Ray Dalio warns: The major cycle of collapse and the 'inevitable pain' ahead

On January 27, 2025, Ray Dalio — the founder of the legendary investment fund Bridgewater Associates — issued a concerning analysis on social media. He warned that the United States is entering a dangerous phase according to his “long cycle” theory, a historical cycle that has repeated many times before and often leads to profound changes. According to BlockBeats, Dalio’s analysis indicates that many socio-economic indicators are pointing toward civil unrest and widespread disorder.

The Three Crises: Debt, Inequality, and Political Conflict

Dalio identifies three main factors pulling America into the abyss. First is the increasingly dire financial situation. The budget deficit continues to grow, and public debt is rising uncontrollably, forming a difficult economic illness. Simultaneously, asset inequality has reached historic highs — the gap between the rich and the poor has never been wider. Dalio calls this a “deadly classic combination” because both financial and social systems are simultaneously plunging into crisis.

Second is the explosion of extreme populism. Political polarization in the U.S. is no longer about normal disagreements but a fierce ideological battle. Moderate voices and thoughtful intellectuals are being pushed out of the public arena. Extremism from all sides is taking over, turning rational debate into endless shouting matches.

Third, the media is no longer a tool for conveying information but has become a weapon for factions. Each side has its “own newspapers,” and every channel serves a specific political group. Objective truth is gradually being forgotten, replaced by stories crafted to serve the interests of media outlets and political figures.

Warning Signs: From Street Violence to Inter-Governmental Conflicts

These signals are no longer vague. Dalio points out that violence has already begun to emerge — chaotic power struggles in major cities, or conflicts between federal and state governments are becoming more acute. These events are not isolated incidents but precursors transitioning from social unrest to genuine civil disorder.

Dalio paints a picture similar to the period from 1930-1945 — a time when the world experienced economic civil wars, the rise of extremism, and ultimately international conflicts. If history tends to repeat itself, the U.S. could follow a similar path.

The Legal and Political Systems Becoming Battlefields

Another concerning phenomenon Dalio identifies is that legal and political systems are increasingly being used as weapons in conflicts. Legal rules and constitutional provisions, once respected as bedrock, are now being replaced by a “win-at-all-costs” mentality — anything can be justified if it secures victory for one’s side. The loss of a shared commitment to uphold the rule of law signals a society on the brink of collapse.

The Path to Exit: Painful Reforms but the Only Golden Escape

Dalio not only issues a warning but also suggests a way out. He calls on policymakers and investors to recognize clearly the power of these historical cycles. There is no way to avoid the “painful but necessary reforms” — tough decisions, especially in education, infrastructure, and scientific research.

Instead of continuing the zero-sum game (“if I win, you must lose”), Dalio proposes building a “win-win cooperation” — an approach where both sides can benefit. This requires true leadership, those willing to abandon short-term gains to build a long-term foundation for shared prosperity.

Although this trajectory is difficult to change, Dalio believes that through wise choices and timely actions, it is still possible to reduce conflict levels and reshape a broader future. But that window of opportunity is gradually closing. The path to avoiding the “sixth phase” (total collapse) still exists, but it demands “painful but necessary” actions now, not tomorrow.