Ray Dalio Warned Us This Much Civil Unrest Was Coming

Ray Dalio

In the aftermath of the civil unrest that accompanied the recession of 2008, Ray Dalio has been predicting something much bigger coming with the next one, and he was right.

Just about no one saw this coming, the extent of the unrest in the wake of the death of George Floyd at the hand of the Minneapolis Police that has produced such a devastating change on the landscape of the country.

Ray Dalio saw it though, and has been talking about this happening for several years now, becoming more certain of himself with each passing year. The trigger, according to Dalio, is a recession, causing all that pressure that is beneath the surface to explode outward like what happens with a volcano.

This is nothing like the racial and war protests of the 1960’s, which were put down without much effort. It’s not that these protests didn’t produce change, but it certainly did not even pretend to ask for the sort of changes that these ones are already producing.

When we are so seriously considering drastic cutbacks in policing, or even getting rid of police entirely as the Minneapolis City Council has decided, this a game that is being played on an entirely different level.

The stock market may not have been too bothered by these things in the past, as they had little effect on the overall economy, but this situation may be different. While we haven’t seen anything yet that should concern us as far as the damage already done, we do need to be very wary of what might be to come if local governments actually carry out their threats by giving in to public pressure on the fringe like they seem so willing to do.

Ray Dalio is an investor, one of the most successful ones of all time, and he wasn’t telling us this to just make political commentary, he was concerned about the potential economic damage of civil unrest that blew up as much as he felt it would once a recession hit again. One did, and what he feared is becoming reality more and more each day.

Just like the thought of our shutting down the country seemed so outlandish not long ago, allowing extremists to capture a section of a city including the local police precinct and do this unopposed wasn’t anything we expected to ever happen. At the very least, if the local police could not control the situation, we’d surely send in the National Guard and take it back in short order.

Those who expected that this revolt would soon subside were quickly disappointed, as while the protests may not be escalating anymore as far as the number of them go, the rhetoric sure has, and their level of control and degree of demands has certainly escalated, to a point where this situation has become very worrisome.

This is such a big issue that it virtually drowned out media coverage of COVID-19, which had been up until that time the most heavily covered issue of all time by a long shot. The protests do not dominate coverage like the coronavirus did not long ago, but there is a new game in town and it’s big enough to have us turn away from something that we have obsessed about more than anything in history.

Businesses already have to deal with some pretty high crime rates, which would become far worse if we did not have law enforcement deterring these things. While we may feel satisfied when someone gets convicted of one of these crimes, and think that catching these people is what it is all about, these events have already happened and it’s the value of deterrence that law enforcement provides that delivers its biggest impact.

This has never been a big worry as the voting public are not fond of higher crime rates either, so we have managed to keep this at least reasonably under control by stepping up efforts when our threshold of tolerance becomes exceeded. We could always rely on the people in charge to step up, not back off, and when they back off the way they have now, this changes everything.

The ultimate that is being sought by these protesters, demanding it actually, is abolishing the police entirely, where both businesses and people become exposed to the maximum amount of threats, threats that are not opposed by deterrence. If the City of Minneapolis ever carries out their intention to shut down policing in their city, it doesn’t take much insight to figure out that this would completely destroy their city if action is not taken.

Many cringed when they saw all the looting going on during the initial wave of it, where businesses such as Macy’s flagship store in Manhattan were helpless against these thugs, although they still had to worry about the police coming. When they don’t, they at least don’t have to worry about being arrested, although they still may need to worry about being shot.

There are only two possible things that can happen here, which are crime running rampant and people taking up arms against them. Such a thing would severely escalate both. Neither are a palatable prospect, with business and personal property being ravaged and people shooting at and killing each other in this new battleground.

They at least had some law enforcement in the Wild West, and in the absence of any, this will give wildness a new meaning, with our first real view of what complete anarchy looks like.

How much damage that is caused to business will really depend on just how much of this we can manage to stomach, which will tell the real story here. While this revolt has extended our imaginations of how much we are willing to allow without taking corrective action, there are limits to this, and our tolerance for allowing such destruction surely isn’t unlimited.

We’re not talking very much about the potential longer-term threat of these violations and our increasing willingness to not only look the other way but to actively empower the perpetrators, but there is still some real concern about this out there, the threat of the real economic nastiness that Ray Dalio envisioned this could cause.

Riots are Small Potatoes for the Stock Market, but These Potatoes May Grow Big

This hasn’t really bothered the market very much so far, and this is because these things historically have been about making a lot of noise but do not result in much impact to the economy. A very small percentage of businesses being looted is nothing compared to the majority of them being shut down by state decree for instance, and we need to see measurable negative effects on the economy as a whole before the stock market needs to even start paying attention.

We could certainly get there and more if we cut back on law enforcement enough. It’s not hard to envision what may happen to Minneapolis for instance if they got rid of their law enforcement, which not only loses the enforcement, this leads to the loss of the power of law itself, where there are no longer any consequences to breaking the law and the law itself becomes rendered meaningless.

This does not mean that the risk to criminals becomes eliminated, and they already face risk on two fronts, the threat of people and businesses defending themselves and the threat of prosecution and incarceration. The loss of law enforcement takes away the prosecution part, as if there is on one to arrest them, they won’t be arrested, but they still need to worry about the response, which will be heightened due to people having no alternative but to arm themselves.

The net effect though will surely be to declare open season on property crimes, leaving those less well defended particularly vulnerable, including a lot of small businesses who have been getting by on fairly tight margins and simply cannot afford the robust 24/7 security force that would be needed to protect them. When these insurgents can overwhelm a police force in what is at best a trial run, it is hard to imagine how any business could defend themselves very well against the crime wave that would fall upon them should they be left to entirely fend for themselves.

Businesses will not be able to stay open under such a scenario, and with even going to the store involving the threat of being robbed, and nowhere to shop even if they are up for the challenge and keep their hands on their gun. This would turn the city into a ghost town as people would need to flee it in droves to survive, those not among the group that are just helping themselves to all the merchandise that used to be bought and sold in the marketplace.

This will certainly lead to a time where it will become painfully obvious to even the dumbest of folks that while George Floyd’s death was a tragedy and the police do need to be reined in a lot, turning a city over to criminals and rendering it inhospitable would be seen as a bit much. This might even be too much for the Democrats who support these things and believe that all we need to do is all hold hands and we can reason with the criminals, as this becomes revealed to them as the fairy tale it already is known to be among those who choose to think and not just dream.

We can do a lot of harm along the way, but it’s hard to imagine our allowing this to get so out of hand to have a big enough effect on the economy that we need to worry a lot. There is another risk that is manifesting that may not evoke a strong response and may persist and grow, which is the threat of Marxism playing a much bigger role in the country.

We’re Sliding Way to the Left, and the Slide May Just Be Beginning

These protests are supposed to be about George, but the scary part is really more about this other guy Karl, as in Karl Marx. Marxism has now exploded in popularity under the guise of racial discontent, and getting rid of the police and having the people demand and even seize this power from the state is just part of it.

Radical Marxists have seized the opportunity to really step up, and while they normally exist on the far fringe, they have stepped up to the mainstream and their support has exploded, especially among left-wing Democrats. If we thought Bernie Sanders and Elizabeth Warren were radical, they are lightweights compared to this movement, although their narratives have a lot in common.

The Marxists that have taken over a section of Seattle are demanding all sorts of things be provided free to the people, not only the free education that the left-wing Democrats want, but a lot more, free housing and the like. Who is supposed to pay for all does not matter at all to them, and if we’re not very careful, this could steer us down a political course that could do huge damage to our national economy.

The emergence of radical socialism is a phenomenon that we have been seeing build over the last few years, and like Dalio’s concerns about rioting, this feeds off of discontent, whether economic or otherwise. By defining our right to the protection of law enforcement as a privilege that we should not enjoy, and our being so eager to turn our cities over to criminals entirely, this is alarming enough, but the goal of these communists and anarchists hardly stops at just getting rid of the police, and as bad as this would be, there may be even more in store.

Should Joe Biden win the election, we need to be particularly wary, as while his radicalism is more muted than the harder line socialists in the party such as Sanders and Warren, to say that he is much more sympathetic to the cause than Donald Trump is an understatement.

The battle is being fought right now though, so we don’t have to wait to see plenty of ugliness, and we can ill afford to continue to allow this radicalism to gain more and more traction while we stand by and apologize. This actually could end up being a pretty big deal to the stock market as well, they just don’t realize it yet.

It’s not just the politicians that are bending to these wishes, as when the private sector wishes to distance themselves from police to the extent that they are even pulling cartoons such as Paw Patrol portraying dogs as police officers, this should scare us a lot as well. Somehow, a single officer killing a man on the street has led to the complete vilification of the profession itself, a true testimony to how much we have lost our minds over this incident, in a way that is simply unspeakable. We have to speak more and think more though, a lot more.

They say you don’t know what you got until it’s gone, and we will surely know the error of our ways if we actually do get rid of the police and take these isolated incidents of violence by police and explode it like a bomb. However, the changing political climate that we’re seeing now may be harder to quell, and a new day may actually be dawning, one that will require enough of us to keep our wits about us to not allow to seriously harm us. Based upon what we have recently seen, this looks like a big challenge indeed as we allow the basic fabric of our society to unravel in the way it is starting to.


Editor, MarketReview.com

Robert really stands out in the way that he is able to clarify things through the application of simple economic principles which he also makes easy to understand.