Best Principles For Dealing With The Changing World Order: Why Nations Succeed And Fail Quotes by Ray Dalio

"My objective is to show you those cases and the mechanics that drove them and, with that perspective, attempt to imagine the future."

"I’m on a mission to figure out how the world works and to gain timeless and universal principles for dealing with it well."

"The biggest thing affecting most people in most countries through time is the struggle to make, take, and distribute wealth and power."

"The people who have the wealth are the people who own the means of wealth production."

"Over time, this dynamic leads to a very small percentage of the population gaining and controlling exceptionally large percentages of the total wealth and power."

"Evolution is the upward movement toward improvement that occurs because of adaptation and learning."

"Human productivity is the most important force in causing the world’s total wealth, power, and living standards to rise over time."

"The big abrupt shifts come from booms, busts, revolutions, and wars, which are primarily driven by cycles."

"Most cycles in history happen for basically the same reasons."

"While these revolution/war periods typically lead to a lot of human suffering, we should never, especially in the worst of times, lose sight of the fact that one can navigate them well."

"Self-interest is the primary motivator for most people, organizations, and governments."

"The 'self' that people are most attached to is the one they will do the most to protect."

"Wealth = Buying Power. Real Wealth ≠ Financial Wealth."

"Stage 1: People and Their Countries Are Poor and They Think of Themselves as Poor."

"Stage 2: People and Their Countries Are Rich but Still Think of Themselves as Poor."

"Stage 3: People and Their Countries Are Rich and Think of Themselves as Rich."

"Humanity's capacity to invent solutions to its problems and to identify how to make things better has proven to be far more powerful than all of its problems combined."

"The degree of inventiveness and innovation in a society is the main driver of its productivity."

"In all countries throughout time (though in varying degrees) people find themselves within 'classes'."

"The poor and the rich quarrel with one another, and whichever side gets the better, instead of establishing a just or popular government, regards political supremacy as the prize of victory." - Aristotle

"All currencies devalue or die, and when they do, cash and bonds are devalued or wiped out."

"When a country needs more money and credit than it currently has, it naturally moves from Type 1 to Type 2, or Type 2 to Type 3, so that it has more flexibility to print money."

"This big cycle typically plays out over something like 50 to 75 years; its ending is characterized by a restructuring of debts and the monetary system itself."

"Most people worry about whether their assets are going up or down; they rarely pay much attention to the value of their currency."

"Of the roughly 750 currencies that have existed since 1700, only about 20 percent remain, and all of them have been devalued."

"The goal of printing money is to reduce debt burdens, so the most important thing for currencies to devalue against is debt."

"When the creation of money sufficiently hurts the actual and prospective returns of cash and debt assets, it drives flows out of those assets and into inflation-hedge assets like gold, commodities, inflation-indexed bonds, and other currencies."

"There are systemically beneficial devaluations, and there are systemically destructive ones that damage the credit/capital allocation system but are needed to wipe out debt in order to create a new monetary order."

"Big devaluations are abrupt and episodic rather than evolutionary."

"I saw how these struggles happened in timeless and universal ways, and how these struggles had huge implications for all aspects of people’s lives."

"How people are with each other is the primary driver of the outcomes they get."

"Typically the people who led the civil war/revolution were (and still are) well-educated people from middle-class backgrounds."

"While having large wealth gaps during economically difficult times was typically the biggest source of conflict, there were always other reasons for conflict that added up to a lot of opposition to the leadership and the system."

"During the civil war/revolution stage of the cycle the governments in power almost always had an acute shortage of money, credit, and buying power."

"To make matters even worse, when there was internal disorder, foreign enemies were more likely to challenge the country."

"As for what types of leaders are best for civil wars and revolutions, they are the 'inspirational generals'."

"While civil wars and revolutions are typically extremely painful, they often lead to restructurings that, if done well, can establish the foundation for improved future results."

"The beginnings of civil wars and revolutions aren’t clear when they are happening, though they are obvious when one is deeply in the middle of them."

"Almost all civil wars have had some foreign powers participating in attempt to influence the outcome to their benefit."

"The international order follows the law of the jungle much more than it follows international law."

"The choice that opposing countries face—either fighting or backing down—is very hard to make."

"Instead there were big family estates called kingdoms and dynasties run by kings and emperors that almost constantly fought with their neighbors for wealth and power."

"Religions and Religious Leaders Were Much More Powerful—and Science as We Know It Today Didn’t Exist."

"The ideas that a) all people should be treated equally and b) judged by the law didn’t exist at the time."

"The Dutch invented capitalism as we know it. This was great for the Dutch and great for the world, but like most great inventions, it brought with it some potentially deadly consequences."

"As is classic, the returns of investment assets in the declining empire fall relative to the returns of investing in the rising empire."

"Though Venice eventually defaulted after losing a series of wars around 1500, liquid bond markets caught on elsewhere including in the Netherlands and in the UK."

"The Scientific Revolution was an extension of the Renaissance-era shift from finding truth in religion to finding truth in logical reasoning."

"The invention and development of communism in the mid-1800s came as a reaction against both capitalism and the wealth gaps it created."

"A new way of thinking in many respects modeled after the ancient Greeks and Romans started in Italian city-states around 1300 and passed through Europe until the 1600s, in a period known as the Renaissance."

"The Commercial Revolution was the move away from a solely agriculture-based economy to one that included trade in a variety of goods."

"After 1870, this was comprised of a persistent trade deficit funded by returns on overseas investments."

"The income from the current account surpluses funded an increasing share of global cross-border investment as other countries become more attractive to invest in."

"Trust in the pound was bolstered by the economic management of the Bank of England, which increasingly operated as a 'lender of last resort' to mitigate the effects of banking panics."

"The result was a sizable increase in output per worker in the countries able to make the switch efficiently—primarily the US and Germany."

"By the late 1800s, the top 1 percent of the population owned over 70 percent of all wealth, more than in peer countries."

"In order to create a culture of innovation, the German government provided credit to corporations, along with technical advice and assistance."

"By 1900, Germany’s GDP had surpassed Britain’s (excluding its empire), although the latter was still the leading trading nation in the world."

"The war killed about 8.5 million soldiers and 13 million civilians, leaving all of Europe exhausted, weakened, and indebted."

"The US, Britain, France, Japan, and Italy—met at the Paris Peace Conference to lay out the new world order in the Treaty of Versailles."

"The Great Depression coupled with the large wealth gaps led to a rise in populism and extremism in nearly every major country."

"World War II, just two decades after World War I, was even more costly in lives and money."

"The Allied victory in 1945 produced a tremendous shift of wealth and power, with the US emerging as the world’s dominant empire."

"It took another 20 years for the British pound to fully lose its status as an international reserve currency."

"The decline in the British pound was a protracted affair that involved several significant devaluations."

"The US was the dominant power, which made it the de facto global police force."

"The Bretton Woods monetary system, which established the dollar as the world’s reserve currency."

"The European Union’s relative declines and crises in the early 21st century occurred for the classic reasons Big Cycle declines occurred."

"The strong development and excellence in education led to advances in innovation and technology, competitiveness in world markets, and economic output."

"In 2008 the debt crisis led to interest rates being lowered until they hit 0 percent."

"The US is roughly 70 percent through its Big Cycle, plus or minus 10 percent."
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"Growing inequality and fiscal problems over the course of the dynasty are critical drivers of the decline."

"Monetary problems were common contributors to the decline of the empires."

"The quality of governance and infrastructure tended to rise early in each dynasty and then fall over the course of the dynasty."

"Internal conflict usually arose from economic differences combined with bad times."

"Bad conditions and large wealth gaps led to the most significant uprisings."

"Isolation and Confucian cultural influences that favored scholarship over commerce, technology, and military strength led to China’s weaker competitiveness."

"China’s physical geography and geology have also had a big impact on the rise and fall of dynasties."

"Past and current leaders of China to learn lessons and establish protections against these natural and political disasters."

"China’s history is both so ancient and so well-documented."

"The ability to see the big patterns of causes and effects."

"The Chinese way of thinking, which is very different from the American way of thinking."

"The planning horizon that Chinese leaders concern themselves with is well over a century."

"Confucianism seeks to bring about harmony by ensuring that people know their roles in the hierarchy."

"Traditional Chinese military philosophy teaches that the ideal way to win a war is not by fighting but by quietly developing one’s power."

"China’s support for private commerce and financial markets was inconsistent."

"Currencies are used for 1) domestic transactions, which the government has a monopoly in controlling and 2) international transactions."

"I’ll begin with a brief overview of the period between 1800 and the foundation of the People’s Republic of China in 1949."

"China’s post-1800 decline began when a) the last Chinese royal dynasty became decadent and weak at the same time that b) the British and some other Western countries became strong."

"The early 1800s was the time of Britain’s rise and expansion across the globe."

"Mao saw capitalism as a system in which companies pursued profits through imperialism."

"Marx’s most important theory/system is called "dialectical materialism.""

"The conflict and struggle between the classes that is manifest in the conflict between capitalism and communism is just one of many such examples."

"As is classic, periods of prosperity financed by debt growth lead to debt bubbles and large wealth gaps."

"The era of peace, prosperity, and globalization began to wane, giving way to an era of conflicts."

"China’s shift from isolation to opening up and from hard-core communism to "market reforms" and capitalism have had a greater impact on the economies of China, the US, and the rest of the world than anything else."

"History has taught us that there are five major types of wars: 1) trade/economic wars, 2) technology wars, 3) geopolitical wars, 4) capital wars, and 5) military wars."

"The United States’ greatest power comes from having the world’s leading reserve currency, which gives the US enormous buying power because it gives it the ability a) to print the world’s money and have it widely accepted abroad and b) to control who gets it."

"The most dangerous sovereignty issue is Taiwan. Many Chinese people believe that the United States will never follow through with its implied promise to allow Taiwan and China to unite, unless the US is forced to do so."

"I am primarily focusing on US-China relations in this chapter, but in truth the game macro investors and global policy makers are playing is like multidimensional chess."