The Advisor’s Edge: The five big forces shaping the rise and fall of the U.S and U.K. Ray Dalio
The U.S. and U.K. are facing unprecedented challenges in regard to their futures.
Ray Dalio is predicting that the quality of life will continue to erode for these two nations.
As of September 2025, Ray Dalio believes both the U.S. and U.K. are on a path of decline due to unsustainable debt, political polarization, and the erosion of the existing world order. He characterizes the economic situation in both countries as a “debt doom loop” or “heart attack” and has recommended investing in alternative assets like gold and bitcoin to hedge against future financial turmoil.
Ray Dalio, in his book Principles for Dealing with the Changing World Order, identifies five major forces that drive the “Big Cycle” of empires rising and falling. He argues that these forces occur in predictable, repeating cycles, and their interplay determines the success or decline of a great power.
The five big forces are:
Money and debt cycles: Countries ascend by investing productively, which fuels economic growth and strengthens their financial system. This often creates a reserve currency that attracts capital. However, as an empire matures, it takes on more debt to finance its lifestyle, leading to the printing of money and asset bubbles. When the debt can no longer be serviced with “sound” money, the bubble bursts, causing a financial crisis and currency devaluation.
Internal conflict: In the early stages of an empire, there is a relatively low wealth gap and a shared sense of purpose. As it becomes prosperous, wealth becomes unevenly distributed, creating a large and growing gap between the rich and the poor. Combined with differences in values, this leads to increasing populism, political polarization, and ultimately internal disorder or civil war.
External conflict: A declining empire’s internal conflicts and debt issues weaken it relative to rising external powers. As a new power emerges to challenge the existing world order, tensions grow, often leading to great power conflicts or wars. The outcome of these conflicts establishes a new world order and a new dominant empire, restarting the cycle.
Acts of nature: Environmental events, such as droughts, floods, and pandemics, can dramatically shift a country’s fortunes. History shows that natural disasters can cause mass migrations and economic disruption that destabilize nations more than wars. For example, climate change is now an expensive factor that countries must deal with.
Technological innovation: The capacity for human inventiveness is a key driver of productivity and economic strength. New technologies can create new sources of wealth and power, but they can also change the nature of warfare. For an empire to rise, it must foster and adopt technological change. A declining empire, by contrast, often becomes less innovative and productive.
According to Dalio’s research, these forces interact to create a “Big Cycle” that follows a specific pattern:
Rise: A new power is established after a major conflict. It is driven by strong education, innovation, and productive investment, leading to peace and prosperity.
Peak: With prosperity comes complacency. A nation takes on more debt, its productivity slows, and wealth gaps widen. This marks the beginning of its decline.
Decline: The empire loses its economic competitiveness, experiences internal social and political conflict, and is eventually challenged by a new, ascendant power, leading to a new world order.
Ray Dalio’s view on the U.S.
Dalio’s warnings regarding the U.S. focus on three key areas:
Political polarization and autocracy: Dalio has warned that the U.S. is drifting toward a 1930s-style autocracy, where political polarization and economic pressures lead to a weakening of democratic institutions. He sees the current situation as analogous to the rise of authoritarian regimes in the 1930s and 1940s, with “strong autocratic leadership” emerging to manage economic instability.
Unsustainable debt: Citing a national debt of over $37 trillion, Dalio has repeatedly warned that the U.S. economy faces a “debt-induced heart attack”. In his view, the rising cost of servicing this debt is like “plaque” in the circulatory system, “squeez[ing] out other spending”. He has specifically pointed to the policies of the second Trump administration as an accelerator of this crisis.
Declining world order: Citing his “Changing World Order” framework, Dalio views the U.S.’s financial and geopolitical strength as part of a “Big Cycle” of empires that is now in a period of decline.
Ray Dalio’s view on the U.K.
Dalio’s assessment of the U.K. echoes his concerns about the U.S., focusing heavily on its debt and political situation.
“Debt doom loop”: In July 2025, Dalio warned that Britain was trapped in a “doom loop” of rising debt, higher taxes, and sluggish growth. He argued that raising taxes to cover growing borrowing costs would cause wealthy taxpayers to flee, worsening the fiscal situation. This would likely lead to a “debt death spiral” in which the government must offer increasingly higher interest rates to attract investors.
Political changes: Dalio views the U.K.’s challenges as part of the broader breakdown of the existing world order. Following the Labour party coming to power in July 2024, he noted the difficulty the government faces in balancing higher spending pledges with the need to address rising debt.
Dalio’s investment advice
In response to these negative views, Dalio has provided consistent advice to protect against economic instability.
Diversify with gold and bitcoin: As both the U.S. and U.K. struggle with debt, Dalio advises investors to hold alternative assets that are not tied to government policies. He has publicly stated that gold should make up 10% to 15% of a well-diversified portfolio and acknowledged that bitcoin is also an “effective diversifier”.
Watch for currency devaluation: Dalio predicts that central banks and governments may attempt to devalue their currencies to manage their debt loads. He views gold as a hedge against this devaluation.
We need to pay attention to these clear warnings of changes coming to our immediate future and look at Gold and Bitcoin as ways to hedge our investments.
Until next time.
David