How The Economic Machine Works

Ray Dalio manages the world's largest hedge fund, Bridgewater Associates.

It has a tremendous track record, so when the man talks about markets, people usually listen.

Beyond that, Dalio is known for having one of the most refined understandings of the economy in the financial industry.

Lots of investors pontificate, but Dalio's views are legitimately well-respected.

As part of his mission to explain how the economy works, Dalio has put together a neat, new 30-minute animated video called "How the Economic Machine Works," where Dalio narrates his big-picture view of the economy.

"I feel a deep sense of responsibility to share my simple but practical economic template," Dalio says. "Though it's unconventional, it's helped me to anticipate and sidestep the financial crisis, and it has worked well for me for over 30 years."

Dalio is worth almost $13 billion, so it's safe to say his economic template has served him well.

How To Do Defense, When The Money's Gone

Danger Room Debrief: How To Do Defense, When The Money's Gone

By Noah Shachtman
November 21, 2008 | 3:41:14 PM
Categories: Danger Room Debrief
Courtesy Of Wired Blog Network

This is the fifth of our Danger Room Debriefs, where we ask smart folks in the military, intelligence, and homeland defense fields to outline some under-the-radar security issues -- and point the way towards potential, often-unorthodox solutions.

Today we hear from John Robb, a software entrepreneur and former Air Force special operations pilot. He is the author of Brave New War.

The current global economic and financial meltdown may yet become something worse: a protracted global depression. As with the last century's Depression, which spawned fascism and WWII, it could recast the world at a fundamental level. As such, it may soon represent our biggest security challenge in over 50 years. Here's what a global depression means:

• A proliferation of hollow nation-states globally. Rampant financial bankruptcy -- the double digit percentage growth in the U.S. national debt late this year bode danger here. Entrenched corruption -- think government employees unused to financial deprivation not getting paid except by graft. An inability to govern territory and a general loss of legitimacy. A global swiss cheese effect from Mexico to Pakistan, where thousands of small holes in the global security system appear with rapidity.


• A rapid increase in the number and power of criminal guerilla groups that will challenge nation-states. These groups will flourish within the ungoverned spaces that emerge, particularly in urban areas and even within the U.S. The combination of access to global markets, rapidly improving technology, and new methods of warfare mean that these groups will be ascendant militarily until successful strategies emerge to counter them.


• Worst of all, these criminal guerrilla groups (collectively known as global guerrillas) will be able to generate wealth via transnational criminal networks and control political services to local populations (through both disruption and parasitically draining national infrastructures), gaining legitimacy that nation-states will not be able to provide. This means that these groups will not only emerge quickly, they will grow stronger over time.

Unfortunately, the U.S. will be forced to navigate this dangerous environment with a small fraction of its former resources. The endless defense budgets of the last century are gone. Which means the development of the new strategies -- not new gear -- to fight this chaotic and complex panoply of non-state foes will become the seminal security challenge of our time.

Can it be accomplished? It remains to be seen whether a transition from the legacy mindset of 20th Century defense to the new environment can be accomplished. The array of financial incentives, political interests, and bureaucratic inertia arrayed against it are staggering.

Signs that we are on the right track include:

1. A radical reduction in hideously-expensive weapons systems and dreams of automated warfare (i.e. the Future Combat System), geared towards fighting an increasingly-unikely great power war.


2. A rapid increase in investments geared towards improving nation-state legitimacy. We need an array of technologies and processes that both support the construction of resilient communities. And we need the means to train, manage, and control (or punish, if the need arises) the militias/paramilitaries that will blanket the global landscape.


3. A move towards much more flexible military platforms and systems that can be rapidly configured to provide tactical, operational, and strategic advantage.

What does a flexible military platform mean? Due to budget constraints, we are going to see a much greater reliance on civilian hardware, software, and standards of interconnectivity. To prevent chaos from the influx of off the shelf hardware and software, the military will need to develop platforms that enable all of this externally derived hardware/software to interconnect and act synergistically. Further, with this platform in place, these technologies can be rapidly and inexpensively stitched together through ad hoc systems design to precisely meets the needs of the emerging situation to generate success.

Here's an example of ad hoc systems design. Let's say there's a perceived need by a deployed unit to track interactions with local militias (dozens are operating in its area). Rather than wait years for a centralized solution, the unit builds a simple Web application that operates in a way similar to a civilian sales tracking application (in fact, many of the components used are from the civilian sector). This new system is quick to deploy and it allows the unit to capture data on every interaction with militia members and track progress. If the system used simple Internet standards for data sharing, the system can be updated, connected, extended, and shared very easily. In an age of scarcity, that's the approach we have to take.

U.S. Intel Warns Of Coming National Decline

By MARTIN SIEFF
Published: Nov. 21, 2008 at 11:46 AM
Courtesy Of United Press International

WASHINGTON, Nov. 21 (UPI) -- Now it's official -- sort of. The United States is in decline.

The National Intelligence Council has warned in its latest report that the United States will decline as an economic and political world power over the next 20 years.

The NIC (NASDAQ:EGOV) report is the first major U.S. government document on national strategy to appear since the Wall Street financial crisis began in September. But it does far more than simply note the crisis' existence. It warns that the ensuing economic crisis now sweeping the entire world is just the first part of a far vaster process -- a changing of the global power structure for the new century.

The report has the title "Global Trends 2025." But The Times of London newspaper described it in a headline with a far bleaker and more sensational message: "Sun setting on the American century."

The report does far more than survey the world. It was deliberately prepared to be an influential guide for the next president of the United tatesS before he takes office on Jan. 20. President-elect Barack Obama will find it exceptionally sober reading. For the report confronts Obama's "Politics of Hope" with a warning of grave dangers ahead.

"The world of the near future will be subject to an increased likelihood of conflict over resources, including food and water, and will be haunted by the persistence of rogue states and terrorist groups with greater access to nuclear weapons," it said.

The report is also an indirect but very explicit repudiation of the grand strategy of outgoing President George W. Bush, Vice President Dick Cheney, former Defense Secretary Donald Rumsfeld and the neo-conservative intellectuals who served them.

It clearly rejects their assumption that a new century of U.S. global supremacy, leadership and even control more total than any the United States enjoyed in the past is likely or even achievable.

Instead, the NIC report warns of an increasingly uncontrollable, fragmented world with strategic, military and economic power increasingly diffused -- and with the danger of local and wider wars, especially over scarce resources, greater than ever before.

"The international system will be almost unrecognizable by 2025, owing to the rise of emerging powers, a globalizing economy, a transfer of wealth from West to East, and the growing influence of non-state actors. Although the United States is likely to remain the single most powerful actor, the United States' relative strength -- even in the military realm -- will decline and U.S. leverage will become more strained," it said.

Ironically, the report appeared as French President Nicolas Sarkozy called for a new global economic summit to be held in Paris, ahead of the one that he and the other Group of 20 leaders of the world's major nations agreed at their Nov. 15 Washington gathering to hold in April. It is unclear if it would be before or after Jan. 20, but if the United States participated, either way a very old Bush administration or very new Obama administration would be hamstrung by the situation -- which is what the French leader appears to have in mind.

Sarkozy's call is, in essence, nothing more than grandstanding: The G20 summit in Washington, as we predicted in these columns, proved utterly useless in affecting the dynamics of the accelerating global economic crisis, but there is no reason to believe that any other gathering of the same ineffectual and unwieldy group, covering so many jealous, independent, conflicting and mutually selfish and suspicious interests, would prove any different.

Sarkozy was clearly trying to maneuver the European Union -- with France as its leader -- into the role of the world's leading player in confronting the crisis. British Prime Minister Gordon Brown clearly has similar ambitions. But Britain and France are simply too small in their basic economies, and the European Union too diffuse, unwieldy and militarily weak, to fulfill that role, especially as it remains so dependent on neighboring Russia for its natural gas supplies.

The National Intelligence Council report saw China and India as more likely to rival or challenge the United States in a position of influence than Europe, with Russia's role unclear.

The report, in fact, is neither sensationalist nor brilliant. It gravely underestimates the importance of Russia as a leading energy producer and exporter, strategic nuclear power and potential swing nation for either stability or upheaval. It takes Japan for granted. And it underestimates China's current economic, financial and regional military power relative to the United States.

But the report is balanced, it attempts to be realistic and it is certainly honest. It sets forth, in cautious, measured, bureaucratic prose, a somewhat ponderous acknowledgment of trends that have been clearly identified and warned about by a wide spectrum of experts and high-powered panels of various kinds for many years.

The real importance of the report is that it so directly challenges and rejects the assumptions of continued American unilateralist supremacy that the Bush administration acted upon and insisted upon. Even before President-elect Obama takes the oath of office and even while Bush remains as an increasingly insubstantial presence in the White House, that world is gone.

© 2008 United Press International, Inc. All Rights Reserved.