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The changing world order

As promised, here is a summary of Ray Dalio's two books, "The Changing World Order: Why Nations Succeed and Fail*" and "Life and Work Principles*."

In his first book, Ray explains the factors and indicators that identify which stage of the world order we are in and what happens during this stage. In his second book, Ray shares the principles for dealing with it.

Here is our attempt to highlight key points. We focused on the fact that we are in the late stage 5 of the world order and how we should prepare ourselves in this stage.

• Understand Where You Are in the Cycle: The signs that we are in late Stage 5—high debt, wealth gaps, political infighting, and a challenged reserve currency (Dollar).
• Diversify to Manage Risk: In late Stage 5, you can expect economic instability and currency devaluation. Ray advises spreading assets across geographies, currencies, and asset classes (gold, stocks, bonds) to hedge against the financial turmoil of a declining empire (the US).
• Focus on Productivity Over Debt: You and the nation should prioritize earning more than you spend. In Stage 5, debt burdens cripple a nation. So, everyone should focus on boosting real productivity (skills, innovation) to outpace reliance on borrowing. Borrowing only delays the inevitable, i.e., the collapse.
• Build Resilience Through Self-Sufficiency: As global trade and alliances falter, reduce dependence on fragile systems (e.g., imported goods, foreign financing). Dalio suggests strengthening local capabilities—personal savings, skills, or national manufacturing—to weather disruptions.
• Avoid Internal Conflict: Late Stage 5 often sees societal division (e.g., left vs. right). Dalio emphasizes bridging the gaps—finding common ground, compromising, and unifying. He stresses that internal strife accelerates decline when external threats peak.
• Prepare for Currency Shifts: With the reserve currency weakening (the Dollar is losing trust), expect inflation or devaluation of currency. Dalio recommends holding assets that retain value (gold, commodities) and understanding rival currencies (Yuan) to adapt to a multipolar financial world.
• Stay Flexible and Adaptive: Rigidity kills in Stage 5 transitions. Dalio advocates stress-testing plans (e.g., “What if the dollar crashes?”) and staying open to radical change—relocating, rethinking investments—to survive a chaotic power shift.
• Learn from History, Not Ideology: Base decisions on data and past cycles (e.g., Britain’s fall, America’s rise), not wishful thinking. Dalio warns that clinging to Stage 5 dominance myths blinds you to inevitable change. You should study the decline of the Dutch or British empire for clarity.
• Strengthen Relationships with Rising Powers: As China gains ground, build bridges rather than walls. Dalio suggests cooperation (trade, diplomacy) over confrontation to secure a foothold in the emerging order.

We hope this summary helps you and inspires you to explore this topic further on your own. We recommend starting by reading the books and later watching videos and podcasts and reading research papers available here.

Here is what CDU and SPD are currently discussing in their coalition negotiations

• Strengthening Germany’s Economy: Boost growth by over 1% by cutting taxes, energy costs, and red tape.
• Boosting Innovation and Startups: Simplify startup processes with a digital platform and invest in AI, robotics, and 3D printing.
• Investment Push: Launch a €100 billion Germany Fund (from €10 billion public money) for growth and affordable housing.
• Strengthening Industry: Lower energy costs, speed up permits, and support steel, pharma, and tech with green solutions like carbon capture.
• Automobiles and E-Mobility: Promote electric cars with incentives and remove the ban on combustion engines.
• Grow space tech (e.g., moon mission).
• Cut air travel taxes, improve airport connections, and push for greener planes without extra burdens on European airlines.
• Maritime and Trade: Strengthen ports and shipbuilding; push EU trade deals with Chile, India, and the U.S.
• Small Businesses and Crafts: Reduce rules for small firms and speed up skilled worker permits.
• Retail and Tourism: Protect local shops from cheap imports; boost tourism with better travel links and low food tax.

There are many other points they are discussing. You can read all the documents here (German).

#1 CO2 costs will more than double by 2030

You might already know that companies pay a CO2 tax based on their carbon footprint. This is one way the government is forcing companies to reduce their carbon emissions.

Companies pass on these costs to customers, ultimately, end customers paying these taxes.

Different countries in Europe have different CO2 pricing. For example, Sweden charges 134€ per tonne of CO2, and currently, it's 55€ per tonne in Germany.

The CO2 tax will increase each year, and from 2027, the CO2 price will be freely negotiated on an exchange. According to experts, the CO2 price will more than double by 2030.

This means the cost of everything we consume will rise, i.e., gas, electricity, food, clothes, etc.

#2 Network charges will increase

EU aims to become climate-neutral by 2050. To achieve this ambitious goal, it must shut down all the gas networks over the next few years.

The more people disconnect from the gas supply, the more expensive it'll be for those who remain. This is because the costs of the gas networks are shared among everyone connected to the gas supply.

In other words, the last customer will pay the entire cost of the gas network alone.

What does this mean for you?

If you are a homeowner or planning to buy a property in Germany, don't invest huge sums in a gas heating system. The reason is there will be no gas networks in the future. Thus, you can't use your gas-operated heating system.

Germany has consultants for every task. The same goes for finding the best heating options: consult an "energy consultant (Energie beratung)."

If you rent, you should expect high heating costs. Talk to your property management or landlord about upgrading the heating system.

#3 Less parental allowance

Your family income must be below the income limit to be eligible for parental allowance. This income limit will reduce from 200,000€ to 175,000€ from 1 April 2025. This is not the gross annual income but your taxable income.

Taxable income is gross income minus expenses to earn that income.

You won't receive parental allowance if your family's taxable income is above 175,000€. You can expect this limit to be further reduced in the coming years.

The income limit was 500,000€ for couples and 250,000€ for single parents before 2021. Since then, it has been gradually reduced.

#4 Digital driver's license

You can participate in the digital driver's license test run in April.

Germany wants to replace your physical driver's license with a digital one by 2030. You'll have an app that will contain your digital license.

The app will digitize all the documents you need to carry when driving—including your vehicle registration certificate.

#5 Legal fees and legal insurance will get expensive.

The Federal Council has approved a 6% and 9% increase in lawyers' fees and court costs, respectively. This will also increase the cost of legal insurance.

Legal insurance is one of the important types of insurance in Germany that you should have. It empowers you to fight for your rights without breaking the bank.

In our comparison and test, we found that Arag*—Aktiv-Premium, WGV—Optimal PBV, and KS-Auxilia*—Jurprivat are the best legal insurance plans.

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