Author: Ray Dalio

Translation: Shen Chao TechFlow

Shen Chao Guide: Ray Dalio, the founder of Bridgewater Associates, published a 23,000-word long article warning that the current situation is not an isolated conflict with Iran but is in the early stages of a world war, paralleling the periods of 1913-14 and 1938-39.

Based on 50 years of global macro investment experience and 500 years of historical research, he predicts: the United States' excessive expansion (750-800 military bases vs. China's 1), clear division of camps, Big Cycle entering step 9, and more than a 50% probability of at least one major conflict erupting within the next 5 years.

Note: The original text is lengthy; this article is a refined version that highlights the core arguments and key data. To read the complete content, please click on the original link.

Core Argument: The World War Has Begun

As a global macro investor for over 50 years, I need to study everything that has influenced the market over the past 500 years. Most people tend to focus on the eye-catching events of the present—like what is happening in Iran right now—and miss the larger, more important, and long-term evolutionary forces. What is most important today is that the U.S.-Israel-Iran war is just a part of the world war we are currently in, and this war will not end soon.

While this may sound like an exaggeration, it is undeniable that we are currently in an interconnected world, undergoing multiple shooting wars: the Russia-Ukraine-Europe-U.S. war; the Israel-Gaza-Lebanon-Syria war; the Yemen-Sudan-Saudi Arabia-UAE war (which also involves Kuwait, Egypt, Jordan, etc.); and the U.S.-Israel-Gulf States-Iran war. Most of these wars involve nuclear powers, as well as significant non-shooting wars (trade, economic, capital, technology, and geopolitical influence wars), with most nations participating.

These conflicts collectively constitute a very classic world war, similar to past "world wars." For example, past "world wars" consisted of interconnected wars that often slid into conflict without a clear start date or declaration of war. These past wars merged into the classic dynamics of world war that influence all wars, just like the wars happening now.

Most people hold a short-term view; they currently expect—and the markets are pricing in—that this war will not last long and that we will return to "normal" when it ends. Almost no one talks about the fact that we are in the early stages of a world war, and this war will not end soon.

Division of Camps and Key Relationships

Through indicators such as treaties, formal alliances, United Nations votes, leaders’ statements and actions, it is easy to objectively see how various parties are aligning. For example, it can be seen that China is allied with Russia, Russia with Iran, North Korea, and Cuba, and this group largely opposes the United States, Ukraine (aligned with most European nations), Israel, the Gulf Cooperation Council nations, Japan, and Australia.

These alliances are very important when imagining the situation of the relevant participants. For instance, while some say China is particularly affected by a closure of the Strait of Hormuz, this is incorrect because the mutual support relationship between China and Iran may allow oil shipments to China to continue, and China's relationship with Russia will ensure that China receives oil from Russia. China also has a wealth of other energy sources (coal and solar) and vast oil reserves (about 90-120 days of consumption). It is also noteworthy that China consumes 80-90% of Iran's oil output, which strengthens its relationship with Iran. Overall, China and Russia seem to be the relative economic and geopolitical winners of this war.

Classic Stages of the Big Cycle

I have many indicators suggesting that we are in a phase of the Big Cycle, where the monetary order, certain domestic political orders, and the geopolitical world order are collapsing. These indicators suggest that we are transitioning from a pre-war phase to a combat phase, roughly similar to the periods of 1913-14 and 1938-39.

The classic dynamic of this phase is intensifying conflict rather than de-escalation. The classic sequence of steps leading to major wars has occurred many times and is currently happening. Watching today’s events and understanding this classic international world order/conflict cycle, it is clear to me that we have progressed to step 9:

1. The relative rise of the economic and military power of the dominant world power versus the declining world power.

2. A sharp increase in economic warfare in the form of sanctions and trade blockades.

3. Formation of economic, military, and ideological alliances.

4. An increase in proxy wars.

5. Rising fiscal pressures, deficits, and debt.

6. Key industries and supply chains increasingly controlled by governments.

7. Trade choke points being weaponized.

8. Powerful new war technologies being built.

9. Multi-theater conflicts increasingly occurring simultaneously (we are here now).

10. Within nations, demands for loyalty support for the national leadership.

11. Direct military conflicts between major powers.

12. Significant increases in taxation, debt issuance, and monetary creation to fund wars.

13. Ultimately, one side defeats the other and gains undisputed control over the new order.

America's Overexpansion

It is easy to identify overextended empires by studying history, developing indicators of their degree of overextension, and seeing how they suffer due to overreach. The United States now has 750-800 military bases in 70-80 countries (by the way, China has only 1) and has commitments worldwide that create costly vulnerabilities.

Overextended great powers cannot successfully wage war on two or more fronts, which will lead to questioning America’s ability to fight on another front (for example, in Asia and/or Europe). For example, it wouldn’t be surprising to see some issues arise in Asia to test and reveal America's willingness to address challenges. Due to extensive commitments in the Middle East and a lack of public support for war with Iran (heading into the midterm elections), it is difficult for the U.S. to do this.

Who Can Win: Not the Strongest, but the Most Resilient to Suffering

History shows that the most reliable indicator of which country may win is not which is the strongest, but which can endure the most suffering for the longest time.

This is certainly a factor in the U.S.-Iran war, where the president assures the American public that the war will end in weeks, gas prices will fall, and we will return to a period of normal prosperity.

While the U.S. seems to be the most powerful country in the world, it is also the most overextended major power, the weakest in terms of enduring suffering in the long term.

Probability Assessment of Wars in the Next 5 Years

Based on my indicators, here are the assessments of the probabilities for existing and potential wars erupting or escalating in the next 5 years:

Iran-U.S.-Israel war: This is a comprehensive war that is currently underway and seems to be escalating.

Ukraine-NATO-Russia direct war: The probability of expanding beyond Ukraine is about 30-40%.

Taiwan → U.S.-China war: I estimate the probability of military conflict between the U.S. and China to be 30-40%, with the highest risk period being in 2028.

Korean-related war: The probability of some military conflict occurring with North Korea in the next 5 years is 40-50%.

South China Sea-Philippines-China-U.S. conflict: The probability of such conflict in the next 5 years is about 30%.

Overall, looking at all these potential conflicts, the probability of at least one occurring in the next 5 years is over 50% in my view.

I am not saying that things will definitely develop further along this cycle to a total world war. I do not know what will happen, and I still hope for a peaceful world built on win-win relationships. But it is important to understand the typical Big Cycle and observe what is happening.