Ray Dalio discusses non-debt money and asks whether investors have enough non-backed debt assets.
But Think about it. What asset in a debt-fuelled economy is not backed by debt in some form or another?
Brick and mortar, a tangible asset, has its value backed by serviceable debt. Between 2012 and 2017, approximately 70% of properties were purchased, with a mortgage. So, in light of the current central bank tightening cycle, average mortgage payments are up 96% in just four years. Wages are continuing to fall.
Being a property owner is a distant dream for young people today. Even renting is not possible without having the bank of Mum and Dad.
“Even renting is not possible without having the bank of Mum and Dad”
WEALTH TRAINING COMPANY
Frankly, soaring homeless rates in the metropolis, particularly amongst the young population, underscores a failing system nearing breaking point.
Leveraged assets are not a good store of value if the loans which finance the purchase of those assets can not be serviced due to the soaring cost of credit.
Many would-be property buyers are now wondering whether we could see a repeat of the 2008 subprime mortgage crisis as mortgage arrears hit near-record rates in a so-called good job market.
When the growing masses of working poor can no longer afford a roof and, to put food on the table, debt money becomes junk, and skills in a real economy become king.
So Ray Dalio discusses non-debt money as a haven from the imploding debt bubble, which started in the 2023 untelevised treasury bond market crash, worse than the 2029 Great Depression, which slashed hundreds of billions of dollars off the value of bond portfolios, claimed at least five banks that year. Today the bond market remains tense, with another bank failing last month as debt money deflates, losing its purchasing power and causing an inflation cost of living crisis.
“When the growing masses of working poor can no longer afford a roof and, to put food on the table, debt money becomes junk”
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With multiple wars on multiple fronts, war is inflationary as I have noted previously. So perhaps the only realistic way inflation falls is if the statisticians cook the books and lie with statistics.
When a fantasy system values those who spin more than those who endeavour to create genuine value, it inevitably leads to a house of cards crashing down. The sun could be setting on the unilateral world order paper empire
Viewing the wonders of Western weapons displayed, like captured trophies in a recent Moscow exhibition, could make people wonder if the hard power of the Empire is also a paper tiger.
Where is the exceptionalism?
“Good money is both a good medium of exchange and a good storehold of wealth widely accepted around the world” – Ray Dalio
Ray Dalio discusses non-debt money in the context of the current war, which challenges the post-WW2 unilateral world order
“Good money is both a good medium of exchange and a good storehold of wealth widely accepted around the world. The most globally recognized and accepted monies are the dollar, to a lesser extent the euro, to a much lesser extent the yen, and, to an even lesser extent the Chinese renminbi,” posted Ray Dalio in his LinkedIn.
“These monies are held in debt assets—i.e., they are debt-backed money—i.e., currency = debt.
In other words, when you hold these monies, you are holding debt liabilities, which are promises to deliver you money,” he wrote.
Ray Dalio discusses non-debt money as a better store of value
“History and logic show that when there are big risks that the debts will either 1) not be paid back or 2) be paid back with money of depreciated value, the debt and the money become unattractive,” he wrote.
So when central banks keyboard currency uninsured bank deposits can be paid to the account holders, which is right, but it also depreciates the currency, ‘s purchasing power
You know the debt system of money is nearing the end when central banks create liquidity to just keep the banks afloat.
There will be no mass bank runs like the previous 1929 Great Depression, but I see a hyperinflationary depression in WW3 ahead.
“Since debts are promises to pay money, when a government has too much debt to be paid, its central bank is likely to print money. This prevents a big debt squeeze by devaluing the money (i.e., inflation),” wrote Ray Dalio.
“Old money invests in non-debt money assets, not stocks or bonds, assets that do not depreciate and weather inflation” – Wealth Training Company
Ray Dalio discusses non-debt money and what they are
“Gold, on the other hand, is a non-debt-backed form of money. It’s like cash, except unlike cash and bonds, which are devalued by risks of default or inflation, gold is supported by risks of debt defaults and inflation. It is held by central banks and other investors for this reason. Gold is the third-most-held reserve currency by central banks, more so than the yen or renminbi. Cryptocurrencies are also non-debt monies. I don’t know of any other types of non-debt monies, though some people might argue that gems and art act similarly because they are non-debt, portable, and widely accepted storeholds of wealth,” he wrote.
“When the financial system is working well—which is when there aren’t debt and inflation crises and the borrower-debtor governments printing debt-backed monies are meeting their obligations and paying their interest without printing and devaluing money—debt assets and other financial assets are good assets to hold; on the other hand, when the reverse is the case, gold is a good asset to own. That’s the main reason gold is a good diversifier, and why I have some in my portfolio,” he added.
The secret of old money, retained by family dynasties in Europe for 900 years. How did these dynasties retain their wealth for so long?
Old money invests in non-debt money assets, not stocks or bonds, assets that do not depreciate and weather inflation.
The one-third rule entails investing one-third in land, one-third in precious metals and precious stones and one-third in Art paintings.
But civil war, global war could be the wild card throwing all the marbles in the air.
