Article Author: Ray DalioArticle Title: Block unicorn
Now that Trump's right-wing team has won a decisive victory over Harris' left-wing program in the general election, avoiding the nightmare scenario of a narrow defeat and election controversy for Trump. As some key appointments are announced, a possible scenario begins to emerge. I want to be clear that the picture I paint is intended to reflect the situation as accurately as possible, without any good or bad bias, because accuracy is essential to making the best decisions.
The current state of affairs as I see it includes:
1) A massive transformation to make government more efficient, which will trigger internal political struggles to turn this vision into reality;
2) An "America First" foreign policy and external preparations for war with China, as China is considered the greatest threat to the United States. Such policies have similarities to what some countries did in the 1930s.
Trump is selecting people to help him achieve these goals, including Elon Musk and Vivek Ramaswamy, who will run the newly proposed Department of Government Efficiency; Matt Gaetz, who, if confirmed by the Senate, will serve as attorney general to push the legal boundaries of the new order of governance; RFK Jr., who will overhaul the health care system as secretary of health and human services; and Marco Rubio as secretary of state, Tulsi Gabbard as director of national intelligence, and Pete Hegseth as secretary of defense, who will lead the fight against foreign adversaries. In addition, there are many others—some will be inside the administration, some will be outside advisors, such as Tucker Carlson, Steve Bannon, and some Trump family members—who will join Trump in this mission. They are all “victory first” advocates who are loyal to their leader and mission, the goal is to overthrow the so-called “deep state” and replace it with a new domestic order that they hope will bring maximum economic power and confrontation with foreign enemies.
Once these people are in place, this appointment method will likely be used to purge people who are accused of being members of the “deep state” and who are considered not to be aligned with or loyal to this mission. This purge will extend to all parts of the government system, including those that were previously considered less subject to political/ideological control, such as the military, the Department of Justice, the FBI, the Securities and Exchange Commission, the Federal Reserve, the Food and Drug Administration, the Centers for Disease Control and Prevention, the Department of Homeland Security, the Department of the Interior, and “F” government employees (a job classification that Trump hopes to reintroduce after being elected president to remove civil service protections from certain government positions). Almost every appointment the president (in cooperation with the Republican-controlled Senate, House, and Justice Department) can control will be controlled to ensure that people are in place who are aligned with Trump and his goals for the new domestic order. In this process, almost everyone inside and outside the government will be viewed as either an ally or an enemy, and all the power available to Trump and his allies will be used to target those enemies who stand in the way of reform. I think they will almost certainly have a major impact on changes in the American and world order, so what will those changes look like?
The Transformation of the American Order
It is now clear that Trump and his team will reform the government and the country like corporate acquirers would an inefficient company. They will make dramatic changes by replacing personnel, drastically cutting costs, and introducing new technologies. It is reminiscent of the ideas Gordon Gekko delivered in his "Greed is Good" speech, but it is important to recognize that this approach is being taken by the President of the United States to the federal government and the country as a whole. As mentioned, the most recent historical parallel is the far right state of the 1930s. To be clear, I am not saying that Trump and his administration are fascists, or that they will act like fascist leaders in many ways; what I am saying is that in order to understand those who are now in charge and their nationalist, protectionist, top-down government-led economic and social policies, as well as their low tolerance for internal opposition and involvement in international great power conflicts, it is useful to look to the behavior of countries that adopted similar policies in the 1930s.
National economic reforms will likely be achieved through industrial policies that are designed to increase productivity and efficiency, but not much attention will be paid to issues that may hinder the implementation of these policies - such as environmental protection, combating climate change, alleviating poverty, or promoting diversity, equity, and inclusion. Some key areas (including, I think, the most important ones, education and debt management) may be neglected (and the Democrats may also ignore these areas). While the Trump-Musk partnership lasts, they will become the main architects and implementers of the new American order.
Previously, these entities were restricted by transactions in many ways, but in the future they will be freer to break free from government constraints. These changes will be very beneficial to financial dealmakers, banks, and asset managers, as capital controls will be relaxed and the Fed will be under pressure to make monetary policy easier, giving them more freedom, money, and credit.These policies are also good for Trump-supporting tech companies, as they will be able to grow and operate largely unfettered. In addition, these policies are also good for lawyers, as they will be busier. I can already see that these people are making bigger plans to accomplish more under a Trump administration than they did under a Democratic administration.
In addition, artificial intelligence will be less regulated, and tariffs will be used to simultaneously raise tax revenues and protect domestic producers. If the Fed continues to insist on cutting interest rates (although I don't think it should do so), this will also move a lot of money stored in money market funds and other deposits to other markets, stimulating the development of markets and the economy.
In addition, the reality that the United States is engaged in an economic war and geopolitical war, and may face military conflicts with China as well as Russia, Iran, and North Korea, will have a major impact on domestic security and policy. For example, ensuring that the United States has adequate supplies in all key technology areas will require policies that require these technologies to be produced in the United States (for example, 20% of the most advanced chips must be produced in the United States by 2030) or in allied countries. This will require strong measures from the central government and the persistence of good energy and regulatory policies to ensure that these goals can be achieved.
Changes in the International Order
The international order will shift between:
a) the existing broken system created by the United States and its allies after World War II, which relies on globally accepted standards of behavior, rules, and governance institutions such as the United Nations, the World Trade Organization (WTO), the International Court of Justice, the International Monetary Fund (IMF), and the World Bank;
b) a more fragmented world order, with the United States pursuing an “America First” policy and a clear distinction between allies, enemies, and non-aligned countries, as the next decade will see more economic and geopolitical conflicts and a higher probability of military war than before.
In other words, the era of multilateral cooperation led by the United States, in which countries tried to coordinate their relations through multilateral organizations and guiding principles and rules, is coming to an end. In its place will be a more self-interested, jungle order, with the United States and China as the two main players, and the essence of the struggle still being the classic “capitalism vs. communism” confrontation (in a contemporary form).
Thus, American-dominated moral and ethical concepts—what is “moral” and “ethical”—will become less important, as the United States will no longer be the global leader in advocating and enforcing these principles. The selection of allies and enemies will be based more on strategic considerations, such as what deals can be made. The camps countries belong to will become the most important issue.
China will be considered the main enemy, as it is both the most powerful and the most ideologically opposed to the United States, while Russia, North Korea, and Iran will also be classified as enemies. In fact, China is widely considered to be the biggest threat to the United States, even more than other domestic threats. As for other countries, this article will not elaborate on their specific positions, but it can be said that all countries are currently classified as allies or enemies to some extent, and this will also become a guiding principle for dealing with them.
Meanwhile, detailed response plans are being developed for major countries and major sectors. All countries will face great pressure and be provided with opportunities to adjust their domestic order to align with the US leadership system dominated by Trump; otherwise, they will face negative consequences.
This conflict between the two great powers will also create opportunities for neutral non-aligned countries, especially in the business sector.
This change in the dynamics of the international order will also have a significant impact on developing countries, now known as the "Global South", and the world as a whole.
The Global South, which accounts for about 85% of the world's total population, may choose to go its own way because the United States will no longer dominate a global common order based on specific ideals, and other countries may not be willing to follow the United States. The United States and China will compete for allies, and China is generally considered to have a greater advantage in winning over non-aligned countries because China is more important economically and better at using soft power.
Given this change in the international order, non-aligned countries will benefit if they:
1. They are in good financial shape, i.e. have healthy income and balance sheets;
2. They are in good internal order and have capital markets that promote the productivity of their people and their country;
3. They are not involved in international wars.
More specifically, the following points can be further elaborated:
To achieve government goals, the influence of the government will increase, even at the expense of free markets and profit-seeking mechanisms. This will spark a debate between conservatives (who support a top-down direction) and those who support a more free market. Along these lines, we should expect increased government intervention in the private market to advance its grand plans, including reshaping the economy and preparing for war. Cost efficiency and national security will therefore become the primary goals of the government’s work with “national champions” rather than simply pursuing profits, which alone cannot achieve these goals.
We need to watch for policy changes that will determine which sectors of the economy benefit the most, such as the energy and mining industries that support AI technology. While there will be winners in a free market, there are some obvious cases where the best American companies may not be enough to meet national needs (such as in advanced semiconductors). Therefore, key partnerships with aligned foreign producers (such as Taiwan’s TSMC) will need to be established to produce products in the United States to minimize dependence on foreign adversaries.
In addition to the need to produce key technologies domestically, steel, automobiles, and many other necessities will also need to be produced. This means more “reshoring” and “friendly outsourcing.” At the same time, there is the need to deal with the potential for disruption that could cut off supply chains in a variety of ways.
Massive deregulation policies will be pursued to support cost-efficient production.
Immigration policy will be strengthened, with an initial focus on closing borders and deporting undocumented immigrants with criminal records.
Trade and Tariff Reform
Challenges of Working with U.S. Allies
Japan is the most important ally of the United States in the geopolitical conflict with China, so the current political dynamics in Japan are critical. Other allies such as the United Kingdom and Australia are important but not great powers. Europe is weak, preoccupied with its own problems, and has no direct stake in the conflict; at the same time, it cannot do without the support of the United States through NATO in the face of the Russian threat. Most other countries do not want to be drawn into the conflict because the goals they are fighting for are less important to them than the United States, and they are more dependent on China than the United States economically. The emerging powers of the non-aligned Global South (BRICS members, which include China and Russia) are a group of countries worth paying attention to. ,
The High Economic Cost of Being a World Hegemon
The economic costs of having the most important technologies, a strong military, and the ability to have soft power will exceed what a profit model alone can provide. Therefore, how to address this economic reality will require further discussion.
The Need to Lower Taxes
To keep voters happy while keeping money in the hands of the most productive people, taxes need to be lowered. Trump and his advisers believe that a corporate tax rate below the current level (about 20%) will increase total tax revenue and improve productivity. This view is positive for the markets.
Major Reforms to the Healthcare System
Major changes to the current healthcare system are expected to be made to improve efficiency and reduce costs.
Priorities and Timelines
Faced with this daunting array of tasks, the new administration will have a limited time to accomplish them, especially in the first 100 days and the first two years thereafter. Priorities will therefore have to be carefully selected. It is unclear which goals will be prioritized, or how successful the new administration will be as its ambitions run into entrenched systemic resistance.
This will undoubtedly be a challenging and important period, so stay tuned and watch.
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