Thanks to an investor for this interesting article by Ray Dalio on the on-going conflict in the Middle East region. Meanwhile, capital markets are calm although anxiety continues to run high. Spend, spend, spend. From my conversation with people in other parts of the world, airports are packed and restaurants are still quite busy.
Here is a long section:
Based on the perspective I have gained from studying history and from my over 50 years of experiences betting on what’s likely to happen, it seems to me that the Israel-Hamas war is another classic, unfortunate step toward a more violent and encompassing international war. In other words, it’s part of a larger war dynamic.
Anyone who has studied history and is watching what is going on should be concerned about 1) these conflicts moving from being contained to being all-out brutal wars that continue until the other side is clearly defeated, and 2) these conflicts spreading to involve more countries. In order to gain perspective on how these pre-war stages in the Big Cycle unfold, I suggest that you study other pre-war periods, such as those in the two years prior to World War I and II in both Europe and Asia. What is happening now sure looks a lot like that.
As I explain in my book, as a principle, “people dying in the fighting is the marker that almost certainly signifies the progression to the next and more violent civil war stage, which will continue until the winners and losers are clearly determined.”
It is unlikely that this Israel-Hamas war will be limited to Israel and the Gaza Strip and likely that it will continue until one side clearly wins over the other. It is also likely that the wars involving Israel, Hamas, Ukraine, and Russia will have big effects on the ongoing great power conflicts, and it is very likely that Hamas acted with support from more powerful countries.
In other words, we should recognize that these two hot wars (the Israel-Hamas war and the Russia-Ukraine war) are not just between the parties directly involved in them, these wars are part of the bigger great power conflicts to shape the new world order and they will have big effects on the countries who are allies and enemies of the four sides in these two seemingly irreconcilable wars. These two wars will cost the allies of these countries a lot. For example, the US is now fighting proxy wars in Europe and the Middle East while preparing for war in East Asia. As these wars spread, they will cost more.
To push the point home, I want to make clear that I believe that we are in that brief part of the Big Cycle when the conflicts are heating up and the leading powers still have the ability to choose between crossing that line into brutal war or pulling back from the brink.
The one thing we know about wars is that they never go as expected, and they are more brutal than they are expected to be in fact so much more brutal than expected that even those who were most boldly in favor of having the wars regretted having them. I hope that the leaders of the great powers will wisely step back from the brink, even while they must prepare to be strong enough to successfully fight and win a hot war.