10 Questions
What motivated Ray Dalio to study the last 500 years of history?
He was surprised by important events that happened in his investment career, which he had not experienced before in his lifetime.
What happened to the United States in 1971, according to Ray Dalio?
The US ran out of money and defaulted on its debts.
What was the significance of gold in transactions between countries in the past?
Gold was used as the money in transactions between countries.
Where can one find a comprehensive version of Ray Dalio's principles for dealing with the changing world order?
In his book, Principles for Dealing with the Changing World Order.
What is the main theme of Ray Dalio's message?
The times ahead will be radically different from those experienced in our lifetimes, but similar to those that have occurred before in history.
What was the value of paper money like the dollar based on during the time period discussed in the passage?
gold
Why did the amount of gold in the US start to dwindle?
because people turned in their paper money checks for gold and the US was writing more checks than it had gold to exchange for them
What was the outcome of President Nixon's decision to suspend the convertibility of the dollar into gold or other reserve assets?
the stock market went up, rising nearly 25%
What was the reason behind President Roosevelt's announcement in 1933 to break the country's promise to exchange dollars for gold?
the US was spending more paper money checks than it had gold to exchange for them
What was the result of the government's actions in both 1933 and 1971, according to the passage?
the value of paper money as it was understood at the time came to an end
Study Notes
The Changing World Order
- The times ahead will be radically different from those experienced in our lifetimes, similar to many times before in history.
- Ray Dalio, with 50 years of global macroeconomic investing experience, learned that the most important events that surprised him happened because they never occurred in his lifetime, but had happened many times before in history.
The 1971 US Default
- In 1971, the United States ran out of money and defaulted on its debts when it spent more paper money than it had gold to exchange for it.
- At the time, gold was the money used in transactions between countries, and paper money was like a check that could be exchanged for gold.
- As people exchanged their dollars for gold, the US gold reserves dwindled, leading to a crisis where the US couldn't keep its promises for all the existing paper money.
The Nixon Shock
- On August 15th, 1971, President Nixon went on television to announce that the US would no longer let people exchange their dollars for gold.
- This event, known as the Nixon Shock, marked a significant change in the global monetary system.
- Despite expectations of a stock market plunge, the market actually rose nearly 25% the next day.
Historical Context
- The same crisis had occurred in 1933 when the US was also running out of gold and President Roosevelt announced that he would break the country's promise to exchange dollars for gold.
- Both events show that the changing world order is not a new phenomenon, but rather a recurring pattern in history.
Learn about Ray Dalio's insights on the changing world order, drawing from his 50 years of global macroeconomic investing experience. Discover the principles to navigate the radically different times ahead.
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