Ray Dalio: 'Expect a Tribute System' as China Influence Grows

Follow the cash. Follow the money. Okay. There's a reaction. Like wars are bad and wars are bad. But the reality is, markets trade as the present value of future cash flows, by and large. And so if you've got the cash, follow the cash. So what's happening in the way of changes? What it means for energy in Asia or what it means here and for our cash flows. But the markets are trading on the basis of the cash flow. So when we came into this period of time, there was a reaction before we had the earnings reports where there was a reaction that this is a scary thing. Quite often markets will sell off. At that time, they did sell off. And then we had great earnings estimates. And the reported earnings were much greater than the actual earnings. So follow the money, okay. At the end of the day you're exchanging a lump sum payment for a future cash flow. And that's what matters.

Yeah. It's interesting. If you look at the markets, Pearl Harbor comes to mind. You see not much initial effect. And then you see the cash flows mattering. But over the period of time, it depends. There are the winners, there are the losers, and there are the neutral countries. Okay. Economically, the winners still experience the cost of the war, the debt, like the British Empire, had the debt and had its consequences. The losers of the war get wiped out. You change all orders. You change the domestic political order, the international order, the monetary order and almost everything. The winners are the neutral countries because they profit during the war. The United States made a lot of money in both World War One and World War Two in the time, one that wasn't in the wars, and then it accumulated a lot of gold and so on. Many entered the period late. So the neutral countries are the ones that end up not being disrupted and end up doing the best. I'm not even sure what it means for the US to win the war in Iran right now. But I think it's clear. Tell me. Okay. The world is looking at will Iran have the control of the Strait of Hormuz? Will it retain the uranium, the nuclear? And will it also have the power through the missiles and others to inflict harm? Will the United States have the power to fight the war? In other words, with politics and Americans with gas prices and cost of living? We now have a situation where the world is looking at this and defining it. Does the United States have the capacity to win the war? And this has huge implications because it means for countries, it means alliances. Why do they have the bases there? The United States has about 750 bases in about 80 countries, and those bases are largely there under the assumption that the United States will turn up and defend them. Right now, that perception is changing. So I think winning the war is clear. Iran is perceived as a middle power, not a great power. And can the United States win it or not? And this is now having a big effect. And when I go around the world, like in Asia, you know, the United States, it has been viewed as a countervailing force relative to China. Okay. Now, it's believed that the United States cannot be relied on to fight, that war will not be there with those bases. And this is changing relationships with China, too. You're seeing a number of leaders go up to China and essentially have relations, but it's like the tribute system, but also in the region. There's the recognition in their view, that there is an environment where the countries in the region have to recognize and respect that power. And so now you're seeing that happen. That tribute system is not an oppressive controlling system. It's much more like there is the purse. The more powerful have an obligation to behave well with the less powerful and the less powerful have an obligation to recognize the more powerful, and they should operate in a harmonious way.