Ray Dalio identifies the five major forces shaping the global economy

SINGAPORE – American billionaire Ray Dalio has identified the five major powers at the front and centre of the global economy.

Speaking at the Milken Institute Asia Summit in Singapore, the Bridgewater Associates founder said the five factors are interconnected and often cyclical. Dalio made his comments Wednesday ahead of the U.S. Federal Reserve’s interest rate decision.

With uncertainty still lingering over what the Fed will do at its meeting this week, Dalio raised concerns about how the country's debt is being managed.

“We’re going to see a change in interest rates from the Fed, so what is that whole dynamic going to do? What’s going to happen to all the debt? How is that going to be handled?” he asked.

The U.S. central bank kept benchmark interest rates at a 23-year high, prompting the government to set aside $1.049 trillion to service debt — a 30% increase from a year ago. That’s part of a projected total of $1.158 trillion in payments for the full year.

“What is its value, is it one man’s debt or another man’s asset? How is it a store of wealth? These are important and pressing questions,” he asked the audience.

“The second issue is the issue of domestic order and chaos,” Dalio said, referring to U.S. politics ahead of the election.

“There are irreconcilable differences between the right and the left, caused by huge gaps in wealth and values… and they raise questions even about an orderly transfer of power,” he added.

For the first time in the 2024 election cycle, Vice President Kamala Harris is now more likely to win than former President Donald Trump, according to a CNBC Federal Reserve poll released Tuesday.

Last week, candidates discussed issues ranging from abortion rights to tariffs and other policy proposals.

However, regardless of who occupies the White House, the president's policy agenda has limited impact on the overall health of the U.S. economy.

Dalio pointed to geopolitics as his third concern: the relationship between the United States and China.

Relations between the United States and China have been defined by a range of ongoing tensions, such as territorial issues in the South China Sea, the political status of Taiwan, and economic tariffs.

“I think there’s probably a fear of war that would stand in the way of that — mutually assured destruction. But that’s chaos,” he later asserted, without specifying a specific flashpoint.

Dalio added that “acts of nature” have historically posed a greater threat to humanity and society than war.

“Natural disasters, droughts, floods and pandemics have killed more people and have been responsible for changing more domestic and international orders,” Dalio noted.

He stressed that the cost of climate change is about to rise. According to the World Economic Forum, the climate crisis is causing a loss of 12% of global GDP for every one degree Celsius of temperature rise.

The billionaire added that the technology would be “amazing” if we could embrace it and invest in it properly.

“The potential productivity benefits of this are enormous,” he said, explaining that technology produces unicorns, and when that happens, a small segment of the population will have a better chance.

“Whoever wins the technology war will win the military war,” he added.

In his assessment of the five factors as a whole, Dalio concluded that “the surprises were more negative than positive,” he said.