So, I was perusing through the hallowed ground of the original HB PP thread. I came across a post from one of the more prominent Bogleheads named Rick Ferri, whose comments are very relevant to this discussion here.
Failed gold speculation aside (which was tongue in cheek by the sounds of it), Rick Ferri is the perfect example of the kind of myopia that Ray Dalio refers to in his papers. The part where Ferri says "The nation can only come off the gold standard once. It does not happen twice. Good luck!" is particularly telling. Some thoughts.
As Dalio remarks, too many people see the economy too up close, day by day, week by week. Even financial professionals might look at a the better part of a single century. But even then it's usually only their home country. Dalio shows why Ferri is wrong in his statement. As illustrated by the chart in my OP, societies tend to shift from 1) hard money, to 2) claims on hard money, and 3) fiat money in a fairly predictable pattern. This is usually driven by the long-term debt cycle. We are currently living in the Type 3 system of fiat money typical of the latter stages of this debt cycle. Gold is essential as an asset to hold as the paper currency inevitably gives way to another hard money system to regain confidence. That is a conclusion you can prudently come to after studying hundreds of years of economic data rather than a few decades in portfolio visualizer. So much for the value of his "5 books, dozens of articles, and thousands of correlation studies."
As an aside, a country can go off the gold standard an indefinite number of times. So he's clearly wrong there. Dalio's paper clearly shows that returns to gold standards happen very regularly in history.
Interestingly, I noticed that Ferri, in his other writings, has committed another sin that Dalio touches upon which is confusing financial modelling with reality. In a discussion regarding Treasury bonds he once called them "damn safe". Um, no. We use short-term Treasury bills as a proxy for a risk free asset, but that is more out of convenience and pragmatism rather than them being truly riskless. In Dalio's paper he once again poignantly remarks that people's confidence in assets like T-bills tends to be highest right when they are riskiest. Because at that point the last failure of paper assets is a distant memory.
A good investment portfolio should be truly permanent. Ray Dalio isn't Harry Browne, but it's clear that they have thinking that dovetails together. For those who have not read the paper I linked in the OP (or the related papers by Dalio), I suggest you do. His work really drives home the fact that you come to different and more informed conclusions by looking at the broad scope of global history going deep into time rather than just the CRSP tapes going back to 1926. If you were to do the latter you'd end up with a Three Fund Portfolio.
P.S. I didn't say "Knucklehead" in this post because I was talking about an individual rather than a group. Keep it classy.
P.P.S. Why give more credence to the word of one financial professional like Dalio over the word of another like Ferri? Simple. When one guy is analyzing centuries of global data in a holistic way, and the other guy is sitting with his face 2 inches from the movie screen (too up close), it's easy to see why.