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Ray Dalio thinks the world’s current path is looking eerily similar to one of the worst decades in recent history.
The founder and former CEO of Bridgewater Associates, the world’s largest hedge fund, said the economic and political issues popping up around the world were similar to the problems experienced in the lead-up to World War II.
In an interview with Business Insider’s global Editor-in-Chief Henry Blodget on “The Bottom Line,” Business Insider’s new weekly business news show, Dalio said the rise of populist leaders across the globe could lead the world down the same path as the 1930s.
“In the 1930s, which was quite similar to a lot of the period we’ve been through economically,” Dalio said, “we had the wealth gap, we had large debts, we had zero interest rates.”
The economic fallout of World War I and the Great Depression led to a growth of inequality in the 1930s, pushing many people around the globe toward populist politicians they felt were more aggressive and combative.
“During this same type of period, we experienced more populism, most countries became populist, and so it’s very important to understand that,” Dalio said.
Given the devastating impact of the rise of populist leaders in the 1930s, Dalio said the current rise of populist sentiment in the US and Europe should warrant scrutiny.
“If you were to see that happen in the United States, Europe, and so on you would have something that would be of concern, because that would alter how the economic conditions work,” he said.
Dalio highlighted the rise of President Donald Trump and nationalist French politician Marine Le Pen and said it was important to keep an eye on the institutions that undergird democracies in the US and Europe.
“There are issues here that will be interesting to compare with, such as the sanctuary-city question, or such as the Supreme Court,” Dalio said. “Will those conflicts become such that they will become more antagonistic than normal and that tend to be more detrimental to the efficient running of the system?”
The Trump administration has said it intends to remove federal funding from so-called sanctuary cities, which resist some cooperation with federal immigration agencies, but local governments have promised to fight back. Additionally, the Senate decided on Thursday to go “nuclear” and get rid of the filibuster for Supreme Court nominees to confirm Trump’s pick of Judge Neil Gorsuch for the high court.
If these events undermine established systems, there could be economic consequences, in addition to the political changes.
“Those are the things we have to watch out for,” Dalio said.