Ray Dalio explains why we may be repeating the mistakes of the 1930s

Great depression conversation 1938Wikimedia CommonsA conversation in 1938

Ray Dalio think that the world’s current path is looking eerily similar to one of the worst decades in recent history.

The founder and former CEO of Bridgewater Associates, the world’s largest hedge fund, said that the economic and political issues that are popping up around the world are similar to the problems experienced in the lead-up to World War II. 

In an interview with Business Insider’s global editor in chief Henry Blodget on The Bottom Line, Business Insider’s new weekly business news show, Dalio said that the rise of populist leaders across the globe could lead the world down the same path as the 1930s.

“In the 1930s, which is was quite similar to what a lot of the period we’ve been through economically,” said Dalio. “We had the wealth gap, we had large debts, we had zero interest rates.”

The economic fallout of World War I and the Great Depression led to a growth of inequality in the 1930s, pushing many people around the globe towards populist politicians that they felt were more aggressive and combative.

“During this same type of period, we experienced more populism, most countries became populist, and so it’s very important to understand that,” said Dalio. 

Given the devastating impact of the rise of populist leaders in the 1930s, Dalio said that the current rise of populist sentiment in the US and Europe should warrant scrutiny.

“If you were to see that happen in the United States, Europe, and so on you would have something that would be of concern, because that would alter how the economic conditions work.”

Dalio highlighted the rise of President Donald Trump and nationalist French politician Marine Le Pen, and said it is important to keep an eye on the institutions that undergird democracies in the US and Europe.

“There are issues here that will be interesting to compare with, such as the sanctuary city question, or such as the Supreme Court,” said Dalio. “Will those conflicts become such that they will become more antagonistic than normal and that tend to be more detrimental to the efficient running of the system?”

The Trump administration has said that it intends to remove federal funding from sanctuary cities, but local governments have promised to fight back. Additionally, the Senate decided on Thursday to go “nuclear” and get rid of the filibuster for judicial nominees to confirm Trump’s pick of Judge Neil Gorsuch for the Supreme Court.

If these event undermine established systems, there could eventually be economic consequences, in addition to the political changes. 

“Those are the things we have to watch out for,” Dalio said.

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