From 1789 to 2026: Ray Dalio's "Bastille Moment" and the American Crisis

Legendary investor Ray Dalio has recently issued a disturbing warning. This master of global macro investing, who studies historical patterns, now sees a “movie” he has watched countless times in history unfolding before him. The problem is, the ending of this “movie” is often catastrophic.

Looking back at history, from the storming of the Bastille during the French Revolution in 1789, to the global collapse between 1930 and 1945, and now to the United States, a chilling pattern emerges: societies tend to operate in predictable cycles, and this cycle is pushing America toward a dangerous tipping point.

The Great Cycle Theory: Why History Repeats Itself

Dalio has spent decades studying history to understand how monetary, political, and geopolitical orders rise and fall. He calls this recurring pattern the “Great Cycle”—a massive cycle lasting roughly 80 years, about a human lifetime.

“For me, observing what’s happening now is like watching a movie I’ve seen many times in history,” Dalio writes in his book Principles for Dealing with a Changing World Order. He details the forces and signs that drive this cycle, allowing people to compare current events with historical templates.

According to Dalio, we are on the brink of moving from Phase 5 (the eve of order collapse) into Phase 6 (the chaos of order breakdown). The consequences of this transition have been repeatedly demonstrated by history.

Wealth Gaps, Populism, Polarization—The “Triple Poison” of Phase 5

What signals that a society has entered Phase 5? Dalio highlights a classic “toxic combination”:

First, the country and its people are in poor financial shape. U.S. federal debt has spiraled out of control, with many states (like California, Illinois, New York) facing long-term fiscal crises. Local governments struggle to fund infrastructure and public services, let alone respond to new economic shocks.

Second, there are enormous disparities in income, wealth, and values. Wealth inequality in the U.S. has reached levels comparable to the pre-Great Depression 1920s. The proportion of wealth controlled by the richest few is only matched during rare periods in history. This gap is not only economic but also ideological—different groups hold fundamentally divergent views on the country’s future.

Third, severe negative economic shocks. Whether inflation, financial market volatility, or geopolitical risks, these shocks trigger chain reactions in societies already fragile.

When these three conditions occur simultaneously, history shows what happens: chaos, conflict, and sometimes even civil war.

Populism and Polarization: The Demise of Moderates

In times of chaos and dissatisfaction, anti-elite leaders claiming to fight for ordinary people emerge. These are populists. In the U.S., we see rising populism on both sides: the shift represented by Donald Trump in 2016 on the right, and the popularity of Bernie Sanders and Alexandria Ocasio-Cortez on the left.

The key observation is: the higher the level of populism and polarization, the further a country has moved into Phase 5, bringing it closer to civil war and revolution.

Recent Pew Research Center data (September-October 2025) shows that 85% of American adults acknowledge increasing political violence. A PBS News/NPR/Marist poll indicates nearly one-third (30%) of Americans believe violence might be necessary to get the country back on track.

This isn’t speculation about what “might” happen—one-third of Americans are psychologically prepared for violence.

From Phase 5 to Phase 6: America at a Critical Point

So, what marks the transition from Phase 5 (order collapse) into Phase 6 (civil war)? Dalio points to two key indicators:

First, deaths in fighting. This almost certainly signals the start of a more violent civil war phase, which will continue until a clear victor emerges.

Second, conflicts over power between federal and state governments. This has appeared in many declining empires and is now playing out in the U.S.

According to the Center for Strategic and International Studies (CSIS), between 2016 and 2024, there were 21 partisan political attacks or plots, compared to only two in the previous 25 years. This indicates a roughly tenfold increase in politically motivated violence in a relatively short period.

The U.S. is now a “powder keg.” The country has more guns than people, and many carry a violent mindset. While recent incidents in Minneapolis may be isolated, they reveal a deeper crisis: escalating power struggles between federal and state authorities.

Lessons from the Bastille: When History Becomes Reality

Why talk about the Bastille in 1789? Because historians mark that day as the start of the French Revolution—but no one knew it at the time.

As Dalio notes, “While historians set dates for the start and end of civil wars, these dates are human constructs. The truth is, almost no one knew when the civil war had begun or ended, only that they were in the middle of it.”

On the day the Bastille was stormed, mobs attacked the symbol of royal authority—a fortress and prison—without knowing it would lead to a decade of terror, the guillotine for the queen, and a revolution that would consume its own leaders.

We face the same question now: we know we are in a crisis, but we don’t know how it will unfold. We can point to factors driving collapse—wealth gaps, populism, polarization, rising violence—but we don’t know the final ending of this “movie.”

How Civil War Happens: From Theory to Reality

Dalio, after studying over 50 civil wars and revolutions, concludes that the most reliable single indicator is government bankruptcy combined with massive wealth disparity. When governments cannot financially rescue entities in trouble, cannot buy necessary goods, or pay people to do what needs to be done, they lose legitimacy.

In such cases, power struggles become the only game in town. Class conflicts intensify, and different groups begin to demonize each other. In the darkest examples—like Nazi Germany’s treatment of Jews—the entire group is scapegoated as the root of all problems.

Truth begins to unravel. Left-wing media support left-wing causes, right-wing media support right-wing causes. Media becomes a weapon of war, with people judged and condemned without courts or juries, lives destroyed. Rules break down, ultimately leading to a “winner-takes-all” war.

Do We Have a Way Back? The Illusion of “Merciful Despotism”

Dalio presents a disturbing view: Phase 5 is a crossroads. One path leads to civil war; the other, to peaceful coexistence and prosperity.

But he candidly admits that the path to peace “is the hardest to achieve.” It requires a strong leader capable of inspiring most people rather than dividing them, and willing to undertake the difficult work of fixing problems. Historically, such “benevolent dictators” are exceedingly rare.

What about the other option? Leaders of the “tough warrior” type, who guide the nation through the hell of civil war or revolution. Looking at history of the 1930s, we see what that leads to.

After the storming of the Bastille, France descended into bloodshed. The Russian Revolution resulted in millions of deaths. These are not abstract numbers—they represent real human suffering.

Warning Signs Are Flashing

So, what should we conclude?

First, we are in a very dangerous moment. All features of Phase 5 are present: fiscal crises, wealth inequality, populism, polarization, and surging violence.

Second, signs of moving from Phase 5 into Phase 6 are emerging. Violent deaths, conflicts between states and federal government, the rise of extremists as minorities—all point in a specific direction.

Third, we are at a “Bastille moment”—a critical point where change is still possible; afterward, history tends to follow a known, often dark, path.

Final Lessons

Dalio’s core message is simple yet powerful: “History shows that creating efficient, mutually beneficial relationships through skilled cooperation—growing the pie together and sharing it—brings more value and happiness to most people than war over wealth and power, which often results in one side enslaving the other and causes much suffering.”

But to achieve this, we must recognize where we stand. We must accept that the lessons of the Bastille are written in blood across history.

We cannot change the cyclical nature of history, but we can choose how to act within it. The problem is, that window of opportunity is closing rapidly.