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

Ray Dalia, welcome back to the All-In

podcast. Third Times the Charm. Thanks

for being here.

>> It's always a 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 preient

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%.

>> If you were building a global financial

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first question I have for you 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 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 I'll take you into

that in a minute. Um there is the um

domestic

gaps, the wealth and values gaps that

are causing irreconcilable differences

between um the left and the right that

is affecting how u 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 uh acts of nature,

droughts, floods, and pandemics. So um

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

United States less. So we have 250 years

here, but um that they always change.

There was one civil war in there. And

then the uh but internationally they

always change. All orders change. and

the international geopolitical order

going from a um a unil a multilateral to

a unilateral world order is changing and

certainly technolog 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,

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 could 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 uh

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 as 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 two 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

they're foreign buyers. about a third of

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. 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 stop stuff up. If

you were to see uh particularly, you

know, in the 1929 to 45 period, you saw

this dynamic. You saw it before. So

there is this financial piece which in

and of itself is not healthy for the US

government

and it's um but it's also problematic

because of the other factors uh

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,

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 u are you going to have the

executive leadership that's going to be

able to make this satisfactory with most

people? Um, 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 are these daycarees

that don't exist and billions of dollars

are flowing to individuals to run these

daycarees. 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

wellmanaged, 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

it's so big and complex and such a,

you know, such a mess. Like, what 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 2900 an ounce to 5200 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 gone 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 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

pretty much covered the economic, the

supply demand, the uh 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 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. The because the

question is Dave, what money do you

think is safe?

>> Right. given what I've just said.

>> Okay.

>> Which Yeah. the act 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 storehold of wealth.

So in other words, if you if one

country's central bank or government

wants to pay another gun 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 uh

asset. It's the 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. There's

important thing to distinguish wealth

from money.

Okay? Wealth is in stuff. It's it, 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 in and so on 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 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 does 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 thrown off the

cash the to make that and so they have

to start to sell that and then you and

when you have to sell it because you

need money you need cash to pay your

debt service or to pay nowadays wealth

taxes.

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 could

talk about whether they like or don't

like wealth taxes or something. But

anything that if 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

and 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 which causes 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 five 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 five and 15%.

Why hasn't Bitcoin performed in the same

way? In the same period that gold's

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 u 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, that 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 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 u 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 movement? um 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 remained 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 or 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, you'll

produce a lot more borrowing. You'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

uneffectively. 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. And so when

you have a lot of debt assets and

liabilities because 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

econom 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 debt 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 hattick 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 econ in the circumstances. may be

more

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

the 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 Wars has picked

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 it just as uh revenue

and I think that people don't

all economists make the mistake of not

including taxes in inflation.

>> And what I mean by that is

if your if your taxes go up

that's inflation.

I mean, why should 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 take

it's taking 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 to say inflation is

something separate, you know, uh uh I

think it's changing the form of 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 government

through 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 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 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've moved from a

multilateral world order to a a

powerbased confrontational world

economy. And in that environment,

everybody's threatening to cut off

everything from, you know, the uh goods

and capital wars that we can have are

threatening. And so, you have to build

independence.

And so, um, that's part of a plan to try

to build that independence.

Um, so I I think when I look at that, I

don't think that's the problem. I I'd

say uh 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 um uh the 3% has um has come out in

favor of it. I'm in favor of it. And I

mean lots of people are in favor of you

know um what I'll call the 3% threepart

solution. 3% of GDP, three parts uh a

bit from one thing, a bit from another.

taxes, spending, and um 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? Is it make sense at

some point for tariffs, which are

effective? I don't think it's it's I I

don't think it's going to No, I don't

think it's anywhere near um that uh both

because of the combination of the size

and then the impact of that size.

tariffs are regressive and I think that

uh there needs to be um some um we have

to deal with the wealth gap app to me

the wealth gap the biggest problem of

the wealth gap which is a big 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 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

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 uh I I haven't studied the numbers. I

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 um 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 u from the government and and you

know the other inefficiencies is a

problem. The one thing that's good about

uh the system um 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,

they're 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 uh 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 wi 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 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 health 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

>> 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 the 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. 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 being, 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 who will force them to do

diff force things to difficult things

and not fight with each other and 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

>> I think there's I think you were we're

moving toward the that war. We're in

that war. We're in what's sta what I

call stage five of a cycle. Okay. In the

book I describe 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 and 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. It 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 of course we've seen it to

some extent with the 2000 bubble in the

technologies and what went on. But e

even if I describe what it was like in

the late 20s, you know, it's just it was

unbelievable. But the technologies will

go on but the companies uh 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 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

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 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 because they are.

They're not far behind. and um 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 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 uh I mean it's like the

marshmallow test. You know the

marshmallow test? You know, you want to

see it as a kid going at early age. you

uh 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. Um 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

crisises, 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 um financial

prudence with uh innovative inventions,

you know, uh because you like

particularly like take AI now. Nobody

knows what's going to come of it and and

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 uh

the law that uh is going to get you

financial prudence and control? 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 um 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, um everything's a

matter of the balance. So the balance of

the pain of failing or the pain of let

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,

hear 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

um I think you make a great

contribution. Um so conversations like

this are are really practical helps for

a lot of people. So anyway, thank you

for letting me participate and uh 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.