Ray Dalio outlines a 6-stage internal cycle of order and disorder, with Stage 5 representing intense conflict and Stage 6 marking civil war or revolution. He warns that the U.S. is currently in a dangerous, high-conflict Stage 5, with a 35%-40% risk of progressing to Stage 6.
6 Stages in the Big Cycle of Internal Order/Disorder:
- New Order: New leaders take power after a conflict/revolution, establishing a new system.
- Resource Allocation: The system becomes functional and, in some cases, prosperous.
- Peace & Prosperity: The high point of the cycle; peace and prosperity lead to a, "well-functioning" society.
- Excess/Bubble: Prosperity causes immense debt, financial bubbles, and widening wealth/opportunity gaps.
- Bad Financial Shape & Internal Conflict: Wealth gaps cause severe resentment, resulting in intense class/ideological warfare.
- Civil War/Revolution: The breakdown of order results in violent or non-violent conflict, which resets the cycle.