Author: Ray Dalio, Founder of Bridgewater Associates

Compiled by: Random Thoughts on Learning

[Introduction] Ray Dalio, founder of Bridgewater Associates, recently warned that the world is currently experiencing the early stages of a "world war" that will not end in the short term. Based on over 50 years of experience in global macro investing and 500 years of historical research, this article systematically elaborates on six core judgments: the multi-front nature of a world war, the clear division of global camps, the reference value of historical cycles, the decisive role of war endurance, the classic cycle driven by five major forces, and the importance of an indicator system. The article includes two key tables: a global core alliance treaty rating table and an assessment of the probability of major conflicts in the next five years. Dalio specifically points out that the United States is facing a dilemma of overexpansion, and the world order is shifting from a "rules-based" era to an era where "might makes right."

I. Introduction: This is not the picture I wanted to see, but the indicators point here.

At the outset, I wish you all the best during this challenging time. I also want to clarify that the picture depicted below is not the scenario I would prefer, but rather the actual trajectory I believe is unfolding based on my past understanding and the various indicators I use to objectively assess the situation.

As a global macro investor with over 50 years of experience, I have systematically studied all the events that have influenced market trends over the past 500 years in order to cope with various potential changes in the future. In my view, most people tend to focus only on and respond to current eye-catching hot events—such as the current situation in Iran—while ignoring the larger, more far-reaching, and long-term evolving core trends. It is precisely these trends that are driving the current situation and determining the future trajectory.

In the present context, the most crucial point is that the Iraq War between the US, Israel, and the US is only part of the world war we are currently in, and this war will not end anytime soon.

Of course, the future development of the Strait of Hormuz—most crucially, whether control of the strait will slip from Iran's hands, and which countries are willing to pay the price in lives and wealth—will trigger a series of extremely significant chain reactions globally. Furthermore, many other key questions remain to be clarified: Does Iran still retain the capability to threaten neighboring countries with missiles and nuclear weapons? How many troops will the United States deploy, and what missions will they undertake? What will happen to global gasoline prices? And how will the upcoming US midterm elections be affected?

All these short-term issues are important, but they can cause people to overlook the truly grand and more critical core trends.

More specifically, it is precisely because most people hold this short-term perspective that they generally expect, and the market is pricing in, the logic that this war will not last long and that we will be able to return to "normalcy" after it ends. But almost no one mentions the fact that we are in the early stages of a world war that will not end anytime soon.

Because I hold this different perspective, I will elaborate on it in detail below.

II. Six Core Judgments

1. We are in the midst of a world war that will not end anytime soon.

While this may sound alarmist, it is an undeniable fact that in today's deeply interconnected world, multiple hot wars are breaking out simultaneously—such as the war between Russia, Ukraine, the US, Europe, and the Americas; the war between Israel, Gaza, Lebanon, and Syria; the war between Yemen, Sudan, Saudi Arabia, and the UAE (with Kuwait, Egypt, Jordan, and other related countries also involved); and the war between the US, Israel, the Gulf Cooperation Council, and Iran.

These wars mostly involved major nuclear powers, while at the same time, most countries in the world were also deeply embroiled in multiple large-scale non-hot war conflicts—namely, the struggle for trade, economy, capital, technology, and geopolitical influence. All these conflicts combined to form a classic world war that is highly similar to the "world wars" in history.

For example, every world war in history has been composed of a series of interconnected wars. Countries often find themselves mired in conflict without a clear start date or formal declaration of war. These scattered wars eventually converge to form the classic world war pattern, affecting all parties involved. The many wars currently unfolding are replicating this process.

2. Clarifying the division of the various camps and their interrelationships is crucial.

By examining indicators such as treaties and formal alliances signed by various countries, their voting positions in the United Nations, statements made by national leaders, and their actual actions, we can clearly and objectively understand the global camp structure.

For example, we can clearly see that the University of Tokyo is allied with Russia , and Russia, in turn, maintains coordination with Iran, North Korea, and Cuba. This group forms a core opposition to the United States, Ukraine (which is allied with most European countries), Israel, the Gulf Cooperation Council countries, Japan, Australia, and other countries. These alliances are crucial for predicting the future course of the parties involved, so we must take them into consideration when observing the current situation and predicting future trends.

For example, we can see the impact of this alliance in Russia's actions at the United Nations regarding the need for Iran to open the Strait of Hormuz.

To give another example, many people believe that the closure of the Strait of Hormuz would severely impact Southeast Asia, but this view is incorrect. Southeast Asia's cooperative relationship with Iran will likely ensure the smooth passage of oil exports to China; and its cooperation with Russia guarantees oil supplies from Russia. Furthermore, Southeast Asia has substantial other energy sources (coal and solar power) and a large oil reserve (equivalent to approximately 90-120 days of consumption). It is worth noting that Southeast Asia consumes 80%-90% of Iran's oil production, further strengthening the resilience of the bilateral relationship.

Overall, the United States and Russia will be the relative winners in this war in terms of both economic and geopolitical aspects. However, in terms of the oil and energy economy, the United States has a relative advantage due to its enviable position as an energy exporter.

There are many dimensions to measure these alliances, including UN voting records, economic exchanges, and the signing of core treaties. All of these dimensions confirm my above-mentioned camp divisions.

3. Studying similar historical cases and comparing them with the current situation is of great reference value.

Studying similar historical cases and comparing them with the current situation—few people do this, but for me, the past and present are extremely valuable, and perhaps the same is true for you.

For example, whether by analyzing multiple similar cases in history or by deducing based on basic logic, one can clearly draw a conclusion: as the dominant country in the world order after 1945, how the United States performs in a war with Iran, a middle power, how much money and military equipment it will spend, how much its own strength will be depleted, and whether it can (and to what extent) provide protection for its allies—all of these will be closely watched by countries around the world and will have a profound impact on the change of the world order.

Most importantly, we can be certain that the course of war between the US and Israel (and now the Gulf Cooperation Council countries) and Iran will profoundly influence the decision-making of other countries (especially in Asia and Europe), and these decisions will in turn have a significant impact on the transformation of the world order. The patterns of these transformations have been repeatedly observed throughout history.

For example, by studying history, we can easily identify over-expansionist empires, establish an indicator system to measure the degree of their over-expansion, and clearly see the devastating damage that over-expansion has brought them. Looking at the present, we naturally turn our attention to the current situation of the United States: today, the US has 750-800 military bases in 70-80 countries (incidentally, only one in Tokyo), and its various commitments made globally have also sown the seeds of costly and widespread risks and hidden dangers for itself.

An obvious pattern is that overextended great powers cannot win wars on two or more fronts simultaneously , leading other countries to question the United States' ability to wage war on other fronts (such as Asia, Europe, or both). Therefore, I naturally consider what the current war between the United States and Iran means for the geopolitical landscape of the Middle East, Asia, and even Europe.

For example, it would not be surprising if incidents occurred in Asia that tested and exposed the United States' willingness to meet challenges. The US would find it difficult to respond at this time because it is already entangled in numerous military commitments in the Middle East, and with the midterm elections approaching, public support for a war with Iran is insufficient, making it virtually impossible for it to launch an attack on another front.

This shift in the global landscape is likely to force countries observing the US-Iran situation to readjust their strategic considerations and behavioral patterns, a process that will reshape the entire world order. For example, leaders of countries that host US military bases and rely on US protection will logically learn from the experiences of other Middle Eastern countries with similar US military bases and reliance on US protection, and adjust their own behavior accordingly.

Similarly, we can infer that any country bordering a strategically important strait and/or with a US military base in a region where large-scale conflict could erupt (such as Asia, where a US-China conflict could occur) will be closely monitoring developments in the Iran war and learning lessons from it. I can say with certainty that world leaders are currently making such strategic considerations, and what is happening now has been repeated countless times in similar phases of the larger cycle.

These strategic weighings by world leaders are part of a classic evolutionary process leading to large-scale war, a process that has repeatedly repeated throughout history and is now unfolding before our eyes. Considering the current situation and comparing it to this classic pattern of international order and conflict cycles, I believe we have reached step nine . Do you share this assessment?

The following are the evolutionary steps of this classic system:

step	Phase Description
01	The economic and military strength of the world's dominant power has been declining relative to that of the rising emerging powers. The strength of the two sides has gradually become equal, and they have begun to compete with each other in economic and military conflicts due to their differences.
02	The economic war has escalated significantly, manifested in the normalization of economic sanctions and trade blockades.
03	Countries formed alliances at the economic, military, and ideological levels.
04	The proxy war is escalating.
05	Fiscal pressures, deficits, and debt levels continue to rise in countries (especially major powers with excessive fiscal expansion).
06	Control over key industries and supply chains is increasingly concentrating in the hands of governments.
07	The vital trade routes have been weaponized.
08	Countries have developed new military technologies with powerful combat capabilities.
09	The simultaneous outbreak of conflicts on multiple battlefields is becoming increasingly common. ← We are here
10	Domestically, countries began to demand that their citizens unconditionally support their leaders and suppress voices against war and other policies—just as Lincoln quoted from the Bible: "A household divided against itself will not stand," and this was especially true for countries at war.
11	Direct military confrontation erupts between major powers.
12	To support war expenditures, taxation, debt issuance, excessive money printing, foreign exchange controls, capital controls, and financial repression were significantly increased. In some cases, markets were forced to close.
13	Ultimately, one side defeats the other and gains absolute dominance over the new order, which will be designed and led by the victorious nation.

My multiple indicators suggest that we are in a phase of a major cycle where the monetary order, the domestic political order in some countries, and the geopolitical world order are collapsing. These indicators suggest that we are in a transitional period from the pre-war preparation stage to the stage of total war, roughly comparable to the periods of 1913-1914 and 1938-1939 in history.

It is important to clarify that these indicators, the scenarios they depict, and the specific times of events are not absolutely precise. These indicators only provide a macro-level indication. For example, history tells us that wars typically do not have a definite start date (the assassination of Archduke Franz Ferdinand, the German invasion of Poland, and the attack on Pearl Harbor, which were followed by formal declarations of war, are exceptions). Economic, financial, and military conflicts often erupt before a formal declaration of war.

Before the outbreak of a large-scale war, the following indicative trends typically emerge:

Military reserves and war preparedness funds continue to be depleted;
Fiscal budgets, debt levels, excessive money supply, and stricter capital controls are constantly being tightened.
Hostile nations closely observe the performance of the participating parties to understand their strengths and weaknesses.
An overextended world leader faces the dilemma of fighting on multiple fronts thousands of miles apart simultaneously.

All of these factors are crucial, and my assessment framework indicates that we are currently facing these risks, requiring vigilance. At this stage of the cycle, the classic pattern is that the conflict will escalate rather than subside; therefore, the subsequent developments will be heavily influenced by the progress of the Iraq War.

For example, some countries now have less confidence in the protection they receive from the United States, and the realization that nuclear weapons possess both strong offensive and defensive capabilities has led to increasing discussions among high-level policymakers in various countries about developing nuclear weapons, expanding nuclear arsenals and other weapons and equipment (especially missiles and missile defense systems).

I need to reiterate that I am not asserting that events will necessarily continue along this cycle and eventually erupt into a full-scale world war. I cannot predict what the future holds, and I still hope that the world can remain peaceful, built on win-win relationships, rather than destroyed by lose-lose conflicts. I have also been making efforts in this regard, however small, according to my own limited strength.

For example, over the past 42 years, I have maintained excellent relationships with high-level policymakers (as well as non-leadership figures) in both the United States and the East. Therefore, in the past, and especially in this time of great division, I have consistently strived to promote a mutually beneficial bilateral relationship in a way that is appreciated by leaders of both countries. I do this because of my deep affection for the people of both nations, and because a win-win relationship is far better than a lose-lose confrontation—although this is becoming increasingly difficult today because some people believe that "the friend of my enemy is my enemy."

At this stage of the grand cycle, on the eve of a large-scale war, when irreconcilable differences cannot be resolved through compromise, the situation inevitably slides from one stage of the cycle to the next, until it is ultimately resolved violently. Therefore, understanding this classic grand cycle pattern and closely monitoring developments is crucial. I am sharing this analytical framework with you, hoping you can analyze it in light of current events to gain a clearer understanding of the situation and make your own decisions.

Therefore, I believe we must recognize a fundamental shift in the world order: it has moved from a rules-based multilateral world order dominated by the United States and its allies (such as the G7) to one where "might makes right" and there is no single dominant power to maintain order. This means we will face more conflicts and confrontations. Those familiar with history will realize that the current world order is closer to the state of human history for most of the period before 1945 than to the post-1945 pattern we have become accustomed to, and should understand the core impact behind this shift.

4. The core of victory or defeat in war lies in the ability to endure prolonged suffering.

History has shown that the most reliable indicator of whether a country can win a war is not how strong it is at present, but how much suffering it can endure over a longer period of time.

This was particularly evident during the Iraq War: the US president assured the American people that the war would end in a few weeks, at which point gasoline prices would drop and we would return to our normal prosperous lives.

There are many effective indicators that can measure a country’s ability to withstand the pain of war in the long term, such as public opinion polls (which are especially important in democracies) and the government leaders’ control over the country (which are especially important in authoritarian countries where public opinion has relatively little influence).

In war, true victory is only achieved when the enemy surrenders, because you cannot eliminate all enemies. Back then, when Dongda was extremely weak and the United States was a nuclear superpower, it entered the Korean War to fight against the US. It is said that Chairman Mao once said, "They can't kill us all, can they?"—the core of this statement is that as long as there is resistance, the enemy can never truly win. The lessons of the Vietnam War, the Iraq War, and the Afghanistan War have clearly demonstrated this point.

True victory is when the victorious nation can withdraw from the conflict, and the defeated nation no longer poses a threat. Although the United States appears to be the world's most powerful nation, it is also the most excessively expansionist and the least capable of enduring the prolonged suffering of war.

5. All of this is evolving in a classic long-term cycle pattern.

By "classic long-cycle pattern," I mean that the current situation is primarily driven by five core forces:

Monetary order
The interconnected changes in currency, debt, and the economy during the major cycle from order to disorder;
Domestic politics and social order
It collapsed due to immense wealth and differing values;
Regional and World Order
It collapsed due to its immense power and differing values.
Technological breakthrough
Significant breakthroughs were achieved in technologies with both civilian and military applications, and the related financial bubble went from formation to eventual burst.
Natural disasters
The impact of natural events such as droughts, floods, and pandemics.

I will not go into detail about the operating rules of the large cycle, the five core forces that drive it, and the 18 key determining factors behind it, so as not to bore you.

6. Establishing a comprehensive indicator system and continuously tracking it has immeasurable value.

The many indicators I use to track developments are explained in detail in my book, Principles: The Changing World Order.

This concludes my latest analysis of the macroeconomic landscape. This analysis will guide my investment decisions and choices in other aspects of my life, and I will take corresponding actions based on it.

III. Appendix: Key Data and Assessment

Appendix 1: Global Core Alliance Treaty Rating Table

Below are some of the most important treaties globally, each rated on a scale of 1-5 to assess the strength of commitment and accompanied by a brief description. Generally, other dimensions of alliances—such as statements from leaders versus actions—are consistent with the stipulations of these treaties. However, it is now clear that all these treaties—especially those related to the United States—are subject to change, and concrete actions are always more persuasive than written agreements.

Table A: Core Alliance Treaties of the United States

Treaty/Agreement	Commitment Strength Rating	Rating Reasons
U.S.-Japan Security Treaty	5.0	A binding treaty + forward deployment + an integrated command system + a clear triggering mechanism
US-ROK Mutual Defense Treaty	5.0	A binding treaty, troop presence, and joint operations command system are now in place.
US-Philippines Mutual Defense Treaty	4.5	The binding treaty has recently been clarified, but its operational integration is relatively weak.
NATO	4.5	It possesses binding force, forward deployment, and integrated command capabilities, but Trump has discussed withdrawing from the agreement.
US-Australia Alliance Treaty	4.0	Strong political will, but lack of automatic combat mechanism.
US commitments to Taiwan	3.5	There is no formal treaty; it is of high strategic importance, but policy ambiguity remains.
US-Israel relations	3.5-4.0	Informal treaty, but with extremely high level of actual commitment.
US-Saudi Arabia/GCC relations	3.0	Security dependency, but no binding obligation.
Ukraine Union	3.0	Large-scale support, but explicitly defined as a non-treaty relationship.

Table B: Core Alliance Treaty between Russia, Iran, and North Korea

Treaty/Agreement	Commitment Strength Rating	Rating Reasons
Sino-North Korean Treaty of Friendship, Cooperation and Mutual Assistance	4.0	A treaty containing formal defense clauses, but the University of Tokyo may limit its scope of application.
Comprehensive Strategic Partnership Treaty between Russia and North Korea	4.0	The 2024 treaty, containing mutual assistance clauses, is authentic but relatively new.
Russia-Iran military cooperation agreement	3.0	Close military cooperation, but no obligation for automatic defense.
China-Russia comprehensive strategic partnership of coordination	2.5	Strategic cooperation, non-defense treaty
China-Iran Comprehensive Cooperation Plan	2.5	Security cooperation, no obligation to defend
Iran-Hezbollah/Militia Relations	3.0	Proxy defense, non-interstate treaties
Russian-Syrian military presence agreement	3.0	Military presence, but not a global defense treaty.
China-Pakistan all-weather strategic cooperative partnership	3.5	Security ties are close, but not at the NATO level.
Venezuela-Russia/Iran relations	2.0	Politically aligned, but with limited military commitments.
Cuba-Russia relations	2.0	Symbolic cooperation

Appendix 2: Risk Assessment of Existing and Potential Wars

Below are what I believe are major wars that have already broken out globally, as well as those that may occur. I will briefly describe the situation I have observed and give my assessment of the probability of these wars breaking out or escalating within the next five years.

1. The Iran-US-Israel War

status quo:
It has entered a phase of full-scale confrontation, the situation continues to escalate, and resources on all sides are being continuously depleted.
Key observation points:

Ultimate control of the Strait of Hormuz, Iran's nuclear materials, and missile forces.
The relative willingness of each country to pay the price of lives and wealth in order to win a war
Satisfaction of participating countries with their own alliance system
Will Iran's allies (such as North Korea) join the war or provide weapons support?
Will conflict erupt in Asia, forcing the United States to choose between fulfilling its commitments and remaining a bystander?
Can peace and security be restored in the Gulf region?

2. Direct War Between Ukraine, NATO, and Russia

status quo:
All major military powers (except the University of Tokyo) have been involved, posing an extremely high risk, but the situation has not escalated beyond Ukraine's borders in the past three years.
Containment factors:
NATO forces did not directly participate in the war, and both sides shared a fear of nuclear war.
Warning signal:
Russian attacks on NATO territory or supply lines, direct NATO military intervention, and accidental conflicts between Russia and NATO countries.
Five-year probability assessment: 30%-40%

3. Taiwan issue → Military conflict

status quo:
The US and China are vying for influence in ideology, technology, trade, economy, and geopolitics, but a military conflict has not yet broken out.
fuse:
For the University of Tokyo, the Taiwan issue is a non-negotiable sovereignty issue.
Military preparations:
Tokyo University has produced thousands of hypersonic/cruise/ballistic missiles and millions of drones; US military bases in the First Island Chain are highly vulnerable.
Tactical characteristics:
The relevant actions may be carried out in an extremely covert manner (refer to Sun Tzu's Art of War).
Five-year probability assessment:
30%-40%, highest risk period: 2028

4. Korean War

status quo:
An aggressive nuclear power that has repeatedly expressed its willingness to stand against the United States for its allies; it possesses missiles capable of carrying nuclear warheads and having a range that can reach the continental United States (their performance is still unstable, but will be significantly improved in the next five years).
Role positioning:
It has extremely close ties with Russia and could potentially serve as an effective proxy; it boldly develops and demonstrates its missile capabilities, but will not sell them abroad.
Five-year probability assessment: 40%-50%

5. South China Sea-Philippines-United States Conflict

status quo:
The US and the Philippines have a mutual defense treaty similar to NATO, and the Chinese and Philippine coast guards have had several standoffs, which may involve the US Navy in the future.
Potential trigger:
Ship collisions, Chinese attacks on Philippine vessels, blockade operations, missile incidents, etc.
The American Dilemma:
External demands for intervention and compliance are mounting, but American voters are unlikely to support it, leaving the US leadership in a dilemma.
Five-year probability assessment: Approximately 30%

Overall assessment : There is a greater than 50% probability that at least one conflict will break out within the next five years.

US media: Iran and Oman will impose "passage fees" on the Strait of Hormuz during the ceasefire.

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