Solid piece put out by Ray Dalio in his newsletter. Read the whole thing if you have some time, here are some highlights though
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The External Conflict
To me the Russia-Ukraine-US-other-countries dynamic is the most attention-grabbing part of the changing world order dynamic that is underway, but it is essentially just the first battle in what will be a long war for control of the world order. It is a very important battle because it will tell us 1) if Putin and Russia win or lose this first battle, 2) how powerful a weapon the American-led sanctions are, and 3) how other nations will align with either side or remain neutral. After we see these things, we will then begin to get clues of what the reactions to them will be—i.e., what will the US, its European allies, and Putin do if a) Putin and Russia win this battle or lose it, b) if the sanctions are or aren’t as effective as needed, and/or c) if China and other opposing countries don’t cooperate? I’d expect that we will see the answers to the first set of questions in the next few weeks.
How can we tell if Putin and Russia win or lose this battle? If Putin and Russia a) get tangible assurances that Ukraine is incapable of being a threat to Russia along with the de facto independence of or Russian control over the eastern provinces of Luhansk and Donetsk, with b) sanctions on Russia that are tolerable, and c) Putin remains in power, then he will have gotten what he wanted at an acceptable cost, and hence it should be scored as his win. If not, it should be scored as his loss. Once we find this out, we will see what comes next, most importantly what Putin will do if faced with a loss. Will he raise the stakes (almost certainly) and what would that be like (very scary)?
How can we tell how powerful American-led sanctions are? If they lead to the desired results of a) winning the battle with Russia and b) having other countries fall in line in following them to achieve this goal, and they do so without the weaponization of the capital markets doing the United States more harm than good, then the sanctions will prove to be very powerful. If not, they will prove to be inadequate. Then we will see what comes next. If they prove themselves to be adequate weapons, we will see some countries (e.g., Russia) raise the stakes and fight using other weapons, and we will see others knuckle under. If they are not effective, we will risk seeing America lose its most unique and greatest power—its control over the world’s reserve currency and capital markets system—as others increasingly escape it. This a real big deal for the power of the United States and the power of the dollar. Without a strong sanctions power, the United States doesn’t have any unique powers relative to the opposition, though it would still have rough power parity with the other powerful countries. That leaves both sides, and a number of countries on each side, with just the power to inflict devastating destruction on the other side militarily. Given how many countries there are that have that power (i.e., how many have nuclear weapons) and given how the sides are lining up, this set of conditions looks frighteningly like those that existed before World War I except the destructive powers are much more “advanced.” That is a scary picture.
How can we tell how the sides are lining up? That is easy to see by watching their actions. As explained and shown in this earlier post, I am keeping a record of indicators to show how the sides are lining up. It is shown in the table below and will be revised as events transpire. For example, how countries line up around whether Putin can attend the G20 meeting will be an obvious big indicator. A split in which the 20 countries choose to not get together would also be a demonstrable statement that we are past the point of working together to resolve issues in an attempt to have a more unified world order and are on to the opposing sides squaring off for a war.
https://www.linkedin.com/pulse/how-can-we-tell-first-battle-long-war-control-world-order-ray-dalio/?trackingId=T0Kw7BxaSBCSdlr4C1X7YQ%3D%3D