Ray Dalio, welcome back to the All-In

podcast. Third time's the charm. Thanks

for being here.

>> It's always always a blast to be here.

Thank you for having me. The last

conversation we had was so popular, and

it was so timely because it was just a

few days actually after the inauguration

of President Trump, and you had provided

some very kind of prescient outlooks for

the administration that I think we all

thought would be very helpful to get on

the record. At the time, you had

highlighted and and as you have been for

some time,

this great debt cycle we're in, the

fiscal and monetary policy issues that

are driving that debt cycle,

and provided some

input that if we were able to cut our

deficit to GDP to roughly 3%,

we may have a shot at a smoother

transition here. Today, the CBO

estimates that the 2026 deficit to GDP

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So, the first question I have for you

looking back on the past year of the

administration

and the actions of Congress and the

economy,

are we on a good path? Are we on no

different a path than we were, say, a

year ago? Are we moving too slowly? I've

studied these

big cycles in history going back 500

years, and there are five big forces

that are intertwined to determine the

answer to your question, which is

uh there's the debt money one and I'll

I'll take you into that at in a minute.

There is the

um

domestic

gaps, the wealth and values gaps that

are causing irreconcilable differences

between

the left and the right that is affecting

how

taxes, democracy and everything works.

There's the international

great power conflict, the classic rising

of a great power challenging existing

great power and changing the

international world order. Then there's

technology all through these cycles

there have been technology and then

there's acts of nature, droughts, floods

and pandemics. So

and when we think of orders we're

talking about there's always a monetary

order and all monetary orders have

broken down for the same reasons. All

uh

political orders, domestic political

orders, they all always change. In the

the United States less so, we have 250

years here, but

they always change. There was one civil

war in there. And then they

but internationally they always change,

all orders change. And the international

geopolitical order going from the

a

multilateral to a unilateral world order

is changing and certainly technology is

changing. Okay. So getting that fact

that they're all on there, now I'll go

down to explain the government's

finances and answer your question. The

economics of a country are basically the

same as the economics of a company or an

individual except the government has a

ability to print money. Look at it like

a company or like your own. Basically

it's projected to spend about $7

trillion and

take in about $5 trillion.

so it's running a 40% deficit, 40% of

its spending. It's been running deficits

for a long time, so it has a debt that

is 600% six times the amount of money

that it takes in

and we can project that number.

Um, the problem with debt cycles

and you can see them transpire, they're

um

almost like the circulatory system of

the body, the capital markets uh bring

credit to different parts of the economy

and if that credit is used to be

productive and produces an income that

pays for the debt service, it's a

healthy process. But what happens is

that if the

um income the debt service grows

relative to the income because it's not

paying for it, it's like a plaque in the

system uh growing up and it squeezes out

spending and so we now have that $2

trillion deficit. Half of that is

interest payments.

Plus we have to roll over $9 trillion

of debt

that has been accumulated and is

maturing. Okay, so now if you were to

look at a company like that or an

individual like that, you have that

problem. So it was a handy

number, 3% of GDP would sort of

stabilize the situation. Very unhealthy

condition. It's not just unhealthy

because it's squeezing out those

spendings, but also because there's a

supply and a demand. In other words,

you have to roll over the $9 trillion

of debt that's coming due

and you have to sell $2 trillion more,

something like that. Okay?

So, now you go to the buyers, and the

buyers, who are the buyers?

There are some domestic buyers and there

are foreign buyers. About a third are

foreign buyers, and now it's a riskier

situation from their point of view.

It's riskier First of all, it's a lot to

acquire.

They

dollar-denominated debt is already a

large percentage of their portfolio,

larger than it would be if just decided

on on a prudent basis.

So, but also

we have political geopolitical risks

that also extend to possibly

the risks that

the debtor

and the creditor will have a conflict.

You could imagine that with China. You

could imagine that with Europe even.

And you know, Europeans could wonder

whether they will get sanctioned. In

other words, the debt service payments

might not be made as a sanction, and the

United States has to worry about whether

it's going to bring in that money. Now,

the things that I'm describing have

happened repeatedly through history.

So, in other words, I'm not just making

this stuff stuff up. If you were to see

particularly, you know, in the 1929 to

45 period, you saw this dynamic. You saw

it before. So, there was this financial

piece which in and of itself is not

healthy for the US government.

And it's

but it's also problematic because of the

other factors compounding the problem.

You highlighted this problem.

You provided a diagnosis that if we

could get to 3%, we could soften the

effect, but it hasn't happened. We were

all very hopeful

last year around this time when Elon

Musk decided to lead DOGE,

the Department of Government Efficiency.

He was going to go in and there were

going to be these kind of big sweeping

changes to reduce government spending,

find fraud, waste, and abuse, and so on.

Did DOGE

fail

because the actions that were taken were

wrong, or did DOGE fail because the

system itself cannot be changed at this

point in the cycle?

That there's too much capital flowing,

the economy is too dependent on it,

there are too many individuals and

businesses are dependent on it.

And it's structurally impossible to pull

our way out of it. I mean, does DOGE

tell us something

about what's possible at this stage?

Yeah, you're talking about uh

taking an inefficient government

and making it efficient.

>> [laughter]

>> Okay, and having to do it quick

because there are elections and if

people don't like it, then, you know,

you lose your mandate.

And in a um society in which, no matter

what you do, you're criticized and and

torn down. So, you know, we have the

fact of uh the question of does

democracy and our system lend itself

toward the sort of um executive

leadership that both makes it efficient

and makes it acceptable for all people.

You know, there was a lot of uh cutbacks

um you know,

things like school lunch programs and

things, you know, um and then trying to

do it surgically. So, it's um

how do you do that

effectively, quickly,

in a manner that uh doesn't uh

cause so much controversy

that the government falls. So, if you

look at history,

that's why I deal with the political.

If you deal with history

and you deal just even common sense,

think, you know, like um are you going

to have the executive leadership that's

going to be able to make this

satisfactory with most people?

You know, and do that quickly.

I think that's

that's a hell of a

hell of a trick to pull off.

Right. So, it might just be structurally

it's a little difficult at this stage.

What an understatement. Structurally a

little difficult at this stage. Yeah.

Well, there was another big news story

recently that there may be quite a lot

of fraud going on with public dollars in

Minnesota that there were these daycares

that don't exist and billions of dollars

are flowing to individuals to run these

daycares. And now there's a lot of this

sort of citizen journalism going on

across the country

that federal spending is actually being

fraudulently abused.

Do you think that this is a symptom of

this stage of the cycle? What's your

view on how this relates to this problem

that we're generally kind of talking

about?

>> Yeah, it's both the stage of the cycle.

And if you're going to have something

well managed, are you going to have the

government well manage it? I mean, how

how how well managed, you know, go to

the Department of Motor Vehicles for

your

>> [laughter]

>> It's so big and complex

and such a

you know, such a mess like

you know, like when when you think is

this a surprise to you that there's all

of this stuff going on all over the

place in terms of inefficiency? Is that

a surprise to you? No. Uh but, you know,

I guess the question is are people

waking up to this? Because last time we

spoke

you highlighted that a piece of your

portfolio was in gold. You had invested

quite a bit in gold. Since we spoke, I

think gold has climbed from 2,900 an

ounce to 5,200 an ounce. What has

happened with gold over the last year?

Is it that markets are waking up to the

point in the cycle that we're in that

you've been highlighting for a number of

years at this point? Or is it because

China is structurally abandoning the US

dollar and treasuries and moving more

into gold and other central banks are

moving into gold? Is it because

individual

speculators and market participants are

getting bubbly with gold? What's your

view on what's going on with gold and

how it relates to the market's

acknowledgement of the stage that we're

in? It's the big cycle and

what what you have to understand is that

gold is not a precious metal that's

speculated on like most people

have come to think of it as.

Um it is um the most established money

that it's the second largest reserve

country currency

that central banks hold.

And so what we've seen is for various

reasons that I've pretty much covered,

the economic, the supply demand, the

political, the geopolitical, for those

reasons central banks themselves have

acquired

gold to build that up.

And individuals and others are looking

for an alternative money. The question

is what is money? So when we're thinking

about this, money

mechanistically, money is debt. What I

mean by that

is that if you're holding money, you're

holding it in the form of a debt

instrument.

And if you um

are holding a debt instrument,

what you're getting is a promise from

somebody to deliver you money.

Okay?

And what I as I mentioned in the

beginning, the power of the central

banks when they have too much debt,

is to print money.

Okay. So, if you've got that down,

okay, then you can understand what's

happening.

Okay? Because the question is, Dave,

what money do you think is safe? Right.

Given what I've just said.

Okay.

>> have Yeah. Yeah, I can asset back.

Right, I want an asset. I want to have

something that's got some physical known

limitation to it. And particularly what

you want is

that can be transferred from one place

to another, because money is both a

medium of exchange and a store hold of

wealth.

So, in other words, if you if one

country's central bank or government

wants to pay another

government, it can't just be in fixed

assets like buildings.

Okay? If you want to transact, you have

to transact in something that you can

transfer to them, and so on. And gold is

the only

asset it's a long-term historic asset

for for reasons. That means that it can

be transferred, they can't print a lot

of it. Um and um it is not dependent on

somebody giving you something. In other

words, most money most if you hold debt,

or you hold stocks, or you hold

something,

you're holding a promise from somebody

to give you buying power.

Okay? So, you can

Like, wealth is important to think to

distinguish wealth from money.

Okay? Wealth is in stuff. It's you know,

it's in buildings, it's in companies,

and so on. But, you can't spend wealth.

You have to When you want to spend it,

and that's the purpose of money,

you have to sell it,

and then you get money to spend.

And right now we have an awful lot of

wealth

relative to money. And the question is

what is that money? And there's the risk

that you go to get convert your wealth

into money

that they're going to print money cuz

that's what they've always done since

we've had fiat currencies.

So as you look out and have

conversations with all the market

participants that you know, and you know

everyone that's of size and scale,

where are we in terms of folks

converting their wealth into gold or

their money into gold? Like how much

more do we have to run

in terms of the dollar denominated value

of gold in the market cycle as this

great rush for the doors, rush for the

exit happens?

>> Two things that come to mind. What I

what I look at is literally

who has what assets

including like central banks. What is

the money and what

uh And and what is that mix?

And I look at the amount of uh wealth

relative

to money or I look at the amount of

wealth relative uh to gold.

And what we've seen is that there's an

enormous amount of wealth

and there was an enormous amount in

central banks of the other money

relative to hard money gold. And so

we've seen about

what I would call

it go from an extremely small number

to something

that is

a less small number. That price increase

and that change in composition

has brought it almost not quite, but

almost

toward

uh the average of what it's been

uh over a period of time. So, uh being

out of balance. However,

because the wealth is total wealth is

still so large

relative to money, that's a real uh

issue. So, let me give you a practical

example of of of this. Wealth taxes and

wealth

being a risk. One question that might be

asked are are we in a bubble?

In other words, are AI stocks and other

such stocks in a bubble? That's a

If you want to get into that, we'll get

into that. But, one of the things

that we know from that

is that one of the characteristics of

bubbles

is that there becomes a need for money

that requires people to sell their

assets

to get money

to meet that need. Now, quite often that

need comes from borrowing money to buy

those assets.

Okay? And then the assets go up in price

and and so on. But, what happens is it

can't be sustained because you have to

make the debt service payments and

they're not throwing off the cash that

to make that. And so, they have to start

to sell that and then you

and when you have to sell it cuz you

need money, you need cash to pay your

debt service or to pay nowadays wealth

taxes.

Oh, okay. So, now we have a dynamic. The

bubble will burst

as that dynamic takes place. There are a

number of things we could talk about

about the bubble if you're interested.

But, just imagine if you put in wealth

taxes. Everybody can talk about whether

they like or don't like wealth taxes or

something. But, anything that's If you

put in wealth taxes and there's a lot of

fear of wealth taxes

in and of itself

that can drive money uh wealth to cash.

Uh and and there's only one way you're

going to get the cash with the wealth,

and that's either sell it or to borrow

against it with that which causes its

its own cash flow issues. And we have a

dynamic having to do with the social

part of this, you know, the wealth gap

that makes that politically an issue.

So, anyway, all I'm saying is people

should worry

and and companies should worry or

countries should worry.

Do they have enough gold? I mean, if you

didn't know what the

if you didn't know what

gold was likely to do and you had no

view on gold,

one should have between 5 and 15% of

their portfolio in gold because of the

fact of how it works with the other

components. In other words, it's a

diversifier

when

when the hits the fan,

okay, gold does well and the other

things don't, generally speaking.

And because of that correlation,

depending on what else is in the

uh portfolio, if you put it through an

optimizer, you'd have something like

that. So, I'm not trying to tout people

on buying gold, but I would say, what is

safe?

What is safe?

And it's safe is somewhere, if you had

no view, between 5 and 15%.

>> Why hasn't Bitcoin performed in the same

way? In the same period that gold

climbed 80% since we last talked,

Bitcoin's down 25%.

What's your view on what's happened with

Bitcoin and why that hasn't played the

role that many thought it was going to

play, which is the safe haven asset?

>> There There's an important

differentiating characteristics of

Bitcoin, and then there's also, you

know, like who owns it and why they buy

why they bought and sell. Okay, so

Bitcoin does not have privacy. Tra- any

transactions

uh can be monitored and then uh

indirectly perhaps controlled. Central

banks are not going to want to buy

Bitcoin and being able to hold it. So,

it's not just individuals, it's

institutions and so on, but most you

know, and central banks. So, there there

are attributes of that. There has been

um some question or thoughts of the

development of, you know, new

technologies like quantum computing and

so on. Can there be issues regarding

that?

And then there's um you know, who owns

it and what are the other exposures that

they have in their portfolio. It tends

to have a

a pretty high correlation with uh the

tech stocks.

So, from an ownership, you know, just

the supply demand is affected by if

somebody gets squeezed in one thing,

they sell something that what whatever

else they have. So, there are those

dynamics. It's a long way

as and it's a relatively small market

that's a relatively controllable market.

I think a lot of attention has been

given to Bitcoin, but as a money, you

know, it's it's it's it's small in

relationship to uh gold and so you know,

those are the dynamics. There is only

one gold. What about silver? I mean,

silver has had a big run-up in the past

year as well. Is that a derivative to

gold and it's effectively people playing

off of the wake of gold price movement?

>> silver in its production is a residual

commodity. The supply of it is difficult

to increase

and through history, uh you know, like

the pound sterling, silver was perceived

as a monetary

uh item.

Uh but it uh has also taken on a

speculative life of its own.

So, you know, people are, um, you know,

hot in it because it's been hot. I just

want to shift gear a little bit back to

something you touched on, but the last

time we met, you also talked about the

importance of making sure that interest

rates remain low for us to kind of

manage the effect and the impact of the

stage of the cycle that we're in. What's

your view, I guess, today on where rates

are and how the Fed has acted over the

past year relative to what needs to be

done

to soften the effects of the stage in

the cycle that we're in. Because we have

so much debt, federal debt,

um,

interest rates are one of the three main

considerations. There's the,

um, taxes, there's spending, and then

there's interest rates are the on the

debt. But, you can't make interest

rates,

um,

severely artificially low because one

man's debts are another man's assets.

And if you make those interest rates

too low

for the creditor,

you will produce the dynamic that we

understand. In other words, they'll

produce a lot more borrowing, they'll

put it into things, and you can fuel a

bubble.

And so, at the same time,

uh, you can't have them so high that the

debtor gets squeezed

unaffectedly. So, there's a balancing

act, you know, keep them high enough

that they're adequate for the creditor,

but not so high that the debtor. So,

when you have a lot of debt assets and

liabilities, cuz for every debt asset,

there's a debt liability. And when you

have a lot of those, that balancing act

is is very difficult. This made more

difficult, you know, because of what's

called the K economy, you know, in other

words, there are bubble elements that

are going on in the part

of the economy, you know, where

um

you know, the question is who will be

the first to be a trillionaire and and

and that, you know, that top

1% of the population and all of that at

the same time as you have the other part

of the economy where um for example, 60%

of all Americans have below a

sixth-grade reading level.

And and to make them productive

particularly as we are also having AI

have replacements for them

um is a particularly difficult thing to

achieve. In other words, when you have

so much dead assets and liabilities and

then you have such a disparity in

conditions between those that are at the

top and let's call it the bottom 60% of

the population, what that's like.

That's uh you know, another

hat trick. That's another

difficult thing to pull off. So

this is a challenging situation. As for

as far as monetary policy

exists the idea of setting an interest

rate and having

a fiscal policy and a monetary policy

that's for the economy as a whole

and doesn't deal with the differences in

the

in the circumstances may be more

well, it is more challenging. Well, so

taking a look at Fed action

and market activity

there's been a lot of reporting over the

past year that a number of global

central banks

have stopped buying US Treasuries and

are shifting to gold.

Does this mean that Fed in the US is

going to have to start buying treasuries

and expand their balance sheet again? Is

it inevitable that we see a re-expansion

of the Fed's balance sheet in this

phase in the cycle given what's going on

with global market action? I think that

it's likely down the road. Um,

uh, right now, uh, there's

um,

the shortening of maturities,

um, as a means of trying to deal with

that. Of course,

that increases the debt rollover risk.

Uh, but the, you know, sell less long

debt,

uh, try to, uh, hold the short rate down

so that the longer rates attachment to

it doesn't get, you know, helps to hold

the long rate down.

And then, uh, try to,

um,

use

the government's power of persuasion

on other countries to either buy the

debt or to hold the debt or to have

other forms of capital enter the United

States. How do you like Kevin Warsh's

pick for Fed chair? What's your view on

how he's going to guide interest rate

policy for the Central Bank and when he

assumes his term? It's a very, very big

challenge. I think he's a practical man.

He understands both sides of the pros

and cons. I think it's a tough job. One

of the other things that I would say was

pretty surprising over the past year

is

how adamantly against

tariffs for fear of inflation and

reduced consumption, which would mean a

negative effect on GDP growth, perhaps.

Tariffs might be. The president and the

administration put in place a number of

tariffs under the emergency

economic powers act, which the Supreme

Court in the last week or so overturned.

But, looking back

on the economic effect of tariffs, what

do you think economists got right and

wrong about their predictions about the

effect tariffs would have on the

economy, on consumption, on inflation?

And are there things that economists

fundamentally missed or didn't

understand and why? Yeah, I I think so.

First of all, um there's the uh tax

revenue part of them. I mean, thinking

of that just as

uh revenue. And I think that people

don't

all economists

make the mistake of not including taxes

in inflation.

Mhm. And what I mean by that [snorts] is

if your

if your taxes go up,

that's inflation.

It I mean, why shouldn't it be any

different than if your cost of housing

goes up, why shouldn't it be part of the

inflation calculation number? It's tak-

it's taken money out of your pocket. I

mean, it's probably the you know, for a

lot of people the biggest expense. And

so, when they say inflation is something

separate,

you know, I I

I think it's changing the form of

uh of inflation in a sense. So, what I

mean is, you know, through history,

tariffs used to be the biggest source of

uh

revenue for the government thro-

throughout most history. And in most

countries. Okay. So, it is a um

I think it's viewed

It's It's a totally valid way of raising

money, and it should be kept kept in

consideration

for that. And And you get the foreigners

paying a portion of it. But, it there's

also, as part of the big cycle question,

is the problem that we have that

we are not independent. Okay, we've had

a hollowing out.

This is the big question, you know, that

we've had a hollowing out of

manufacturing, the middle class,

and so on. Now, are we going to try to

build that?

And what is the plan to build that? Or

are we going to continue on with large

trade deficits?

And um

so, you have unsustainable

trade deficits that the United States

has,

and which are capital

um

surpluses. In other words, the

dependence on foreign capital is the

other side of those trade balances, and

that's unsustainable. So, because that's

unsustainable,

um you need uh

some way of uh rectifying that. Okay, so

what is the plan to rectify that?

Partially, that plan

uh can have trade tariffs.

I think they're totally valid,

uh but it all has to be part of another

greater plan, which is to develop

the industries that we need to have

developed, which we're seeing happen in

a much more proactive way. In other

words, you're seeing more

government

um

activity to create infrastructure,

to bring in industries, and so on. You

need that not only economically, but you

need it geopolitically, because you

can't have dependencies.

In other words, we're entering a world

of greater conflict. We moved from a

multilateral world order to a a

power-based confrontational

world economy.

And in that environment, everybody's

threatening to cut off everything from

it. You know, the uh goods and capital

wars that we can have are threatening.

And so you have to build independence.

And so

that's part of a plan to try to build

that independence.

So I I think when I look at that, I

don't think that's the problem. I

I'd say and it's misunderstood. So yes,

I think people are misunderstanding

that.

And the important thing is we get the

other things right. You know, like Let's

get down to 3% and and by the way,

there's a bipartisan bill that on this.

And

Uh The three the 3% bill.

>> to this

has come out in favor of it. I'm in

favor of it. I mean lots of people are

in favor of you know,

what I'll call the 3% three-part

solution. 3% of GDP, three parts,

a bit from

one thing, a bit from another, taxes,

spending and

and hopefully interest rates. And just

to take the inflation question to its

conclusion at the State of the Union

this week, President Trump shared his

vision, which is that tariffs can

completely replace an income tax in the

United States. Do you think that that's

a feasible path? Does it make sense at

some point for tariffs, which are

effectively consumption taxes

>> it's I don't think it's going to No, I

don't think it's anywhere near

that

both because of the combination of the

size and then the impact of that size.

Tariffs are regressive.

And I think that there needs to be

some

We have to deal with the wealth gap.

To me the wealth gap, the biggest

problem of the wealth gap, which is a a

social problem, is also the productivity

gap.

And you have to make most people

productive.

And you have to do that through

infrastructure and so on. And I I don't

think I think that needs to be

addressed. It's a really important point

you just made. I think my

analysis

indicates that nearly half of Americans

either work for a government agency

or a government service provider or a

contractor. The data over the past year

is the federal workforce declined by

317,000

employees, roughly 14% of the total

federal workforce.

As this administration has reduced the

size of some of these agencies, reduced

the size of that workforce,

what happens to those individuals? Do

they go work in the private workforce

and become productive, or do you think

they're getting subsumed by other

government agencies, either state or

local, or government service providers

to do work that fundamentally is not

productive to growing the economy? I I I

haven't studied the numbers.

I don't think I can adequately answer

that. I would say

government is extremely inefficient.

It has a role. It has an important role,

but even that role it's handling very

inefficiently. Other governments handle

that role of maybe education,

some of these things in a better way. We

need fundamental We need

You know, best thing you could invest in

is education.

But anyway, where they go and what they

do

from the government and and you know,

the other inefficiencies

is a problem. The one thing that's good

about

uh the system

that

the capitalist system in a sense is it

doesn't live if it can't uh if somebody

either won't bet on it or it doesn't

make a profit. So, um yeah, so I think

wherever it goes, um it's wherever those

people go,

there's just so many inefficient people

and inefficient systems.

Is there not enough productivity-driven

economic growth in this nation at this

time

to give more people the opportunity to

improve their income, improve their

wealth, improve their livelihoods?

Is that the fundamental issue we're

dealing with at the moment? Or is it

that, you know, people aren't prepared

or educated to be productive and

therefore the system itself has failed

them? There are three things basically

that you need to do to be successful.

You have to first educate your children

well.

And so that they are capable of being

productive and also educate them in

civility.

So that they are civil with each other.

The second is then they have to come out

to an environment

that is an orderly, civil environment

that people can compete and work with

with with and and compete and work with

each other to be productive that that

works for the most people.

And the third thing is you have to stay

out of wars. You have to stay you don't

have to have no civil war and no

international war. If you do those three

things right, you will have a successful

country. That's all throughout history.

Okay, we're having problems with those.

And are those three things the antidote

to some of the rising movements that

we're seeing in increased unionization

and effects that unions are having on

the political process, which is also

leading to these rises in socialism

and support for socialist movements in

the United States as well as the wealth

taxes which

from the view that's shared by those

participating in those movements, they

are meant to solve income inequality,

wealth gap issues that we're seeing in

the United States. So that's their

solution. Is the solution to those

movements education and civility,

creating a civil environment and staying

out of wars? Is that all we need to do

to make this successful or is there more

to the end?

>> Yes, that's that's that's that what we

need

is is is to stop fighting. Okay, we're

now at a stage

where we have irreconcilable

differences.

In other words,

when

when the causes people are behind

are more important to them than the

system,

the system is in jeopardy.

Our system is in jeopardy

because

um

they people will not accept the system

or the alternatives. And so they're

going to fight.

You know, I think

I think when we have we're going to have

the midterm elections,

you're going to go past the midterm

elections with

probably that uh Democrats will take the

house and be and maybe I don't know,

it's going to be difficult. And you know

what? Nobody can succeed

because everybody's going to be

fighting.

Uh they're going to all be fighting.

Okay? So how does that affect

productivity? Uh okay. And then when you

deal with things like how do you get a

good education system? So you have now

almost the mob disorder.

Mob disorder and inefficiency.

Nobody's allowed to take charge of this.

If if you go back in history,

Plato, you know, I think it was like 350

BC wrote about the cycle

you know, of democracies and the threat

to democracies.

What's happening now is similar to

Julius Caesar and Rome

and beings

you know, stabbed in the Senate and and

what you need is you need

a bipartisan

you need you need the country to have

have a strong almost

a strong leader. We do need a strong

leader to get the the reforms done to

make the country work well, but I mean,

so how do you force

this mob of people who are behaving this

way including in the elections and so

fragment to create order.

So, you need a a tough leader will force

them to do different force things to

difficult things

and not fight with each other and

[laughter]

focus on being productive. That's what

you need I think. It sounds a little

like there may be this

inevitable path of the choice that no

one wants to make between some form of

socialism and some form of fascism. Is

that where this goes?

>> I think you were we're moving toward the

that war. We're in that war. We're in

what's state what I call stage five of a

cycle. Okay. In the book I described the

pattern that's happened over and over

again and when you get to this position

when there are a bad finances

combined with large wealth and values

gaps

and irreconcilable differences

and you have external threats as well as

domestic threats

you have this dynamic. I think that's

where we are I

I'm like a mechanic. My goal I'm not

ideological. I'm just a practical guy

trying to make money in the markets and

trying to describe things and that's

what it looks like. I think when we look

at the bubble question on AI, what a lot

of people don't realize in

bubbles is

that through all technologies, they

think that they

are betting on the technology when they

buy the stocks in the companies.

That's not true.

Okay, there's a giant difference

between the behavior of the companies

and the behavior of the technologies.

And that the norm is in these is that a

lot of companies won't survive in the

start. Very small percentage and they'll

all fight

and so on, but the technologies will go

on and it'll be great. The technologies

will. So, I want to emphasize to people

that dynamic and I can go on

and describe, you know, what it's like.

Uh uh

Of course, we've seen it to some extent

with the 2000 bubble in the technologies

and what went on, but

even if I describe what it was like in

the late '20s,

but you know, it's just it was

unbelievable, but the technologies will

go on, but the companies

um won't necessarily go on. And um so,

when I'm looking at that,

that has big implications. Right now, it

looks to me

like AI

uh basically is eating everything

and it might eat itself.

And

uh what I mean by that is not produce

adequate profits. We can't take just a

domestic view of that. We have to look

also at what's happening in China

and um Um, make interesting distinctions

there. you know? There's a difference in

philosophy

that's carried through in the economy

of how the economies of the United

States and China work

in that we have basically primarily a

profit-based system.

They have a system in which they might

believe that profits are a second

consideration. They're not necessarily

needed

in order to achieve the best results.

For example, in China, they would say

usage of AI is fantastic. So, it should

be like electricity

or something, and let's make it free for

everyone.

And let's make it open source for

everyone.

Okay, and they might get much higher

usage, and they'll get their

productivity gains through the usage.

And we have a profit system to pay back.

Okay, well, now we're in one world. How

do you compete in that world? What do

you do with that? In other words, just

imagine that their technologies are

almost as good as ours, cuz they are.

They're not far behind.

And and and then but that you could get

them for free.

Open source.

Okay, now you got to pay it back.

Okay, so

I just want to emphasize

that these are also systematic risks

that enter into the picture of of AI.

But you certainly Yeah. Uh, there are a

lot of unknowns here. As we wrap,

looking

back on the history of this nation, I

ask myself the question a lot, how did

we get to the point that we've gotten to

in terms of the amount of debt, the

amount of government spending, the role

that the central bank has played, and

the risks that we find ourselves in

today that all seem largely avoidable if

we hadn't taken

or made the decisions we made along the

way. You've highlighted that they repeat

over and over again. But if you could go

back and restructure the United States

and be a founding father and write the

Constitution yourself,

what are one to three things that you

would have done differently? What would

you have written into the Constitution

that may have prevented us from getting

into the situation that we're in today?

Well, the I mean, it's like the

marshmallow test.

You know the marshmallow test? You know

you you want to see it.

It is a kid going at early age you give

them the choice between one marshmallow

now and two marshmallows in 20 minutes.

And the kid that chooses the two

marshmallows in 20 minutes is going to

have a better life and make better

decisions kind of thing.

I mean, that therein lies our problem.

The immediate gratification and also the

not knowing if things are going to be

productive.

But the system has been remarkably

adaptable, too. In other words, we've

gone through crises, we've wiped out

debts,

and we've gotten past it. And there are

certain ways of getting past it. But you

you know, it's a it's a tough question

to balance

financial prudence with

innovative inventions.

You know? Because you

like particularly like take AI now.

Nobody knows what's going to come of it

in in what what way, right? Is it going

to pay? Is it not going to pay? And all

of that. And so, what do you write into

the law

that

is going to get you financial prudence

and controlled? And do you when you

write it into the law, does that lessen

the experimentation

and you know, the entrepreneurship and

all of the things that you know? So,

it's tough to do this with

with rules. I think maybe the main thing

is I would say read history.

Read history and know these things and

try to get that balance right, you know,

everything's a matter of the balance. So

the balance of the pain

of failing or the pain of putting money

into a something that fails. Well Ray, I

want to thank you once again for taking

the time to be here with me. It's always

great to catch up here your perspective.

Obviously so much has changed in the

last year and yet so much hasn't. It's

been great to to get your view on it and

I think it's really helpful to do this.

So so thanks so much. And and thank you

for what you guys do. I'm I'm I'm

riveted to your program and I think you

make a great contribution.

So conversations like this are

are really practical helps for a lot of

people. So anyway, thank you for letting

me participate and thank you for what

you do for a lot of people. Thank you.

>> That's right. I'm going all in.

I'm going all in.