The Crisis of Global Order Under the Shadow of the Germany-France War: What Step Are We Taking Toward Conflict?

In the beginning of 2026, a rare consensus emerged on the world political stage. At the Munich Security Conference, leaders from Germany, France, and the United States almost simultaneously voiced the same message — the international order established after World War II is effectively dead. This signal is shocking not only because of politicians’ frankness but also because it aligns with the judgments of the investment community.

Ray Dalio, founder of Bridgewater Associates, immediately published a ten-thousand-word analysis, positioning the current world as being in a “disorderly period” within a major cycle. Meanwhile, quantitative indicators are also issuing warnings: the World Uncertainty Index (WUI) quietly hit a record high, reaching 106,862.2 in Q3 2025, surpassing levels seen during the 2008 financial crisis, the 2020 pandemic, and even the 2001 “9/11” events.

Politicians, investors, and data are all pointing to an unsettling conclusion: the old order is dead, the new order has not yet emerged, and the world is falling into a dangerous vacuum.

The Nature of the International Order: Power, Not Rules

Dalio spent years studying the rise and fall of eleven major empires over the past five centuries, developing a “big cycle” theory. His core insight, though simple, is profound: the determining force of the international order is not rules but relative power.

Domestically, laws, police, and courts maintain order. But on the international stage, these mechanisms do not exist. The United Nations cannot control more powerful nations, nor can it enforce resolutions. When major powers clash, the resolution is not through courts but through the contest of strength — negotiations and compromises or armed confrontation.

Within this logical framework, conflicts between nations do not erupt suddenly but evolve along a clear escalation path:

Trade War → Technology War → Geopolitical War → Capital War → Military War

The first four levels escalate sequentially. Once a military conflict begins, all dimensions are weaponized, and the destructive potential reaches its peak. Dalio points out that the riskiest moments for war typically occur at a critical point when opposing powers are evenly matched and core interests cannot be reconciled.

His analysis clearly indicates that the most potential for outbreak is not obscure but points directly to the confrontation between the U.S. and China over Taiwan. This judgment is not alarmist but a rational analysis based on historical patterns.

The Repetition of 1937: How Economic Warfare Evolves into Hot War

Dalio’s heightened alertness to current dangers stems from the high similarity he perceives between the 1930s and today. Using the full evolution of WWII as a historical mirror, he reveals how economic crises can logically lead step-by-step to armed conflict:

Economic Collapse → Social Divisions → Rise of Extremist Politics → Resource Seizures Abroad → Escalation to Economic War → Outbreak of Hot War

After the 1929 Wall Street crash, Germany’s unemployment soared to 25%, Japan’s exports plummeted, businesses went bankrupt, and currency values collapsed. In this economic desperation, both countries turned to populist politics and military expansion — not out of innate belligerence, but because, in economic hardship, external expansion seemed more “cost-effective.” When domestic survival is threatened, seizing others’ resources and markets becomes a survival strategy.

A particularly noteworthy example is the U.S. economic strangulation of Japan:

• 1940: Restricted steel exports to Japan, causing shortages of key raw materials
• July 1941: Frozen all Japanese assets in the U.S., banned oil exports, and closed the Panama Canal
• As a result, 80% of Japan’s oil supply was cut off, with internal reserves estimated to last only two years
• Japan faced a dilemma: either unconditionally retreat or go to war to seize resources

December 7, 1941, Pearl Harbor was attacked.

Dalio emphasizes a key lesson: before hot war erupts, there is usually a long buffer period of economic warfare lasting about ten years. Although WWII was officially declared in 1939, the prelude began with the 1929 economic collapse. The escalation from economic despair to armed conflict is a long process — but once it reaches the final stage, it’s very hard to turn back.

The Present as a 2026 Reflection: How Far Along Are We?

Applying Dalio’s five levels of conflict to today’s geopolitical situation reveals a concerning picture:

Drawing an analogy with WWII timeline, the current world roughly corresponds to the period from 1937 to 1940 — the late middle phase of economic warfare, approaching the most dangerous critical point, but still some distance away. However, this distance is shrinking.

The key variable is whether capital war will escalate to a “full freeze” stage. Once capital war reaches an extreme, it’s akin to the total oil embargo on Japan — forcing the other side to choose between absolute retreat or armed confrontation. From this perspective, the historical logic of the Germany-France war remains relevant and even serves as a potential prelude to today’s international conflicts.

Market Signals: Three Eerie Indicators

Quantitative data offers a colder, more brutal evidence than political declarations. The World Uncertainty Index (WUI) measures global instability by tracking the frequency of the word “uncertainty” in country reports by The Economist Intelligence Unit. In Q3 2025, WUI hit a record high of 106,862.2, surpassing levels during 9/11, the Iraq War, the 2008 financial crisis, and the COVID-19 pandemic.

Factors driving this spike include: rising global tariffs, regional geopolitical conflicts, a weakening dollar, and political interference in Federal Reserve independence.

But here’s the eerie contrast: while uncertainty hits record highs, U.S. stock markets also reach new highs. The Nasdaq surpasses 24,000 points, the S&P 500 breaks above 7,000, yet the dollar index falls to around 95.

This seemingly contradictory phenomenon perfectly confirms Dalio’s description of a “late cycle”: governments, through massive money printing and fiscal spending, inflate nominal asset prices while real purchasing power declines. In other words, stocks are rising in numbers, but the dollar’s value is falling.

The real panic indicator is in commodities: Gold surpasses $5,500/oz, silver exceeds $100/oz — both hitting record highs. Dalio’s advice to “sell bonds and buy gold” is being echoed by market participants voting with real money. Smart capital is preparing for the worst.

How to Break the Cycle: Dalio’s Paths and the Harsh Reality

Dalio is not purely pessimistic. He believes that the big cycle does not necessarily end in catastrophe, but the conditions are extremely demanding:

1. A strong nation maintains productivity and measures spending, avoiding future debt
2. Systemic benefits should be shared broadly, not concentrated among elites
3. Maintain win-win relationships with opponents, rather than zero-sum conflicts

He emphasizes a fundamental principle: “Power, respect for power, and wise use of power.” The most sophisticated power is like a hidden knife — not to be flaunted. Overly showcasing force only provokes arms races and mutual decline. Instead, generosity and trust are far more powerful in building win-win relationships, far surpassing the destructive logic of mutual annihilation.

In his words: “Victory means getting what’s most important without losing what’s most important. Wars that cost more in life and money than they gain are foolish.”

But he admits that, despite the rational desire to avoid “foolish” wars, history shows they still happen. The reasons lie in the prisoner’s dilemma, gradual escalation, difficulty in concessions, and strategic misjudgments. The gap between human rationality and human weakness often determines the course of history’s joys and sorrows.

The Final Act of History: Can We Do Better Than Last Time?

Since 1500, Europe has experienced three complete “peace-conflict” cycles, each lasting about 150 years. After each prosperity, large-scale wars followed. The world is now at a turning point of the fourth cycle.

The Franco-German war is not just a historical event but a classic case of conflict escalation. Today’s world faces a similar test: the old order is disintegrating, the new order has yet to emerge, and the balance of power is shifting, with conflicts intensifying from Taiwan to the South China Sea, from trade to technology.

History does not repeat exactly, but it often rhymes. The key question is: Will humanity make wiser choices this time, or are we doomed to follow the tragic old path of the Franco-German wars?

As the most reluctant politicians at the Munich Security Conference are forced to face reality; as smart money floods into gold and silver; as the WUI hits record highs — we have little time left for hesitation and observation.