Ray Dalio warns: The world order is changing, a new geopolitical era is emerging

On February 14, Ray Dalio, founder of Bridgewater Associates, said in a post on X that world leaders are increasingly recognizing the breakdown of the international system established after World War II. Referring to discussions at the Munich Security Conference, he said the framework that has structured geopolitical and economic relations for decades no longer functions as it once did. According to him, this observation is now widely shared among political leaders, rather than considered a distant concern.

Dalio deciphers the new geopolitical era

Dalio relies on recent statements from several officials to support his analysis. He notes that Friedrich Merz believes that the established world order no longer exists, with the current environment now dominated by great power competition. In a similar vein, French President Emmanuel Macron warned that Europe “must prepare for war”, while US Senator Marco Rubio described the current geopolitical situation as the start of a new phase, marking a clear break with the previous international order.

According to Dalio, relations between states differ from national political systems because no global authority can impose binding rules or arbitrate conflicts. Interactions are therefore mainly based on power relations rather than on legal frameworks. When disputes emerge, states rely on negotiation, pressure, or confrontation rather than judicial settlement.

Five forces sparking global rivalry

Dalio identifies five main forms of rivalry in today's global environment: trade and economic conflicts, technological competition, geopolitical tensions, capital-related conflicts and military confrontation. Although the first four do not generally involve direct combat, they nevertheless constitute struggles for influence between nations. Over time, these rivalries can intensify and, in some cases, lead to military conflicts, with other forms of pressure reinforcing armed action.

These conflicts, whether or not they involve fighting and human losses, reflect the balance of power between nations. They can be limited or generalized, depending on the stakes and the relative power of the adversaries. Once a military conflict begins, the other dimensions are generally mobilized to the maximum.

Ray Dalio

At the same time, Dalio emphasizes that financial resources constitute a key lever of influence, because they make it possible to strengthen military capabilities, to influence global trade and to influence the behavior of other countries. He notes that nations capable of sustaining both economic growth and military power often remain dominant over long periods of time, although this is not permanent.

As an example of growing risks, Dalio cites tensions between the United States and China, particularly around Taiwan, which he describes as a particularly sensitive area. He points out that the risk of military confrontation generally increases when powers reach comparable levels of force and their disagreements remain unresolved.

Dalio on economic and financial measures before and during the war

Dalio points out that financial confrontation often precedes armed conflict and generally follows a gradual rise in tensions:

• Before conflict, states use economic tools such as sanctions, asset freezes, export restrictions, and capital controls.
• When war breaks out, governments step up their economic intervention, redirecting resources from civilian activities to military objectives.
• This can include regulating production, rationing, controlling imports and exports, and setting prices and wages.
• States can also restrict access to financial assets and limit capital flows to maintain economic stability and support the war effort.

He adds that in times of major conflict, financial markets are strongly influenced by state decisions and developments in the military terrain, creating strong uncertainty for investors. In some cases, stock markets have been suspended, preventing investors from accessing their funds. Under these conditions, precious metals like gold, and sometimes silver, become safe havens. With prices and capital flows tightly regulated, it becomes more difficult to assess the real value of assets.

Dalio believes investors can protect themselves by reducing their exposure to debt and increasing their allocation to gold, as currencies tend to weaken during times of war. He concludes that major conflicts are not inevitable, emphasizing that nations can avoid these cycles if they remain productive, maintain surpluses, manage their systems effectively, and maintain stable, mutually beneficial relationships with their main rivals.