The New Age of Geoeconomics

Donald Trump's tariff threats are part of a much wider and longer-term intellectual pendulum swing.

- Gillian Tett

In January 2008, during the World Economic Forum's annual meeting in Davos, I was summoned to a conference room to meet Mr Ray Dalio, founder of the mighty Bridgewater hedge fund. His team handed me a vast report, the size of a Bible. This, I was solemnly told, represented Mr Dalio's views on the credit cycle. I duly skimmed it—and then dumped it into a bin, since it was so heavy. That turned out to be a big mistake.

When the great financial crisis exploded later that year, Mr Dalio was hailed as one of its prophets, in large part because of the forecasts in that report I discarded. "I calculated the rate at which debt growth (is) going to occur and the supply and demand for credit, relative to economic fundamentals," he recently told me by way of explanation.

Fast-forward 17 years and Mr Dalio is wielding more analysis in his new book titled How Countries Go Broke. This essentially argues that the US must cut its US$36 trillion (S$46 trillion) debt or risk another financial crisis.

But a subtle—and crucial—shift has occurred.

In 2008, Mr Dalio fashioned his forecasts primarily by studying economic and financial cycles. The new book, like 2021's The Changing World Order, analyses not just credit cycles but the "domestic political and geopolitical orders" too. The reason? Foreign relations are fuelling the US' debt spiral, since the country feels under threat and keeps spending; meanwhile, domestic polarisation prevents it from enacting fiscal reform.

"It used to be that money mattered most, but now politics and geopolitics have got more important," he explains. "They are affecting money in ways we could not imagine before—there is populism from left and right that looks a lot like the 1930s."

Some social scientists might scoff, pointing out politics has always shaped economics to some degree. But Mr Dalio's intellectual journey is echoed by many others in the financial, corporate and government spheres.