Ray Dalio: "AI Is Eating Everything - and It Might Eat Itself"

Ray Dalio, welcome back to the All-In. podcast. Third time's the charm. Thanks. for being here. >> It's always always a blast to be here. Thank you for having me. The last. conversation we had was so popular, and. it was so timely because it was just a. few days actually after the inauguration. of President Trump, and you had provided. some very kind of prescient outlooks for. the administration that I think we all. thought would be very helpful to get on. the record. At the time, you had. highlighted and and as you have been for.

some time, this great debt cycle we're in, the. fiscal and monetary policy issues that. are driving that debt cycle, and provided some. input that if we were able to cut our. deficit to GDP to roughly 3%, we may have a shot at a smoother. transition here. Today, the CBO. estimates that the 2026 deficit to GDP. is about 6%.

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looking back on the past year of the. administration. and the actions of Congress and the. economy, are we on a good path? Are we on no. different a path than we were, say, a. year ago? Are we moving too slowly? I've. studied these. big cycles in history going back 500. years, and there are five big forces. that are intertwined to determine the. answer to your question, which is. uh there's the debt money one and I'll. I'll take you into that at in a minute.

There is the. um. domestic. gaps, the wealth and values gaps that. are causing irreconcilable differences. between. the left and the right that is affecting. how. taxes, democracy and everything works. There's the international. great power conflict, the classic rising. of a great power challenging existing. great power and changing the.

international world order. Then there's. technology all through these cycles. there have been technology and then. there's acts of nature, droughts, floods. and pandemics. So. and when we think of orders we're. talking about there's always a monetary. order and all monetary orders have. broken down for the same reasons. All. uh. political orders, domestic political. orders, they all always change. In the. the United States less so, we have 250.

years here, but. they always change. There was one civil. war in there. And then they. but internationally they always change, all orders change. And the international. geopolitical order going from the. a. multilateral to a unilateral world order. is changing and certainly technology is. changing. Okay. So getting that fact. that they're all on there, now I'll go. down to explain the government's. finances and answer your question. The.

economics of a country are basically the. same as the economics of a company or an. individual except the government has a. ability to print money. Look at it like. a company or like your own. Basically. it's projected to spend about $7. trillion and. take in about $5 trillion. so it's running a 40% deficit, 40% of. its spending. It's been running deficits. for a long time, so it has a debt that.

is 600% six times the amount of money. that it takes in. and we can project that number. Um, the problem with debt cycles. and you can see them transpire, they're. um. almost like the circulatory system of. the body, the capital markets uh bring. credit to different parts of the economy. and if that credit is used to be.

productive and produces an income that. pays for the debt service, it's a. healthy process. But what happens is. that if the. um income the debt service grows. relative to the income because it's not. paying for it, it's like a plaque in the. system uh growing up and it squeezes out. spending and so we now have that $2. trillion deficit. Half of that is.

interest payments. Plus we have to roll over $9 trillion. of debt. that has been accumulated and is. maturing. Okay, so now if you were to. look at a company like that or an. individual like that, you have that. problem. So it was a handy. number, 3% of GDP would sort of. stabilize the situation. Very unhealthy. condition. It's not just unhealthy.

because it's squeezing out those. spendings, but also because there's a. supply and a demand. In other words, you have to roll over the $9 trillion. of debt that's coming due. and you have to sell $2 trillion more, something like that. Okay? So, now you go to the buyers, and the. buyers, who are the buyers? There are some domestic buyers and there. are foreign buyers. About a third are. foreign buyers, and now it's a riskier.

situation from their point of view. It's riskier First of all, it's a lot to. acquire. They. dollar-denominated debt is already a. large percentage of their portfolio, larger than it would be if just decided. on on a prudent basis. So, but also. we have political geopolitical risks. that also extend to possibly. the risks that. the debtor.

and the creditor will have a conflict. You could imagine that with China. You. could imagine that with Europe even. And you know, Europeans could wonder. whether they will get sanctioned. In. other words, the debt service payments. might not be made as a sanction, and the. United States has to worry about whether. it's going to bring in that money. Now, the things that I'm describing have. happened repeatedly through history. So, in other words, I'm not just making.

this stuff stuff up. If you were to see. particularly, you know, in the 1929 to. 45 period, you saw this dynamic. You saw. it before. So, there was this financial. piece which in and of itself is not. healthy for the US government. And it's. but it's also problematic because of the. other factors compounding the problem. You highlighted this problem.

You provided a diagnosis that if we. could get to 3%, we could soften the. effect, but it hasn't happened. We were. all very hopeful. last year around this time when Elon. Musk decided to lead DOGE, the Department of Government Efficiency. He was going to go in and there were. going to be these kind of big sweeping. changes to reduce government spending, find fraud, waste, and abuse, and so on. Did DOGE. fail. because the actions that were taken were. wrong, or did DOGE fail because the.

system itself cannot be changed at this. point in the cycle? That there's too much capital flowing, the economy is too dependent on it, there are too many individuals and. businesses are dependent on it. And it's structurally impossible to pull. our way out of it. I mean, does DOGE. tell us something. about what's possible at this stage? Yeah, you're talking about uh. taking an inefficient government. and making it efficient. >> [laughter]. >> Okay, and having to do it quick. because there are elections and if.

people don't like it, then, you know, you lose your mandate. And in a um society in which, no matter. what you do, you're criticized and and. torn down. So, you know, we have the. fact of uh the question of does. democracy and our system lend itself. toward the sort of um executive. leadership that both makes it efficient. and makes it acceptable for all people.

You know, there was a lot of uh cutbacks. um you know, things like school lunch programs and. things, you know, um and then trying to. do it surgically. So, it's um. how do you do that. effectively, quickly, in a manner that uh doesn't uh. cause so much controversy. that the government falls. So, if you. look at history, that's why I deal with the political.

If you deal with history. and you deal just even common sense, think, you know, like um are you going. to have the executive leadership that's. going to be able to make this. satisfactory with most people? You know, and do that quickly. I think that's. that's a hell of a. hell of a trick to pull off. Right. So, it might just be structurally. it's a little difficult at this stage. What an understatement. Structurally a.

little difficult at this stage. Yeah. Well, there was another big news story. recently that there may be quite a lot. of fraud going on with public dollars in. Minnesota that there were these daycares. that don't exist and billions of dollars. are flowing to individuals to run these. daycares. And now there's a lot of this. sort of citizen journalism going on. across the country. that federal spending is actually being. fraudulently abused. Do you think that this is a symptom of.

this stage of the cycle? What's your. view on how this relates to this problem. that we're generally kind of talking. about? >> Yeah, it's both the stage of the cycle. And if you're going to have something. well managed, are you going to have the. government well manage it? I mean, how. how how well managed, you know, go to. the Department of Motor Vehicles for. your. >> [laughter]. >> It's so big and complex. and such a. you know, such a mess like. you know, like when when you think is.

this a surprise to you that there's all. of this stuff going on all over the. place in terms of inefficiency? Is that. a surprise to you? No. Uh but, you know, I guess the question is are people. waking up to this? Because last time we. spoke. you highlighted that a piece of your. portfolio was in gold. You had invested. quite a bit in gold. Since we spoke, I. think gold has climbed from 2,900 an. ounce to 5,200 an ounce. What has.

happened with gold over the last year? Is it that markets are waking up to the. point in the cycle that we're in that. you've been highlighting for a number of. years at this point? Or is it because. China is structurally abandoning the US. dollar and treasuries and moving more. into gold and other central banks are. moving into gold? Is it because. individual. speculators and market participants are. getting bubbly with gold? What's your. view on what's going on with gold and. how it relates to the market's. acknowledgement of the stage that we're.

in? It's the big cycle and. what what you have to understand is that. gold is not a precious metal that's. speculated on like most people. have come to think of it as. Um it is um the most established money. that it's the second largest reserve. country currency. that central banks hold. And so what we've seen is for various.

reasons that I've pretty much covered, the economic, the supply demand, the. political, the geopolitical, for those. reasons central banks themselves have. acquired. gold to build that up. And individuals and others are looking. for an alternative money. The question. is what is money? So when we're thinking. about this, money. mechanistically, money is debt. What I.

mean by that. is that if you're holding money, you're. holding it in the form of a debt. instrument. And if you um. are holding a debt instrument, what you're getting is a promise from. somebody to deliver you money. Okay? And what I as I mentioned in the. beginning, the power of the central. banks when they have too much debt, is to print money.

Okay. So, if you've got that down, okay, then you can understand what's. happening. Okay? Because the question is, Dave, what money do you think is safe? Right. Given what I've just said. Okay. >> have Yeah. Yeah, I can asset back. Right, I want an asset. I want to have. something that's got some physical known. limitation to it. And particularly what. you want is.

that can be transferred from one place. to another, because money is both a. medium of exchange and a store hold of. wealth. So, in other words, if you if one. country's central bank or government. wants to pay another. government, it can't just be in fixed. assets like buildings. Okay? If you want to transact, you have. to transact in something that you can. transfer to them, and so on. And gold is. the only.

asset it's a long-term historic asset. for for reasons. That means that it can. be transferred, they can't print a lot. of it. Um and um it is not dependent on. somebody giving you something. In other. words, most money most if you hold debt, or you hold stocks, or you hold. something, you're holding a promise from somebody. to give you buying power. Okay? So, you can.

Like, wealth is important to think to. distinguish wealth from money. Okay? Wealth is in stuff. It's you know, it's in buildings, it's in companies, and so on. But, you can't spend wealth. You have to When you want to spend it, and that's the purpose of money, you have to sell it, and then you get money to spend. And right now we have an awful lot of. wealth. relative to money. And the question is.

what is that money? And there's the risk. that you go to get convert your wealth. into money. that they're going to print money cuz. that's what they've always done since. we've had fiat currencies. So as you look out and have. conversations with all the market. participants that you know, and you know. everyone that's of size and scale, where are we in terms of folks. converting their wealth into gold or. their money into gold? Like how much. more do we have to run. in terms of the dollar denominated value.

of gold in the market cycle as this. great rush for the doors, rush for the. exit happens? >> Two things that come to mind. What I. what I look at is literally. who has what assets. including like central banks. What is. the money and what. uh And and what is that mix? And I look at the amount of uh wealth. relative. to money or I look at the amount of.

wealth relative uh to gold. And what we've seen is that there's an. enormous amount of wealth. and there was an enormous amount in. central banks of the other money. relative to hard money gold. And so. we've seen about. what I would call. it go from an extremely small number. to something.

that is. a less small number. That price increase. and that change in composition. has brought it almost not quite, but. almost. toward. uh the average of what it's been. uh over a period of time. So, uh being. out of balance. However, because the wealth is total wealth is. still so large. relative to money, that's a real uh. issue. So, let me give you a practical.

example of of of this. Wealth taxes and. wealth. being a risk. One question that might be. asked are are we in a bubble? In other words, are AI stocks and other. such stocks in a bubble? That's a. If you want to get into that, we'll get. into that. But, one of the things. that we know from that. is that one of the characteristics of. bubbles. is that there becomes a need for money.

that requires people to sell their. assets. to get money. to meet that need. Now, quite often that. need comes from borrowing money to buy. those assets. Okay? And then the assets go up in price. and and so on. But, what happens is it. can't be sustained because you have to. make the debt service payments and. they're not throwing off the cash that. to make that. And so, they have to start.

to sell that and then you. and when you have to sell it cuz you. need money, you need cash to pay your. debt service or to pay nowadays wealth. taxes. Oh, okay. So, now we have a dynamic. The. bubble will burst. as that dynamic takes place. There are a. number of things we could talk about. about the bubble if you're interested. But, just imagine if you put in wealth. taxes. Everybody can talk about whether. they like or don't like wealth taxes or.

something. But, anything that's If you. put in wealth taxes and there's a lot of. fear of wealth taxes. in and of itself. that can drive money uh wealth to cash. Uh and and there's only one way you're. going to get the cash with the wealth, and that's either sell it or to borrow. against it with that which causes its. its own cash flow issues. And we have a. dynamic having to do with the social. part of this, you know, the wealth gap. that makes that politically an issue.

So, anyway, all I'm saying is people. should worry. and and companies should worry or. countries should worry. Do they have enough gold? I mean, if you. didn't know what the. if you didn't know what. gold was likely to do and you had no. view on gold, one should have between 5 and 15% of. their portfolio in gold because of the. fact of how it works with the other.

components. In other words, it's a. diversifier. when. when the hits the fan, okay, gold does well and the other. things don't, generally speaking. And because of that correlation, depending on what else is in the. uh portfolio, if you put it through an. optimizer, you'd have something like. that. So, I'm not trying to tout people. on buying gold, but I would say, what is. safe?

What is safe? And it's safe is somewhere, if you had. no view, between 5 and 15%. >> Why hasn't Bitcoin performed in the same. way? In the same period that gold. climbed 80% since we last talked, Bitcoin's down 25%. What's your view on what's happened with. Bitcoin and why that hasn't played the. role that many thought it was going to. play, which is the safe haven asset? >> There There's an important. differentiating characteristics of. Bitcoin, and then there's also, you. know, like who owns it and why they buy.

why they bought and sell. Okay, so. Bitcoin does not have privacy. Tra- any. transactions. uh can be monitored and then uh. indirectly perhaps controlled. Central. banks are not going to want to buy. Bitcoin and being able to hold it. So, it's not just individuals, it's. institutions and so on, but most you. know, and central banks. So, there there. are attributes of that. There has been. um some question or thoughts of the.

development of, you know, new. technologies like quantum computing and. so on. Can there be issues regarding. that? And then there's um you know, who owns. it and what are the other exposures that. they have in their portfolio. It tends. to have a. a pretty high correlation with uh the. tech stocks. So, from an ownership, you know, just. the supply demand is affected by if. somebody gets squeezed in one thing,

they sell something that what whatever. else they have. So, there are those. dynamics. It's a long way. as and it's a relatively small market. that's a relatively controllable market. I think a lot of attention has been. given to Bitcoin, but as a money, you. know, it's it's it's it's small in. relationship to uh gold and so you know, those are the dynamics. There is only. one gold. What about silver? I mean, silver has had a big run-up in the past.

year as well. Is that a derivative to. gold and it's effectively people playing. off of the wake of gold price movement? >> silver in its production is a residual. commodity. The supply of it is difficult. to increase. and through history, uh you know, like. the pound sterling, silver was perceived. as a monetary. uh item. Uh but it uh has also taken on a.

speculative life of its own. So, you know, people are, um, you know, hot in it because it's been hot. I just. want to shift gear a little bit back to. something you touched on, but the last. time we met, you also talked about the. importance of making sure that interest. rates remain low for us to kind of. manage the effect and the impact of the. stage of the cycle that we're in. What's. your view, I guess, today on where rates. are and how the Fed has acted over the. past year relative to what needs to be.

done. to soften the effects of the stage in. the cycle that we're in. Because we have. so much debt, federal debt, um, interest rates are one of the three main. considerations. There's the, um, taxes, there's spending, and then. there's interest rates are the on the. debt. But, you can't make interest. rates, um, severely artificially low because one. man's debts are another man's assets. And if you make those interest rates.

too low. for the creditor, you will produce the dynamic that we. understand. In other words, they'll. produce a lot more borrowing, they'll. put it into things, and you can fuel a. bubble. And so, at the same time, uh, you can't have them so high that the. debtor gets squeezed. unaffectedly. So, there's a balancing. act, you know, keep them high enough.

that they're adequate for the creditor, but not so high that the debtor. So, when you have a lot of debt assets and. liabilities, cuz for every debt asset, there's a debt liability. And when you. have a lot of those, that balancing act. is is very difficult. This made more. difficult, you know, because of what's. called the K economy, you know, in other. words, there are bubble elements that. are going on in the part. of the economy, you know, where.

um. you know, the question is who will be. the first to be a trillionaire and and. and that, you know, that top. 1% of the population and all of that at. the same time as you have the other part. of the economy where um for example, 60%. of all Americans have below a. sixth-grade reading level. And and to make them productive. particularly as we are also having AI.

have replacements for them. um is a particularly difficult thing to. achieve. In other words, when you have. so much dead assets and liabilities and. then you have such a disparity in. conditions between those that are at the. top and let's call it the bottom 60% of. the population, what that's like. That's uh you know, another. hat trick. That's another.

difficult thing to pull off. So. this is a challenging situation. As for. as far as monetary policy. exists the idea of setting an interest. rate and having. a fiscal policy and a monetary policy. that's for the economy as a whole. and doesn't deal with the differences in. the. in the circumstances may be more.

well, it is more challenging. Well, so. taking a look at Fed action. and market activity. there's been a lot of reporting over the. past year that a number of global. central banks. have stopped buying US Treasuries and. are shifting to gold. Does this mean that Fed in the US is. going to have to start buying treasuries. and expand their balance sheet again? Is. it inevitable that we see a re-expansion.

of the Fed's balance sheet in this. phase in the cycle given what's going on. with global market action? I think that. it's likely down the road. Um, uh, right now, uh, there's. um, the shortening of maturities, um, as a means of trying to deal with. that. Of course, that increases the debt rollover risk. Uh, but the, you know, sell less long. debt, uh, try to, uh, hold the short rate down.

so that the longer rates attachment to. it doesn't get, you know, helps to hold. the long rate down. And then, uh, try to, um, use. the government's power of persuasion. on other countries to either buy the. debt or to hold the debt or to have. other forms of capital enter the United. States. How do you like Kevin Warsh's. pick for Fed chair? What's your view on.

how he's going to guide interest rate. policy for the Central Bank and when he. assumes his term? It's a very, very big. challenge. I think he's a practical man. He understands both sides of the pros. and cons. I think it's a tough job. One. of the other things that I would say was. pretty surprising over the past year. is. how adamantly against. tariffs for fear of inflation and. reduced consumption, which would mean a.

negative effect on GDP growth, perhaps. Tariffs might be. The president and the. administration put in place a number of. tariffs under the emergency. economic powers act, which the Supreme. Court in the last week or so overturned. But, looking back. on the economic effect of tariffs, what. do you think economists got right and. wrong about their predictions about the.

effect tariffs would have on the. economy, on consumption, on inflation? And are there things that economists. fundamentally missed or didn't. understand and why? Yeah, I I think so. First of all, um there's the uh tax. revenue part of them. I mean, thinking. of that just as. uh revenue. And I think that people. don't. all economists. make the mistake of not including taxes.

in inflation. Mhm. And what I mean by that [snorts] is. if your. if your taxes go up, that's inflation. It I mean, why shouldn't it be any. different than if your cost of housing. goes up, why shouldn't it be part of the. inflation calculation number? It's tak-. it's taken money out of your pocket. I. mean, it's probably the you know, for a. lot of people the biggest expense. And.

so, when they say inflation is something. separate, you know, I I. I think it's changing the form of. uh of inflation in a sense. So, what I. mean is, you know, through history, tariffs used to be the biggest source of. uh. revenue for the government thro-. throughout most history. And in most. countries. Okay. So, it is a um. I think it's viewed.

It's It's a totally valid way of raising. money, and it should be kept kept in. consideration. for that. And And you get the foreigners. paying a portion of it. But, it there's. also, as part of the big cycle question, is the problem that we have that. we are not independent. Okay, we've had. a hollowing out. This is the big question, you know, that. we've had a hollowing out of. manufacturing, the middle class,

and so on. Now, are we going to try to. build that? And what is the plan to build that? Or. are we going to continue on with large. trade deficits? And um. so, you have unsustainable. trade deficits that the United States. has, and which are capital. um. surpluses. In other words, the. dependence on foreign capital is the. other side of those trade balances, and.

that's unsustainable. So, because that's. unsustainable, um you need uh. some way of uh rectifying that. Okay, so. what is the plan to rectify that? Partially, that plan. uh can have trade tariffs. I think they're totally valid, uh but it all has to be part of another. greater plan, which is to develop.

the industries that we need to have. developed, which we're seeing happen in. a much more proactive way. In other. words, you're seeing more. government. um. activity to create infrastructure, to bring in industries, and so on. You. need that not only economically, but you. need it geopolitically, because you. can't have dependencies. In other words, we're entering a world. of greater conflict. We moved from a. multilateral world order to a a. power-based confrontational.

world economy. And in that environment, everybody's. threatening to cut off everything from. it. You know, the uh goods and capital. wars that we can have are threatening. And so you have to build independence. And so. that's part of a plan to try to build. that independence. So I I think when I look at that, I. don't think that's the problem. I.

I'd say and it's misunderstood. So yes, I think people are misunderstanding. that. And the important thing is we get the. other things right. You know, like Let's. get down to 3% and and by the way, there's a bipartisan bill that on this. And. Uh The three the 3% bill. >> to this. has come out in favor of it. I'm in. favor of it. I mean lots of people are. in favor of you know,

what I'll call the 3% three-part. solution. 3% of GDP, three parts, a bit from. one thing, a bit from another, taxes, spending and. and hopefully interest rates. And just. to take the inflation question to its. conclusion at the State of the Union. this week, President Trump shared his. vision, which is that tariffs can. completely replace an income tax in the. United States. Do you think that that's. a feasible path? Does it make sense at.

some point for tariffs, which are. effectively consumption taxes. >> it's I don't think it's going to No, I. don't think it's anywhere near. that. both because of the combination of the. size and then the impact of that size. Tariffs are regressive. And I think that there needs to be. some. We have to deal with the wealth gap. To me the wealth gap, the biggest. problem of the wealth gap, which is a a.

social problem, is also the productivity. gap. And you have to make most people. productive. And you have to do that through. infrastructure and so on. And I I don't. think I think that needs to be. addressed. It's a really important point. you just made. I think my. analysis. indicates that nearly half of Americans. either work for a government agency. or a government service provider or a.

contractor. The data over the past year. is the federal workforce declined by. 317,000. employees, roughly 14% of the total. federal workforce. As this administration has reduced the. size of some of these agencies, reduced. the size of that workforce, what happens to those individuals? Do. they go work in the private workforce. and become productive, or do you think. they're getting subsumed by other. government agencies, either state or.

local, or government service providers. to do work that fundamentally is not. productive to growing the economy? I I I. haven't studied the numbers. I don't think I can adequately answer. that. I would say. government is extremely inefficient. It has a role. It has an important role, but even that role it's handling very. inefficiently. Other governments handle. that role of maybe education,

some of these things in a better way. We. need fundamental We need. You know, best thing you could invest in. is education. But anyway, where they go and what they. do. from the government and and you know, the other inefficiencies. is a problem. The one thing that's good. about. uh the system. that. the capitalist system in a sense is it. doesn't live if it can't uh if somebody. either won't bet on it or it doesn't.

make a profit. So, um yeah, so I think. wherever it goes, um it's wherever those. people go, there's just so many inefficient people. and inefficient systems. Is there not enough productivity-driven. economic growth in this nation at this. time. to give more people the opportunity to. improve their income, improve their. wealth, improve their livelihoods?

Is that the fundamental issue we're. dealing with at the moment? Or is it. that, you know, people aren't prepared. or educated to be productive and. therefore the system itself has failed. them? There are three things basically. that you need to do to be successful. You have to first educate your children. well. And so that they are capable of being. productive and also educate them in. civility. So that they are civil with each other.

The second is then they have to come out. to an environment. that is an orderly, civil environment. that people can compete and work with. with with and and compete and work with. each other to be productive that that. works for the most people. And the third thing is you have to stay. out of wars. You have to stay you don't. have to have no civil war and no. international war. If you do those three. things right, you will have a successful.

country. That's all throughout history. Okay, we're having problems with those. And are those three things the antidote. to some of the rising movements that. we're seeing in increased unionization. and effects that unions are having on. the political process, which is also. leading to these rises in socialism. and support for socialist movements in. the United States as well as the wealth. taxes which. from the view that's shared by those.

participating in those movements, they. are meant to solve income inequality, wealth gap issues that we're seeing in. the United States. So that's their. solution. Is the solution to those. movements education and civility, creating a civil environment and staying. out of wars? Is that all we need to do. to make this successful or is there more. to the end? >> Yes, that's that's that's that what we. need. is is is to stop fighting. Okay, we're. now at a stage. where we have irreconcilable.

differences. In other words, when. when the causes people are behind. are more important to them than the. system, the system is in jeopardy. Our system is in jeopardy. because. um. they people will not accept the system. or the alternatives. And so they're. going to fight.

You know, I think. I think when we have we're going to have. the midterm elections, you're going to go past the midterm. elections with. probably that uh Democrats will take the. house and be and maybe I don't know, it's going to be difficult. And you know. what? Nobody can succeed. because everybody's going to be. fighting. Uh they're going to all be fighting. Okay? So how does that affect. productivity? Uh okay. And then when you. deal with things like how do you get a.

good education system? So you have now. almost the mob disorder. Mob disorder and inefficiency. Nobody's allowed to take charge of this. If if you go back in history, Plato, you know, I think it was like 350. BC wrote about the cycle. you know, of democracies and the threat. to democracies. What's happening now is similar to.

Julius Caesar and Rome. and beings. you know, stabbed in the Senate and and. what you need is you need. a bipartisan. you need you need the country to have. have a strong almost. a strong leader. We do need a strong. leader to get the the reforms done to. make the country work well, but I mean, so how do you force.

this mob of people who are behaving this. way including in the elections and so. fragment to create order. So, you need a a tough leader will force. them to do different force things to. difficult things. and not fight with each other and. [laughter]. focus on being productive. That's what. you need I think. It sounds a little. like there may be this. inevitable path of the choice that no. one wants to make between some form of.

socialism and some form of fascism. Is. that where this goes? >> I think you were we're moving toward the. that war. We're in that war. We're in. what's state what I call stage five of a. cycle. Okay. In the book I described the. pattern that's happened over and over. again and when you get to this position. when there are a bad finances. combined with large wealth and values. gaps.

and irreconcilable differences. and you have external threats as well as. domestic threats. you have this dynamic. I think that's. where we are I. I'm like a mechanic. My goal I'm not. ideological. I'm just a practical guy. trying to make money in the markets and. trying to describe things and that's. what it looks like. I think when we look. at the bubble question on AI, what a lot. of people don't realize in.

bubbles is. that through all technologies, they. think that they. are betting on the technology when they. buy the stocks in the companies. That's not true. Okay, there's a giant difference. between the behavior of the companies. and the behavior of the technologies. And that the norm is in these is that a. lot of companies won't survive in the. start. Very small percentage and they'll.

all fight. and so on, but the technologies will go. on and it'll be great. The technologies. will. So, I want to emphasize to people. that dynamic and I can go on. and describe, you know, what it's like. Uh uh. Of course, we've seen it to some extent. with the 2000 bubble in the technologies. and what went on, but. even if I describe what it was like in. the late '20s, but you know, it's just it was.

unbelievable, but the technologies will. go on, but the companies. um won't necessarily go on. And um so, when I'm looking at that, that has big implications. Right now, it. looks to me. like AI. uh basically is eating everything. and it might eat itself. And. uh what I mean by that is not produce. adequate profits. We can't take just a. domestic view of that. We have to look.

also at what's happening in China. and um Um, make interesting distinctions. there. you know? There's a difference in. philosophy. that's carried through in the economy. of how the economies of the United. States and China work. in that we have basically primarily a. profit-based system. They have a system in which they might. believe that profits are a second. consideration. They're not necessarily.

needed. in order to achieve the best results. For example, in China, they would say. usage of AI is fantastic. So, it should. be like electricity. or something, and let's make it free for. everyone. And let's make it open source for. everyone. Okay, and they might get much higher. usage, and they'll get their. productivity gains through the usage.

And we have a profit system to pay back. Okay, well, now we're in one world. How. do you compete in that world? What do. you do with that? In other words, just. imagine that their technologies are. almost as good as ours, cuz they are. They're not far behind. And and and then but that you could get. them for free. Open source. Okay, now you got to pay it back. Okay, so. I just want to emphasize.

that these are also systematic risks. that enter into the picture of of AI. But you certainly Yeah. Uh, there are a. lot of unknowns here. As we wrap, looking. back on the history of this nation, I. ask myself the question a lot, how did. we get to the point that we've gotten to. in terms of the amount of debt, the. amount of government spending, the role. that the central bank has played, and. the risks that we find ourselves in. today that all seem largely avoidable if.

we hadn't taken. or made the decisions we made along the. way. You've highlighted that they repeat. over and over again. But if you could go. back and restructure the United States. and be a founding father and write the. Constitution yourself, what are one to three things that you. would have done differently? What would. you have written into the Constitution. that may have prevented us from getting. into the situation that we're in today? Well, the I mean, it's like the. marshmallow test. You know the marshmallow test? You know. you you want to see it.

It is a kid going at early age you give. them the choice between one marshmallow. now and two marshmallows in 20 minutes. And the kid that chooses the two. marshmallows in 20 minutes is going to. have a better life and make better. decisions kind of thing. I mean, that therein lies our problem. The immediate gratification and also the. not knowing if things are going to be. productive. But the system has been remarkably. adaptable, too. In other words, we've. gone through crises, we've wiped out.

debts, and we've gotten past it. And there are. certain ways of getting past it. But you. you know, it's a it's a tough question. to balance. financial prudence with. innovative inventions. You know? Because you. like particularly like take AI now. Nobody knows what's going to come of it. in in what what way, right? Is it going. to pay? Is it not going to pay? And all.

of that. And so, what do you write into. the law. that. is going to get you financial prudence. and controlled? And do you when you. write it into the law, does that lessen. the experimentation. and you know, the entrepreneurship and. all of the things that you know? So, it's tough to do this with. with rules. I think maybe the main thing. is I would say read history. Read history and know these things and.

try to get that balance right, you know, everything's a matter of the balance. So. the balance of the pain. of failing or the pain of putting money. into a something that fails. Well Ray, I. want to thank you once again for taking. the time to be here with me. It's always. great to catch up here your perspective. Obviously so much has changed in the. last year and yet so much hasn't. It's. been great to to get your view on it and. I think it's really helpful to do this.

So so thanks so much. And and thank you. for what you guys do. I'm I'm I'm. riveted to your program and I think you. make a great contribution. So conversations like this are. are really practical helps for a lot of. people. So anyway, thank you for letting. me participate and thank you for what. you do for a lot of people. Thank you. >> That's right. I'm going all in.

I'm going all in.