Ray Dalio is one of the brightest minds of our time, a person whose insights I always follow closely. His wealth of knowledge, accumulated through decades of experience, is something I constantly look to for learning and personal growth.
While working on my presentation, I came across another article from him worth reading as tariff concerns still linger. On another note, pressure is mounting from all sides on the Trump administration to moderate its trade policy with China and I view this as inevitable.
The clock is ticking because the economic data is going to start to reflect the deterioration in sentiment. I’m certainly more optimistic than some of my clients.
Here is a section:
I was pleased and not surprised that the US and China will be having “tariff negotiations,” which will be negotiations on much more than trade. In my dreams, I can imagine the US and China working out a beautiful rebalancing, one in which the unsustainable excesses are reduced to levels that are sustainable.
To review, as a result of many factors that I won’t digress into again, this is the dynamic I see: Americans and others buy inexpensive manufactured goods from China that are financed by the United States borrowing from China and others.
In the process, the United States has lost its ability to manufacture effectively, which has contributed to the plight of the bottom 60%, while it has developed a geopolitically threatening dependence on manufactured goods from China and other countries.
At the same time, China and other countries have developed an unhealthy, excessive dependence on the returns of US debt assets and other American capital market assets.
This is an unsustainable imbalance that one way or another, in a coordinated, well-managed way or in a crash must come to an end.