Billionaire Ray Dalio says rising US-China tensions could escalate into a 'shooting war' — and draws comparisons with the years before World War II

• The legendary hedge fund manager Ray Dalio said he thinks economic tensions between the US and China could conceivably escalate into a "shooting war."
• In a LinkedIn post on Thursday — part of a series on the changing world — he wrote that an economic war is usually a precursor of a military conflict.
• Dalio said he reviewed events in the 1930s and leading up to World War II to help explain the dominance of world powers now.
• "The United States and China are now in an economic war that could conceivably evolve into a shooting war," he wrote in a long post.
• Visit Business Insider's homepage for more stories.

Ray Dalio said economic tensions between the US and China could escalate into armed conflict, drawing parallels between today and the years before World War I and World War II.

While calling himself "no great historian," Dalio attempted to explain in a LinkedIn post on Thursday (part of a series on the changing world) how the world got to where it is now and how to deal with it.

In the 8,000-word post, Dalio, the billionaire founder of the investment management firm Bridgewater Associates, said that understanding the volatility in the 1930s and in the years leading up to World War II would help clarify today's world powers.

"Because the United States and China are now in an economic war that could conceivably evolve into a shooting war, and I've never experienced an economic war, I studied a number of past ones to learn what they are like," he wrote.

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"Comparisons between the 1930s leading to World War II and today, especially with regard to economic sanctions, are especially interesting and helpful in considering what might be ahead," he added.

In evaluating the US's previous debt problems, Dalio said the trend was to implement protectionist policies and increase tariffs to protect employment and domestic businesses.

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He said that while tariffs do contribute to greater economic weakness, they "benefit those entities protected by the tariffs and can create political support for the leader who is imposing" them.

"Severe economic downturns with large wealth gaps, large debts, and ineffective monetary policies make a combustible combination that typically leads to significant conflicts and revolutionary changes within countries," he wrote.

He added that "during periods of great conflict there is a strong tendency to move to more autocratic leadership to bring order to the chaos."

Dalio said rival powers enter into wars "only when their powers are roughly comparable."

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"Smart leaders typically only go into hot wars if there is no choice because the other side pushes them into the position of either fighting or losing by backing down," he wrote. "That is how World War II began."

This week, China imposed sanctions on US politicians including Sens. Ted Cruz and Marco Rubio for condemning Beijing's treatment of Uighur Muslims and other minorities.

Tensions between the two nations have ramped up in recent weeks since China imposed a new security law on the semiautonomous region of Hong Kong. The US hit back at Beijing by suspending its special trade measures with Hong Kong.

Read Dalio's full 8,000-word piece here »