In his book, Big Debt Crises, Dalio studied more than 48 debt crises that have occurred throughout history.
Ray Dalio understands the macro environment as well as anyone.
While most investment managers were down big during the Great Financial Crisis, Dalio’s fund was up 8.7% in 2008.
Here is how Dalio views our global economy today:
In his book, Big Debt Crises, Dalio studied more than 48 debt crises that have occurred throughout history.
• Productivity Growth
• The Short-Term Debt Cycle
• The Long-Term Debt Cycle
In the long run, the economy is primarily driven by productivity
In the short run, the economy is primarily driven by credit and debt
Dalio defines credit as the giving of buying power.
The buying power is given to the borrower in exchange for a promise to pay it back, which is debt.
It’s especially good when credit is used by individuals and businesses to expand the production of the overall economy.
Dalio warns that throughout history, most countries eventually run into debt crises because policymakers generally err on the side of being too loose with credit.
In order to pay that back, that person will need to spend less than they make at some point in the future.
More credit ➡️ more spending ➡️ higher incomes ➡️ higher asset prices 🔁
Less credit ➡️ less spending ➡️ lower incomes ➡️ lower asset prices 🔁
Credit exacerbates the natural boom/bust cycle.
The short-term debt cycle, widely known as the business cycle, occurs roughly every 5-8 years.
Interest rates are a key driver in debt accumulation, as cheap money incentivizes individuals, companies, and countries to take on debt at artificially low-interest rates.
• Austerity (spending less)
• Debt defaults/restructurings
• The central bank printing money
• Wealth redistribution
It’s the easiest way out and the most effective tool relative to the other options.
This has been the Fed’s playbook since the GFC.
Going forward, I expect:
• The Federal Reserve funds US government deficits, leading to continued currency devaluation relative to real goods and services.
• Artificially low-interest rates with negative real rates.
Here’s Dalio explaining why:
• Have a solid emergency fund
• Live within your means
• Eliminate unnecessary debts
• Own a diversified portfolio
• Own quality, cash flow positive companies
Focus on what you can control.
https://t.co/8zDSOeubbi
Ray Dalio understands the macro environment as well as anyone.
— Clay Finck (@Clay_Finck) November 29, 2022
While most investment managers were down big during the Great Financial Crisis, Dalio\u2019s fund was up 8.7% in 2008.
Here is how Dalio views our global economy today: pic.twitter.com/rXFusmWVrk
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So the cryptocurrency industry has basically two products, one which is relatively benign and doesn't have product market fit, and one which is malignant and does. The industry has a weird superposition of understanding this fact and (strategically?) not understanding it.
The benign product is sovereign programmable money, which is historically a niche interest of folks with a relatively clustered set of beliefs about the state, the literary merit of Snow Crash, and the utility of gold to the modern economy.
This product has narrow appeal and, accordingly, is worth about as much as everything else on a 486 sitting in someone's basement is worth.
The other product is investment scams, which have approximately the best product market fit of anything produced by humans. In no age, in no country, in no city, at no level of sophistication do people consistently say "Actually I would prefer not to get money for nothing."
This product needs the exchanges like they need oxygen, because the value of it is directly tied to having payment rails to move real currency into the ecosystem and some jurisdictional and regulatory legerdemain to stay one step ahead of the banhammer.
If everyone was holding bitcoin on the old x86 in their parents basement, we would be finding a price bottom. The problem is the risk is all pooled at a few brokerages and a network of rotten exchanges with counter party risk that makes AIG circa 2008 look like a good credit.
— Greg Wester (@gwestr) November 25, 2018
The benign product is sovereign programmable money, which is historically a niche interest of folks with a relatively clustered set of beliefs about the state, the literary merit of Snow Crash, and the utility of gold to the modern economy.
This product has narrow appeal and, accordingly, is worth about as much as everything else on a 486 sitting in someone's basement is worth.
The other product is investment scams, which have approximately the best product market fit of anything produced by humans. In no age, in no country, in no city, at no level of sophistication do people consistently say "Actually I would prefer not to get money for nothing."
This product needs the exchanges like they need oxygen, because the value of it is directly tied to having payment rails to move real currency into the ecosystem and some jurisdictional and regulatory legerdemain to stay one step ahead of the banhammer.
