On the surface, progress in the U.S. economy looks pretty good. Wall Street is roaring, Silicon Valley is booming with Silicon Valley potential, unemployment is pretty stable, and GDP is rising. A healthy picture, right?
Ray Dalio says that’s wrong. The U.S. economy has changed so much now that it can no longer be considered a “monolith.”
This dynamic becomes increasingly complex as the country becomes increasingly reliant on its most productive industry: technology. While Wall Street has begun complaining about a “bubble” in world valuations, Dalio warned that more broadly, the prospects for most workers are now tied to those in relatively small industries.
“I think the problem now is you can’t look at the United States as a whole,” the Bridgewater Associates founder told the Fortune Global Forum in Riyadh on Monday. “You have to look at everything in terms of very, very big differences and how to deal with those differences,” he added.
He explained: “If you look at the AI world, where there are actually about 3 million people (1% of the population) at the leading edge, and then…the 5% or 10% of people around them, you see a world that the whole world depends on.
“Then there’s the bottom 60 percent of the population.”
Dario’s lens echoes Moody’s research report released earlier this month. According to the analysis, the economies of 22 U.S. states are shrinking — and are actually in recession. Meanwhile, only 16 countries achieved economic growth, while 13 were classified as “stagnant”. That is, the states that contribute the most to U.S. GDP—California, Texas, and New York—are unaffected, boosting overall U.S. economic growth.
In fact, Moody’s chief economist Mark Zandi told wealth The future of the entire U.S. economy is tied to the growth of two states: California and New York. California, of course, because it’s home to big tech companies, while New York benefits from its West Coast innovation as a financial partner.
Dalio continued: “If you think about it, 60 percent of Americans are reading below a sixth-grade level. It’s tough, and (they) become unproductive, and because of these things, you create dependency, an extreme degree of dependence.”
According to the National Literacy Institute54% of American adults have a reading level below the equivalent of sixth grade, while 64% of our country’s fourth graders are not proficient in reading.
“Is this a bubble? Is this not a bubble? We’re going to debate that and eventually we’ll find the answer, but regardless, it’s a question in itself.”
deal with problems
Over the past few decades, wealth inequality has become increasingly polarized in the United States and in many developed countries around the world. In fact, since 2020, the transfer of wealth has been flowing largely to those at the upper end of the income ladder.
according to Data from the Federal ReserveBetween 2020 and 2025, the wealth of the bottom 50% of the U.S. population increased by just over $2 trillion. By comparison, assets held by the top 0.1% have almost doubled, from $12.17 trillion to $22.33 trillion, according to the latest estimates.
“The question is, what do (policymakers) do when you don’t have enough money and the gap between rich and poor is so big?” Dalio asked.
He went on to say that his advice to government officials is to recognize that wealth redistribution is a “very difficult decision” with huge consequences for the productivity of the entire country. “Think of it as a mechanical issue, not an ideological issue,” he added. “Based on that, who do you choose to pay and how do you do that?”
The government may be nervous about taxing those with more disposable income, After all, they may be the only ones spending money. Moody’s analysis shows that based on 100 basis points (equivalent to spending levels in the fourth quarter of 1999), as of this writing, America’s top income earners (96.6% to 100% of the population) have increased spending to about 170 basis points.
In contrast, expenditures for low- and middle-income earners increased to around 120 basis points. That being said, the CPI has pretty much followed the same trajectory from the fourth quarter of 2020 to the latest data, meaning spending has only kept pace with inflation.
“The U.S. economy is driven primarily by the wealthy,” Zandi noted. “As long as they keep spending, the economy should avoid recession, but if they become more cautious, for whatever reason, the economy is going to have big problems.”