Ray Dalio, the founder of Bridgewater Associates, recently issued a warning that the world is currently in a critical late stage of the Big Debt Cycle.
He noted that the total debt levels of governments, corporations, and households worldwide have reached historic highs, with the rate of debt growth significantly outpacing gross domestic product and personal income growth.
This imbalance could suppress future global economic growth and potentially lead to a crisis in the global financial system.
Indeed, the current global debt situation is extremely precarious.
One of the catalysts for this has been the outbreak of the Covid-19 pandemic in 2020, which compelled governments around the world to continuously increase their debt levels to address various forms of fiscal support.
Additionally, there has been a growing dependency among citizens and businesses on government assets, making it difficult for many countries to reduce their fiscal expenditures back to pre-pandemic levels.
At the same time, the issue of wealth inequality is becoming increasingly severe, allowing asset prices in many regions to rise unaffected by economic challenges.
A prime example of this is the recent record highs in the US stock market, which only exacerbates the wealth gap.
As asset prices rise irrationally, the number of individuals who can afford high costs diminishes, leading to an increased reliance on government support.
This vicious cycle, if continued, will not only result in financial crises but could also trigger various forms of anti-government protests and riots across nations.
Moreover, historical experience suggests that political instability in various regions often leads to conflicts of varying scales, potentially culminating in global warfare.
Therefore, when many people warn of an impending Third World War, it is not merely alarmist rhetoric.
If countries do not seriously confront the Big Debt Cycle, the likelihood of a Third World War occurring in the foreseeable future is significant.
Andrew Wong is a veteran independent commentator
