Ray Dalio, Why Not ‘Warfare Deleveraging’?
If Ray Dalio is fairly certain war is coming, how strongly should he try to prevent it? What are his principles for billionaires, if they have bad news to report?
I read Ray Dalio to learn about debt. What I came away with was an explanation of how debt lead to wars. https://www.principles.com/big-debt-crises/ Seventy years worth of debt that leads to depression then populism then war.
It’s right there in his book. But he doesn’t seem to believe war is coming this time. If war does follow the latest 70-year debt cycle, shouldn’t we expect 100 million plus deaths.
Okay, so Dalio has sidestepped some of the implications of his own research.
What does Dalio owe society? If you’ve amassed $18 billion, what responsibility do you have to invest that capital in programs that will reduce the risk of war? After all, his money was made timing credit cycles. In a sense, Dalio’s wealth is the retained-credit part of the debt that may get millions killed.
Have those around Dalio pointed out that he has become more concerned about his reputation than the uncomfortable implications of his research? Does he still practice the principles he preaches?
Or does he just not believe the guns will start firing?
Sure, I’m sympathetic. Would I fly around in my private jet telling everyone WAR IS COMING! I mean, what a downer! The invitations for Dalio to speak would probably decline. Talk of war certainly wouldn’t be good for Bridgewater’s business.
Dalio’s basic view is that the financial markets, and by extension the economy, work on credit. Credit naturally expands and contacts. We experience that mostly as growing jobs and wages, or shrinking jobs and wages. Credit also expands and contracts the value of assets, like houses and equity.
Behind all credit is debt. Through the credit cycles, which generally last around 5–7 years, some debt is re-valued to match weakened economic conditions. But most of it is rolled over, or refinanced. It grows. Eventually, after around 70 years, it has grown so large a massive deleveraging must take place — essentially writing off most of the debt and starting over.
There is no easy way to do that. If there was, the FED would have paid down the $4 trillion that has been sitting on its balance sheet since 2008 — which it said it would pay off. The FED isn’t being churlish. The public won’t allow them to deal with the problem (a subject for another day). And there are other piles of debt, just as large!
Anyway, Dalio explains that there’s a right way to deleverage, which he calls a “beautiful deleveraging”. (talk about a tone-deaf phrase! Nothing beautiful about mass bankruptcies) The opposite of that, Dalio says, is an “ugly deleveraging”.
Why didn’t he call them what they really are, a “warfare deleveraging” or a “peaceful deleveraging”?
I wish he would. Millions of lives are stepping onto the balance.
If you’re not familiar with Dalio, he produced one of the best videos about our system of economic financing. “How The Economic Machine Works”. Highly recommended!!! https://www.youtube.com/watch?v=PHe0bXAIuk0 If anything, watching the video will help you have a good conversation with the Uncle Goldbug in your family. It will also give you your sea legs for discussing the stormy subject of war.
