially important for us a) to be explicit about what our principles are in order to be clear about what we agree and disagree on, b) to practice the art of thoughtful disagreement, and c) to respect our ways of getting past our disagreements so we can start rowing in the same direction. I believe that how well this is done will have a greater effect on the economy, markets and our overall well-being than classic monetary and fiscal policies, so I continue to closely watch how conflict is handled while tactically reducing our risk to it not being handled well.