On June 8, the CDF TALK Forum, hosted by the China Development High-level Forum, was broadcast live online, and Lu Mai, secretary-general of the China Development High-level Forum, had an in-depth dialogue with Ray Dalio, chairman of Qiaoshui.

Throughout the live broadcast, golden sentences such as "this epidemic is like a tsunami,"do not adhere to traditional investment," and "interest rates cannot be used to stimulate the market when interest rates reach zero." Dario also expressed profound views on hot issues such as "the harm of the epidemic", "China's rise" and "zero interest rate".

In a live broadcast, Dalio reiterated the view that China is rising, expressed concern about the growing gap between the rich and the poor in the United States, and called on "everyone not to be too emotional."

As for COVID-19, Dalio believes that the epidemic may have a global impact of 23 trillion US dollars (163 trillion yuan). With the implementation of the zero interest rate policy, the traditional stimulus policy will also fail and capitalism will be completely changed.

Dalio also warned that under the condition of zero interest rate, do not adhere to traditional investment, diversification of investment is very important.

The following is an excerpt of the key points of the LVB:

The gap between the rich and the poor in the United States is the highest since the 1930s.

But the rise of China is unstoppable.

Dalio mentioned that before the outbreak, there had been some trends, some (new) trends that had not occurred in his lifetime.

That is, "gradually entering the end of the long-term debt cycle", "the gap between the rich and the poor and the political gap", and "the rise of China".

According to Dario, the long-term debt cycle in which the first trend was "gradually towards the end of the long-term debt cycle" began in 1945, in which a large amount of credit was created and new debt began to accumulate after debt restructuring. Then the power to create money for the central bank Xiaobai Maimai Inc, and once the economy weakened, they began to print money and expand credit, so that the market was propped up again.

Dario notes that central banks can do this until interest rates reach zero, but when interest rates are close to zero, it will be difficult to stimulate the economy in the same way. "for example, when interest rates fell to 00:00 in 2008, at that time the government had to print money, buy financial assets and inject them into the market. "

The second trend, "the gap between the rich and the poor and the political gap", did not happen in Dario's lifetime, but it did happen between 1930 and 1945.

Dario uses the picture above to show you the severity of the gap between the rich and the poor, with net wealth on the left and income on the right. At present, the net wealth of the richest Americans in the top 0.1% is close to that of the bottom 90%, and the gap between rich and poor is the highest since the 1930s. In terms of income gap, the top 10% of the rich are roughly the same as the bottom 90%.

Dario says the gap between the rich and the poor has sparked populism. When asked about ways to solve these inequalities, Dalio said, "the solution to this problem has always been in our own hands, as you said, war or revolution is very terrible." If we can transcend ourselves, realize that for the greater good we must solve these problems, and realize that we need a new domestic / international system that can make the cake bigger, a mechanism that works well, a mechanism of distribution based on mutual understanding and generosity, we may have enough wealth, creativity and inventiveness to transform the world and make it a better place. "

The third trend, the rise of China, is that China is challenging the status of the United States, which has never happened before. Before, the Soviet Union and Russia were not very powerful opponents in terms of economic volume.

"when I came to China 35 years ago, half of my life was intertwined with the rise of China," Dario said. I have watched China's per capita income increase 22 times, the poverty rate from 88 per cent to less than 1 per cent, and China's share of world GDP from 2 per cent to 22 per cent. I have witnessed this process and witnessed its evolution. "

Dario also gave advice on how to avoid conflict between China and the United States: "try not to be too emotional, think more, see goals in a higher sense, and realize that war is a very terrible thing and a disaster for mankind." and a more challenging choice is actually a better way. "

In his latest article, the Great cycle of the past 500 years, released at the end of May, Dalio also wrote: "the United States is no longer the most powerful empire, it is in relative decline, and China's power is rising rapidly. No other country can match it. In this ten-thousand-word article, Dario analyzes the 500-year rise and fall of several great powers and warns that the United States is in decline and that China will rise rapidly.

The epidemic will cause 23 trillion US dollars in damage worldwide.

The rise in unemployment will be more serious than in 2008.

Dalio and his team studied the impact of the outbreak on revenues in individual countries, companies, and individuals, and concluded that 23 trillion dollars could be lost globally, with heavy losses.

$23 trillion is about 163 trillion yuan, more than China's GDP of a year and a half (based on 99 trillion in 2019).

Dalio also said, "I think this epidemic is actually very much like a tsunami, when it recedes, the damage caused is left behind." So this is our estimate of the amount of economic loss. "

"and the rise in unemployment is likely to be similar to that of the Great Depression and much more serious than it was in 2008. "

But the outbreak is just a stress test, Dalio suggests, and an economic downturn will happen no matter what the reason.

Some netizens also agreed with Dario's view, saying: "it is not the fault of the moment to make a mistake of 40 years." "

Dalio also called on us to concentrate on dealing with the epidemic now, because this is the most urgent issue at present.

Capitalism will be completely changed.

Is the era of open and free trade coming to an end?

'Capitalism as we know it will be completely changed because structurally, interest rates can no longer be used to stimulate the economy, 'Mr. Dalio said.

In the past, through quantitative easing, central banks bought assets (such as bonds) and then allocated them effectively through the financial system, and the lending system decided how to allocate capital. If the loan can be allocated reasonably, the income can be obtained, and if the borrower can make rational use of capital, he can also make money.

But Dalio believes that none of this will work now, because the gap between the rich and the poor and the political gap make it impossible for Xiaobai Maimai Inc to reach those who need it most.

The free trade era of capitalism is also under threat. Dalio believes that we are going through a difficult period in which the entire global economy will be damaged, poor economic conditions and these contradictions will lead to more tensions. "so, we will see that globalization will turn to 'self-sufficiency'. In other words, we have to restructure the system in the light of greater polarization, which, of course, was initially driven by political reasons, but now it has gone beyond political factors. "

"in the previous process of globalization, comparative advantage was applied to production and supply, mainly in the form of open and free trade. I think this era is over, and the principles and tensions of self-sufficiency or independence will characterize our future environment, "Dario said."

How do investors deal with zero interest rates?

Don't insist on traditional investment

With regard to the problem of zero interest rates in the United States, Dalio believes that the situation is similar to that during the war. "most currencies and debts are still denominated in dollars," he said. "at the same time, the real rate of return on the dollar is actually negative. According to other calculations, it is zero, so there is no reason for investors to hold dollars. Now the central bank is doing the same thing as during the war. This is the situation we are in. "

When asked about advice for investors to deal with zero interest rates, Dario said that most investors will focus on the value of assets such as bonds, stocks and private equity, but not enough attention to the value of the currency and currency issues. The rate of return on holding bonds is measured on the basis of interest rates.

"because the central bank has caused a flood of liquidity, it means you have 100 yuan, and the interest rate is 1%. If you don't want to take credit risk, but you will still take currency risk, it means you won't get your $100 back after 100 years," Dalio said.

Mr Dalio said bluntly that the credit had become permanent bonds and might not even repay the principal. In other words, now these central banks are giving you a zero interest rate policy, because they have the power to decide that you don't have to actually repay, so a lot of bad debts hang on their balance sheets and don't have to repay the principal. This is a form of debt relief.

In this environment, Dalio suggests: we may need to think about the ups and downs of reserve currencies, we may need to think about what is to preserve value; it is very important to diversify investment in such an environment. To diversify according to different locations, currencies, and asset classes, do not adhere to traditional investment, diversification is essential.

How does Dario think of "money" and "Hero"

On the live broadcast, Dario also shared his views on money. Dario feels that money has no intrinsic value, and people sometimes just think about making money, almost crazy and obsessed, without thinking about the meaning of money.

Dario said, "what am I supposed to do with my money? It can be pleasure, but I believe I have the responsibility to do charity, and it is my pleasure to make money best serve the entire ecosystem. This is my personal view of money. "

In addition to money, Dario's view of heroes is also impressive. "Joseph Campbell wrote a book called Heroes of a Thousand faces, which gives a good answer to this question, and history supports it," Dario said. "

Dario said that we have different behaviors and aspirations, and there will always be some kind of people among us who walk into the so-called "heroic journey" and become pioneers, who go far away and experience life.

Dario divides the journey of life into three stages. The first stage is that you have to rely on others. In the second stage, others depend on you and you need to work. In the third stage, you need to make a transition to help others succeed without you, which is a natural process.

Dario believes that the moment when they put other people and their common tasks above their own interests, that is, when they become heroes, and then, a little later in their life journey, they will usher in the third stage of their lives. And complete the transition; and most people do not have to be heroes, no matter what role, they are equally important; they all play their own roles. But this is what the journey of life looks like.