♪♪ >> Hello and welcome to "GZERO World."

I'm Ian Bremmer, and today we examine whether a new world order is in sight.

After 40 years of extraordinary growth, China is now on a path to overtake the United States and become the world's largest economy.

COVID has made predicting exactly when that happens more difficult, but current economic indicators point to sometime around year 2030 -- in other words, real soon.

But does China's rise have to mean America's decline?

My guest today says no empire lasts forever and warns that America's role as a global superpower is at risk if it can't get its own house in order.

I'm speaking with Ray Dalio.

He's founder of the world's largest hedge fund, Bridgewater Associates.

Then, a crash in cryptocurrency prices wiped out nearly $1 trillion in market value.

But some investors are still holding on for dear life or "hodling," as they say on Reddit.

Don't worry, I've also got your "Puppet Regime."

>> All right, let's get this show on the road, Jack.

I got a colonoscopy at 9:00.

>> But first, a word from the folks who help us keep the lights on.

>> Major corporate funding provided by founding sponsor First Republic.

At First Republic, our clients come first.

Taking the time to listen helps us provide customized banking and wealth-management solutions.

More on our clients at firstrepublic.com.

Additional funding provided by... ...and by... >> The biggest source of chaos in the present-day world is the United States.

Can you guess which world leader said this in 2021?

Was it Vladimir Putin, who has long seen America's footprint in Eastern Europe and NATO expansion as an existential threat?

Was it Kim Jong-un?

I mean, after all, North Korea did just say it successfully tested a missile capable of hitting the U.S. territory of Guam.

Or was it Iran?

Members of Parliament there did chant "Death to America" while in session after the killing of Iranian General Qasem Suleimani.

The correct answer -- you know I'm going to do this to you -- is none of the above.

It's Chinese President Xi Jinping, who added that the United States is the biggest threat to China's development and China's security.

And it turns out that both the United States and China feel the same way about each other, too, which is nice, I guess.

I mean, a U.S. intelligence report put China's ambition to become a global power as its top risk in 2021.

Though the United States and China won't likely end up in a war anytime soon, relations between the two remain competitive and tense.

On top of that, China's economic and political system is now powerful enough that it's largely been accepted by the rest of the world.

China's astronomical growth has been impressive, no doubt.

It's even been said that the American dream lives on in China.

800 million people there have risen out of poverty.

The middle class there is booming and life expectancy has soared.

In contrast, COVID-19 has done well to highlight inequality in the United States, from widening income gaps to higher death rates among poor people and minorities to increased rates of food insecurity in what is still unquestionably the world's richest country.

Deep political divisions and social instability within the United States also make for easy targets for Chinese officials who see the rise of the East in step with the decline of the West.

It's possible that the United States is just following the trend line of great powers and their decline.

That's according to billionaire investor Ray Dalio in his new book, "Principles for Dealing with a Changing World Order."

Ray sees rising debt levels, a widening wealth gap and the meteoric rise of China as the potential unmaking of America's superpower status.

Here's our conversation.

Ray Dalio, thanks for joining me.

>> So glad to be here.

>> So the big book, not a surprise.

And you are looking at the state of the planet and some significant changes that, put all together, most of us have not seen in our lifetimes.

Three -- I want to get through all three of them before we get into detail.

Let's start with number one -- increasing and you think increasingly unsustainable levels of debt.

>> Yeah, the three things that together got me to do this research of the patterns of the last 500 years so I can understand it were the enormous levels of debt creation and debt monetization, when you hit zero interest rates and you can't ease through lowering interest rates.

So I needed to study the rises and declines of the value of money and currencies in the cycles.

The second was the internal conflict, the risk to democracy.

The measures that I used showed that the largest wealth gaps and political gaps since 1900 in that internal conflict.

And the third is the rise of a great power to challenge the existing great power and the existing world order -- the rise of China and challenging that.

And I learned before that many things that surprised me a lot in my life happened not in my lifetime but before.

So I needed to see those cycles and those patterns going back to about 500.

So the first one, as you're pointing out, the large production of debt and debt monetization, is an area that I specialize in.

And in terms of understanding as a macro -- global macro investor, and that produces what we're seeing in a mechanical way, which means that the value of money goes down.

In other words, you could look at it very simply that if the quantity of money and credit, which is buying power, increases faster than the quantity of goods and services and financial assets, that the prices of goods, services and financial assets will rise, the value of money will go down.

And so we see that happening now.

We're in the part of the cycle for that in which everybody received a lot of checks and all that money coming in and people's paper net worth then went up because you got more money.

But we're not used to inflation.

But what is happening is then you're in that part of the cycle where there's that inflation pressure in goods, services and financial assets.

And what that has to do is then cause reactions.

And those reactions are along the lines like people no longer will want to hold cash investments, they will not want to hold bond investments because those will start to have a negative real return.

And as that inflation psychology and that investment psychology changes, it changes the movement of money.

So it worsens the supply/demand picture for money.

So you see -- you are seeing the beginning of a supply/demand imbalance.

>> Do you think we've passed the tipping point?

Do you think that the role of the dollar as global reserve currency is long-term fundamentally unsustainable because of debt that's already been taken on?

>> The role of the dollar as a store hold of wealth -- There's two purposes of a currency -- a medium of exchange and a store hold of wealth, and because of the imbalances and the supply/demand that is baked in as we now need them, you know, and also take the political issues and the types of spending that are being demanded -- required, I might say -- that means that that imbalance will exist.

And so you are, I think, for the foreseeable future that it will not be an effective store hold of wealth as it is now not an effective store hold of wealth.

That drives not just to other currencies -- there are other currencies -- but other countries are in this type of position too to some extent.

And so you see Europe and Japan, which have the three old currencies and so on in somewhat similar positions.

So you see the poor store hold of wealth being reflected in other items going up because you measure them in dollars, but it's really the currency is going down.

So we've entered a period of time in which the question will be what will be the money of the future or what will be the moneys of the future?

Increasingly, there will be a competition of moneys as a store hold of wealth.

There'll be competitions for store holds of wealth.

Now, that could be your real estate, it could be your stocks, it could be your gold, it could be your bitcoin.

Those are the choices, but those assets as a whole will be -- You'll see the movement into those.

You will, in other currencies, such as China's renminbi, you will see gradually an increase in the usage of those currencies at the same time.

But don't just look at it as "oh, the currency."

Look at it as other store holds of wealth.

>> And you would argue that some of the explosion of excitement over bitcoin and cryptocurrencies is just this general desire to move away, to diversify away from the dollar for the reasons you're mentioning.

>> That's right, because a dollar -- a cash and a bond, which is a promise to receive dollars, are being depreciated.

And that's right, so you will see those as digital gold.

You will see other currencies.

You'll see probably China's renminbi, which will increasingly be -- they'll have a digital renminbi and there will be choices.

>> So let's move to the second point, and that's just the significant and structural divides that we're increasingly seeing inside of democracies and of course, mostly in the world's most powerful democracy, the United States.

Talk about why this is one of the factors that you consider such a big driver for a change in global order.

>> Well, it started with the populism that became more apparent when Donald Trump first came in.

Populism didn't exist much in the developed world and didn't exist in the U.S. And I needed to study it -- Populism of the left and populism of the right -- and what I meant is, or what I mean by populism is the person of the left or the right, the leader who will fight for that group in a fight against the other group.

So history has shown that populism of the -- populists of the left and populists of the right then begin to gain power under this set of circumstances when there is a large wealth gap.

And there's the financial part.

So it became very relevant to me because it changed how the wealth pie was being shifted.

So, for example, when Donald Trump came in, tax changes had a big impact on financial markets, and as a result, you could see it, you know, reverberate and you could also see what was happening between states start to change.

So I needed to study that conflict, and I plotted it -- both the wealth gaps, the income gaps -- and I plotted the political gaps.

And all of those were the greatest since the 1930 to '45 period -- in fact, greater than that period going back to 1900, and we could see it every day.

What was happening on January 6th was not a surprise in that readers of history would see this pattern happen.

And as we look forward, we can see that threat to democracy and the inclination to have a type of civil war occurring, for example.

It's entirely possible that neither party will accept losing on the presidential elections in '24.

So that's amazing, right?

Because then you lose rule of law.

You lose the Constitution as being -- You move to a phase where there is power, that it is a matter of power and a matter of fighting to win at all costs.

>> Ray, when you look at the last two years of pandemic and the fact that you know, labor rates, wages have gone up significantly as a response, people talk about the great resignation, there's been a significant amount of money that's gone towards redistribution and the rest, would you say -- I mean, I understand that that undermined your first issue of indebtedness.

But on the second point, do you think this is just a blip or does it have the potential to be a more structural change that could actually improve the levels of inequality and disenfranchisement that you're describing?

>> No, they go together.

That's right.

In other words, I do believe that the opportunity gaps, the education gaps, it's part of this cycle.

Capitalism in its cycles creates great resource allocation and empowers people who don't have money, they get the money as good investments and so on.

And it raises incomes, raises living standards and it raises wealth gaps.

And when it raises the wealth gap, because it's self-perpetuating because people who earn the money earn more money, can educate their children better and so on.

And there are education gaps and so on.

Naturally, those gaps widen and occur, and they are a problem.

And so I understand those problems.

I can see those problems.

So the need to build infrastructure, the need to build better education and greater equality in education has to, by the way, also accompany greater productivity if you want to raise living standards.

It's a law -- timeless and universal law that you can't spend more than you earn forever, and you can't fund that by raising debt because -- and then printing money because the holders of that debt will get a bad return.

>> So now we'll get to the most challenging piece of all of this in some ways, which is the fact that this is not happening in a bubble.

It's happening while another country is on track with a very different political system, a very different economic system and going to, in all likelihood, be the largest economy in the world by the end of the decade.

Of course, you and I are talking about China.

Are you someone who, looking at a medium- to long-term projection, would be betting?

I mean, all of the things equal, let's leave aside that you're an American citizen, all the rest.

Just as a capitalist, would you be betting more on the Chinese system than the American system or even the Western system writ large long-term at this point?

>> Well, I can say the following.

It's not so simple.

I think if the United States was at its best, it's a hell of a system, but they've got us outnumbered.

You know, there are four times -- more than four times as many Chinese as there are Americans.

And so that means if per capita income goes to half what it is in the United States, China will be twice as large.

So China -- And China's growing at a faster rate than the United States is.

So most of those things say what you have is a big, effective competitor.

I started to go to China.

I know China very well over -- since 1984 I started to go, and when I first went there, I would bring $10 calculators to people.

They never saw anything like that.

Leaders of companies and government officials.

And they thought they were miracle devices.

And now in quantum computing and A.I.

and so on, they're competitors.

Since I started going there, per capita income has increased by 26 times.

The life expectancy has increased by 10 years.

The poverty rate has gone from 88% to less than 1%.

It's certainly a powerful competitor, okay?

And in that regard -- And it's a bigger country and bigger means more powerful, too.

So that's a tough competitor, and I don't know that we are -- the United States is doing its best in terms of being an effective competitor in its various ways.

In many ways, yes, but in many ways no, because we're also at each other's throats and we have these financial issues.

And so at the end of the day, it will be just simply a matter of who is most powerful and most powerful will really be primarily determined on how we are with ourselves.

>> If labor is no longer as important going forward and increasingly, we're looking at technology that would imply that whether you have 1.4 billion or 400 million, the big thing that both the Americans and the Chinese have going for them is that they dominate all the technologies and nobody else does.

That implies a more bipolar investment pattern, no?

>> That's right.

But when you look at it, the Chinese are churning about eight times as many engineers out as we are, the United States.

The population is bigger.

It's certainly a competitor, and we certainly have to do everything we can to be strong.

And that's why when I think about it, you know, I'm 72 years old, and the America that I remember is a different -- and grew up with is a different America than it exists today in terms of like equal opportunity and the American dream and us working in a sense together and doing amazing things like the space program and so on, those types of things.

I'm not saying we're not doing terrific things.

The best American universities are the best universities in the world and there's a handful of those.

But if you take the population as a whole and you look at the educational levels and those types of things, we have the problems we're talking about.

>> The book is "Principles for Dealing with the Changing World Order."

The man is Ray Dalio, and I want to thank you for joining me on "GZERO World."

>> Thank you, Ian.

♪♪ >> In the past few weeks, cryptocurrencies have lost roughly half their value.

>> A drop from 30% from its record high.

It is, yes, bitcoin.

>> The best way to describe it and what I'm hearing is a flash crash.

We've seen this dynamic play out a couple of times this year.

It happened back in May.

We saw it happen in September.

>> Bitcoin, the world's oldest and most famous crypto, is down from its all-time high of around $68,000 in November to a six-month low at $33,000.

After minutes from a Federal Reserve meeting revealed plans to increase interest rates to curb inflation, risk assets like stocks and bitcoin have nose-dived and crypto has taken the biggest blow.

Rumors of an upcoming executive order from the Biden administration on regulating cryptocurrencies have also spread more than their share of fear, uncertainty and doubt, which has led to a further drop in prices.

Thanks to the crash, New York City's new mayor Eric Adams, NFL quarterback Aaron Rodgers and basketball star Klay Thompson are all facing pay cuts after they opted to take their paychecks in crypto.

It's reported that NFL wide receiver Odell Beckham Jr. lost nearly $350,000 after converting his $750,000 paycheck into bitcoin.

But evangelists remained undeterred.

El Salvador's president, Nayib Bukele, he has vowed to buy the dip even after the International Monetary Fund urged his country to stop using bitcoin as legal tender because of its destabilizing effects and high volatility.

It's like a casino.

The country currently owns more than 1,500 bitcoins.

But what is the big deal about bitcoin anyway?

Critics argue that it's a Ponzi scheme best suited for drug dealers and criminals.

They aren't totally wrong.

In 2011, the Silk Road, a digital black market that only took bitcoin, was seen as a one-stop shop for heroin and guns and even human organs, which is kind of nasty.

Its creator is now serving a life sentence behind bars.

Rug-pull scams also pervasive in the space -- That's when investors have the rug pulled out from underneath them, so to speak, by a group of founders and developers that take the money and run rather than use it to develop their project.

But supporters of bitcoin and alternatives like Ethereum say that this technology is revolutionary, as it offers a more secure, anonymous and unhackable form of finance that cuts out the need for untrustworthy banks.

The tech has gone so mainstream that investment banks that once dismissed crypto altogether are now piling on.

Analysts at Goldman Sachs now say that bitcoin will compete with gold.

Others, like JPMorgan, see cryptocurrency as serving as the backbone to a new and more decentralized version of the Internet known as Web 3.0.

Cathie Wood, a well-known Wall Street investor, even thinks that bitcoin has so many use cases, the value of one -- just one bitcoin could be worth one million by 2030, which is useful when China is the largest economy in the world.

Flip side -- it could also go to zero.

♪♪ And now to "Puppet Regime," where world leaders have some hot Valentine's Day tips.

>> Welcome to a special Valentine's edition of "Globe of Love," the call-in show where world leaders answer your romantic queries.

>> All right, let's get this show on the road, Jack.

I got a colonoscopy at 9:00.

Caller, what's your name and what's your question?

>> Hi, my name is Bill, and I'm wondering what I can do this Valentine's Day to surprise my wife.

>> Well, Bill, I recommend throwing a massive party.

I do it all the time.

Birthdays, holidays, lockdowns.

>> With all due respect, having a party isn't always the best idea, Bill.

My party's a disaster these days.

[ Laughter ] I recommend you do things old school -- romantic dinner, glass of ginger ale, maybe put a nice fox-trot on the phonograph to shake a tail feather.

>> Um, Mr. President, what's a fox-trot?

>> What's a fox-trot?

It's all over the TokTik.

Anyway, who's next?

Caller, what's your name and question?

>> Hi, this is Mary Sue.

I want to tell my crush that I love him for Valentine's, but I don't know how.

>> I cannot for the life of me, understand why anyone would go to such trouble to love another person more than oneself.

>> What?

But I love him.

>> Have you tried re-educating him?

>> What?

You know, for being president of China, you aren't much of a romantic, Xi.

Look, Mary Sue, you must send strong signal of devotion, but subtle, like, for example, line up 100,000 troops around his house and then tell him how you feel.

>> You better not!

>> Oh, but I will, Joe!

And I did.

>> You stay the heck away from Mary Sue's crush's house.

You hear me?

>> Make me, Joe.

Mary Sue's crush belongs to me, Joe, to me.

Mary Sue's crush has always belonged to me, to me alone!

[ Laughing ] >> Uh, hello?

>> "Puppet Regime"!

>> That's our show this week.

Come back next week, and if you like what you see, you're worried about China taking over, have no idea where the world's heading, you know where to turn.

Check us out at gzeromedia.com.

♪♪ ♪♪ ♪♪ ♪♪ >> Major corporate funding provided by founding sponsor First Republic.

At First Republic, our clients come first.

Taking the time to listen helps us provide customized banking and wealth-management solutions.

More on our clients at firstrepublic.com.

Additional funding provided by... ...and by...