Embracing the New Order, Welcoming New Opportunities.
Written by: Ray Dalio, Founder of Bridgewater Associates
Translated by: Block unicorn
Now, with Trump's right-wing team achieving a decisive victory over Harris's left-wing proposals in the election, the nightmare scenario of Trump potentially losing narrowly and triggering election disputes has been avoided. As some key appointments are announced, a possible scenario begins to emerge. I want to make it clear that the picture I am painting is intended to reflect the situation as accurately as possible, without bias towards good or bad, because accuracy is crucial for making the best decisions.
The current state I see includes:
1) A large-scale overhaul aimed at improving government efficiency, which will trigger internal political struggles to turn this vision into reality;
2) An "America First" foreign policy, along with external preparations for war with China, as China is seen as the greatest threat to the U.S. This policy bears similarities to the practices of some countries in the 1930s.
Trump is selecting individuals to assist him in achieving these goals, including Elon Musk and Vivek Ramaswamy, who will be responsible for the newly proposed Department of Government Efficiency; Matt Gaetz, who, if confirmed by the Senate, will serve as Attorney General to push the legal boundaries of the new governance order; Robert F. Kennedy Jr., who will undertake a thorough reform of the healthcare system as Secretary of Health and Human Services; and Marco Rubio as Secretary of State, Tulsi Gabbard as Director of National Intelligence, and Pete Hegseth as Secretary of Defense, who will lead the fight against foreign adversaries. Additionally, many others—some within the government and some as external advisors, such as Tucker Carlson, Steve Bannon, and some members of the Trump family—will join Trump in this mission. They are all "victory-first" advocates loyal to the leader and the mission, aiming to overthrow the so-called "deep state" and replace it with a new domestic order that they hope will bring maximum economic strength and counter foreign enemies.
Once these individuals are in place, this method of appointment is likely to be used to purge those accused of being members of the "deep state," who are seen as not aligned with or loyal to this mission. This purge will extend to various parts of the government system, including those previously considered less politically/ideologically controlled institutions, such as the military, the Department of Justice, the FBI, the SEC, the Federal Reserve, the FDA, the CDC, the Department of Homeland Security, the Department of the Interior, and "F-class" government employees (a classification Trump hopes to reintroduce after being elected president to eliminate civil service protections for certain government positions). Almost all appointive positions that the president (in cooperation with a Republican-controlled Senate, House, and Department of Justice) can control will be managed to ensure that individuals aligned with Trump and his new domestic order goals are in place. In this process, nearly everyone inside and outside the government will be viewed as either allies or enemies, and all available power in the hands of Trump and his allies will be used to strike against those who obstruct reform. I believe they will almost certainly have a significant impact on changes in the U.S. and world order; what will these changes look like?
The Transition of the American Order
It is now clear that Trump and his team will reform the government and the nation like corporate acquirers dealing with inefficient companies. They will implement massive changes through personnel replacements, significant cost reductions, and the introduction of new technologies. This can be likened to the message conveyed by Gordon Gekko in his "Greed is Good" speech, but it must be recognized that this approach is taken by the President of the United States towards the federal government and the entire nation. As mentioned, the most similar historical case recently is the extreme right-wing countries of the 1930s. It is important to clarify that I am not saying Trump and his government are fascists, nor that they will act like fascist leaders in many ways; what I mean is that to understand those currently in control and their nationalist, protectionist, top-down government-dominated economic and social policies, as well as their low tolerance for internal opposition and involvement in international great power conflicts, one can refer to the behavioral patterns of countries that adopted similar policies in the 1930s.
Economic reforms in the nation are likely to be achieved through industrial policies aimed at increasing productivity and efficiency, but issues that may hinder the implementation of these policies—such as environmental protection, addressing climate change, alleviating poverty, or promoting diversity, equity, and inclusion—will not receive much attention. Some key areas (including what I consider the most important areas of education and debt management) may be neglected (the Democrats may also neglect these areas). During the ongoing collaboration between Trump and Musk, they will become the main designers and executors of the new American order.
Previously, these entities were restricted in many ways by transactions, but in the future, they will be able to operate more freely from government constraints. These changes will greatly benefit financial intermediaries, banks, and asset managers, as capital controls will be relaxed, and the Federal Reserve will face pressure to make monetary policy more accommodative, thus providing them with more freedom, funds, and credit. These policies will also benefit tech companies that support Trump, as they will be able to develop and operate largely unrestrained. Additionally, these policies will be advantageous for lawyers, as they will be busier. I have seen that these individuals are formulating larger plans to accomplish more under the Trump administration than during the Democratic administration.
Moreover, regulatory oversight of artificial intelligence will be relaxed, and tariffs will be used to simultaneously increase tax revenue and protect domestic producers. If the Federal Reserve continues to insist on lowering interest rates (although I believe this should not be done), it will also shift a large amount of funds stored in money market funds and other deposits to other markets, thereby stimulating market and economic development.
Additionally, the U.S. is engaged in an economic and geopolitical war and may face military conflicts with China, as well as with countries like Russia, Iran, and North Korea, which will have significant implications for domestic security and policy. For example, to ensure that the U.S. has sufficient supplies in all key technology areas, policies will be introduced requiring these technologies to be produced in the U.S. (for instance, by 2030, 20% of the most advanced chips must be produced in the U.S.) or produced in allied countries. This requires the central government to take strong measures and adhere to good energy and regulatory policies to ensure these goals can be achieved.
Changes in the International Order
The international order will transition between the following two forms:
a) The existing broken system created by the U.S. and its allies after World War II, relying on globally recognized standards of behavior, rules, and governance institutions such as the United Nations, World Trade Organization (WTO), International Court of Justice, International Monetary Fund (IMF), and World Bank;
b) A more fragmented world order, where the U.S. will pursue an "America First" policy and clearly delineate allies, enemies, and non-aligned countries, as more economic and geopolitical conflicts will arise in the next decade, along with a higher likelihood of military wars than ever before.
In other words, the era of U.S.-led multilateral cooperation is coming to an end, during which countries attempted to coordinate their relationships through multilateral organizations and guiding principles and rules. Instead, a more self-interest-based, survival-of-the-fittest order will emerge, with the U.S. and China becoming the two main players, and the nature of the struggle remaining a classic confrontation between "capitalism and communism" (in contemporary forms).
Thus, the U.S.-led moral and ethical perspectives—what is considered "moral" and "ethical"—will become less important, as the U.S. will no longer be the global leader advocating and enforcing these principles. The choice of allies and enemies will be based more on strategic considerations, such as what deals can be made. The alignment of countries will become the most important issue.
China will be viewed as the primary enemy, as it is both the strongest and ideologically most opposed to the U.S.; meanwhile, Russia, North Korea, and Iran will also be classified as enemies. In fact, China is widely regarded as the greatest threat to the U.S., even more so than domestic threats. As for other countries, this article will not elaborate on their specific positions, but it can be said that currently, all countries are categorized to some extent as allies or enemies, which will also become the guiding principle for dealing with them.
At the same time, detailed response plans for major countries and significant areas are being developed. All countries will face immense pressure and be provided opportunities to adjust their domestic orders to align with the Trump-led U.S. leadership system; otherwise, they will face negative consequences.
This conflict between the two great powers will also create opportunities for neutral non-aligned countries, especially in the business sector.
The dynamic changes in this international order will also have significant implications for developing countries (now referred to as the "Global South") and the world as a whole.
The Global South accounts for about 85% of the world's total population and may choose to go its own way, as the U.S. will no longer dominate a global common order based on specific ideals, and other countries may not be willing to follow the U.S. The U.S. and China will compete for allies, with China generally seen as having a greater advantage in courting non-aligned countries due to its greater economic importance and better performance in exercising soft power.
Given this change in the international order, non-aligned countries that can meet the following conditions will benefit:
Good financial health, meaning they have a healthy income statement and balance sheet;
Internal orderliness, and capital markets that can promote the productivity of people and the nation;
Not involved in international wars.
More specifically, the following points can be further elaborated:
Increased Government Influence
To achieve government goals, even at the expense of free markets and profit mechanisms, government influence will increase. This will spark debates between conservatives (who support top-down approaches) and groups advocating for more free markets. Along this line, we should expect increased government intervention in private markets to drive the realization of its grand plans, including reshaping the economy and preparing for war. Therefore, cost efficiency and national security will become the primary goals of government collaboration with "national champion" enterprises, rather than merely pursuing profits, as profits alone cannot achieve these goals.
We need to pay attention to policy changes that will determine which economic sectors benefit the most, such as the energy and mineral industries supporting artificial intelligence technology. While there will be winners in the free market, in some obvious cases, the best American companies may not be sufficient to meet national needs (for example, in the advanced semiconductor sector). Therefore, it is necessary to establish key partnerships with aligned foreign manufacturers (such as Taiwan's TSMC) to produce products in the U.S. to minimize dependence on foreign adversaries.
In addition to the need to produce key technologies domestically, there is also a need to produce steel, automobiles, and many other essentials. This means more "reshoring" and "friend-shoring." At the same time, there is a need to address potential disruptive risks that could sever supply chains in various ways.
Massive Deregulation
To support cost-efficient production, large-scale deregulation policies will be implemented.
Immigration and Deportation Actions
Immigration policies will be strengthened, with an initial focus on closing the borders and deporting undocumented immigrants with criminal records.
Trade and Tariff Reform
Challenges in Collaborating with U.S. Allies
In the geopolitical conflict with China, Japan is the most important ally of the United States, making the current political dynamics in Japan crucial. Other allies like the UK and Australia are important but not major powers. Europe is weak, preoccupied with its own issues, and has no direct interests in this conflict; at the same time, Europe relies on U.S. support through NATO in the face of the threat from Russia. Most other countries are unwilling to get involved in this conflict, as the goals pursued by the U.S. are not as significant to them as they are to the U.S., and they are more economically dependent on China than on the U.S. The emerging non-aligned powers of the Global South (including members of the BRICS nations like China and Russia) are a group of countries worth paying attention to.
The High Economic Costs of Being a Global Superpower
The economic costs required to maintain the most important technologies, strong military capabilities, and soft power will exceed what can be provided by profit models alone. Therefore, how to address this economic reality will require further exploration.
The Necessity of Tax Reductions
To maintain voter satisfaction while keeping funds in the hands of the most productive groups, tax reductions are necessary. Trump and his advisors believe that a corporate tax rate lower than the current level (around 20%) will increase total tax revenue and enhance productivity. This perspective is positive for the market.
Significant Reforms to the Healthcare System
Major adjustments to the current healthcare system are expected to improve efficiency and reduce costs.
Priorities and Timelines
In the face of this series of daunting tasks, the new government has limited time to accomplish them, especially in the first 100 days and the following two years. Therefore, priorities must be rigorously filtered. It is currently unclear which goals will be prioritized, and it is also uncertain how successful the new government will be when its ambitions encounter entrenched systemic resistance.
Undoubtedly, this will be a challenging and significant period; let us stay attentive and wait and see.
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