Billionaire investor Ray Dalio is worried about 'something worse than recession’: Full interview

[00:00:00] Speaker 1: Welcome back and joining me now is Ray Dalio, the founder of the world's largest hedge fund, Bridgewater Associates. He is also the author of the new book, How Countries Go Broke. It's out in June. Mr. Dalio, welcome to Meet the Press. Thank you. Good to be here. Just call me Ray. Okay. Well, Ray, I'll take you up on that. Thank you so much for being here. We really appreciate your perspective. As I just said, you did found the world's largest hedge fund. You have been in this field for more than 50 years. It's worth pointing out to our viewers, I think it's important to note you consider yourself to be apolitical. And you say that the tariff problem is a symptom of a much greater problem. What do you mean by that? [00:00:43] Ray Dalio: There's a financial problem. There's an imbalance problem. There are basically five big forces through history that drive everything. First, there's the money, credit, debt, economic cycle in which there's a building up of debt in a cyclical way that becomes too large. And we're going to have problems. We're going to have a government debt problem. Maybe we can get into this. The second big force through time is the internal conflict force, the left and the right differences in wealth and values causing a conflict that we're seeing changing our political order. So the first is changing our monetary order. The second is changing our political order internally. And then the third is the great world order, the how countries deal with each other when there's a rising power, challenging existing power. And now we are going from multilateralism, which is largely an American world order type of thing, to a unilateral world order in which is great conflict. And the other two factors all through history have been acts of nature, droughts, floods and pandemics. And number four is technology, technology changing and how they are coming together are the main forces behind this. For example, there can't be [00:02:10] Speaker 1: imbalances anymore in that environment. Do you think that President Trump's tariffs are exacerbating what you are describing? This complicated mix of challenges that the world is facing? [00:02:25] Ray Dalio: I think it's just a function of how well they're handled. You know, it's a reality that it's a desire to bring in tax revenue from that. It's a reality that we would like to build manufacturing and jobs here. This is a reality. That's how that's done, whether that's done in a practical way, whether that's done in a stable way, whether that's done with quality negotiations, in which that's a mutual problem, or whether that's done in a chaotic and disruptive way that produces great conflict, makes all the [00:03:01] Speaker 1: difference in the world. Based on what you're seeing right now, do you think that these tariffs are being carried out in a practical way or a chaotic way? I think we'll, we'll see. So far, [00:03:10] Ray Dalio: very disruptive. So far, very disruptive, right? And as we don't know what the numbers are, but that could be part of a process, right? It depends where we are at the end of the 90 days, because what was put there is like throwing rocks into the production system. And those impacts are going, would be enormous in terms of the efficiency of the whole world. Great cost. [00:03:34] Speaker 1: I want to ask you about something that's on a lot of people's minds, your predictions for the future. And I want to start with the R word. I know you think this is just a piece of it. Of course, I'm talking about a recession. Do you think it is likely that the United States will dip into a [00:03:50] Ray Dalio: recession because of President Trump's tariffs? I think that right now, we are at a decision-making point and very close to a recession. And I'm worried about something worse than a recession, if this isn't handled well. A recession is two negative quarters of GDP. And whether it goes slightly there, we always have those things. We have something that's much more profound. We have a breaking down of the monetary order. We are going to change the monetary order because we cannot spend the amounts of money. So we have that problem. And when we talk about the dollar and we talk about tariffs, we have that. We are having profound changes in our domestic order, how ruling is existing. And we're having profound changes in the world order. Such times are very much like the 1930s. I've studied history and this repeats over and over again. So if you take tariffs, if you take debt, if you take the rising power challenging existing power, if you take those factors and look at the factors, those changes in the orders, the systems are very, very disruptive. How that's handled could produce something that is much worse than a recession, or it could be handled well. Let's take [00:05:08] Speaker 1: the debt situation. I'm sorry. Go ahead. Well, very, very quickly, because I want to be very specific about what you mean. You're saying worse than recession. You're saying this is reminiscent of the 1930s. We should tell our viewers, you correctly predicted the 2008 financial crisis. What is your prediction for where the country is headed right now? Right now, we're at a juncture. Let's take the budget. [00:05:32] Ray Dalio: If the budget deficit can be reduced to 3% of GDP, it will be about 7% if things are not changed. If it could be reduced to about 3% of GDP, and these trade deficits and so on are managed in the right way, this could all be managed very well. I believe that members of Congress should take the pledge, what I call the 3% pledge, that in one way or another, that they will get that budget deficit down to that number. If they don't, we're going to have a supply-demand problem for debt at the same time as we have these other problems. And the results of that [00:06:11] Speaker 1: will be worse than a normal recession. And just to follow up on that point, worse than a recession, you're talking about the 1930s. What specifically are you warning of? Are you saying that it could be as bad [00:06:22] Ray Dalio: as a depression? What's your biggest fear? The value of money? What is a storehold of wealth? That is a bond. In other words, one man's debt is another man's assets, bond holders. And so we're going to be in a situation where if that storehold of wealth is in jeopardy, because there's too much supply and demand and so on, and we have a monetary inflation, we will have great disruptions. And that could be like the breakdown of the monetary system in '71. It could be like 2008. It's going to be very severe. I think it could be more severe than those if these other matters simultaneously occur. Imagine if we have a downturn politically and an international conflict. [00:07:11] Speaker 1: What's worst-case scenario that you're warning of? To be very specific. To be very specific. The value of money, [00:07:24] Ray Dalio: internal conflict that is not the normal democracy as we know it, and international conflict in a way that is highly disruptive to the world economy and could even be a military conflict, just as these breakdowns have occurred before. You know, we have a new order that began in 1945, a new monetary order and a new geopolitical order. And these go in cycles that can be measured. And I worry about the breakdown of that kind of an order, particularly since it doesn't need to happen, because there are certain things that could be done in which this is a better restructuring of these debts and actions taken. So that takes me to [00:08:10] Speaker 1: my next question. You have this book, How Countries Go Broke: The Big Cycle. What is the solution here? [00:08:16] Ray Dalio: Well, there are a series of solutions, but let's take the most important. And wait, one minute. One minute. Okay. Three percent of GDP. Bring that deficit down. It can be done in a bipartisan way, the way it was done between 1991 and '98. I explain how that could be done, doing things together for the greater good. And then internationally, on all of these issues, to use American strength, but to negotiate well, to lay out ways in which bad conflict and inefficient policies don't create great disruptions, [00:08:54] Speaker 1: but get us through this in an orderly way. All right. Ray Dalio, thank you so much. Your book, How Countries Go Broke: The Big Cycle, we really appreciate it. Thank you so much for being here. We really appreciate it. [00:09:08] Ray Dalio: Thanks for watching. Stay updated about breaking news and top stories on the NBC News app or follow us on social media.