Ray Dalio sees a massive debt problem and explains his somewhat sombre view in his latest podcast.
Ray Dalio believes we are in the late part of a debt cycle where servicing debt payments begin to squeeze consumption, which gets to a level where it becomes a self-reinforcing problem. Indeed, corporate bankruptcies and credit card delinquencies are currently at levels similar to the Great Recession more than a decade ago.
“Ray Dalio believes we are in the late part of a debt cycle”
WEALTH TRAINING COMPANY
When bond investors fret about defaults, Ray Dalio sees a massive debt problem
Then central banks come to the rescue, increase the money supply and purchase the assets, bonds.
Ray Dalio sees a massive debt problem when there is a limit to debt growth
Ray Dalio sees patterns in history with central bank monetary policy.
“First, there is an interest rate policy. Money is tied to gold, which is something hard. But when there is too much printing of money, and the need for credit doesn’t work, central banks go to an interest rate driven monetary policy,” he said.
“When interest rates cannot go any lower, there is a situation where there is an imbalance between the demand and supply for bonds, credit instruments. When the supply offered is much greater than the market demand, then there is monetary policy two, which is quantitative easing QE, the printing of money and the purchases of those bonds by the central bank,” he added.
“When the supply offered is much greater than the market demand, then there is monetary policy two, which is quantitative easing QE”
RAY DALIO
Ray Dalio sees a massive debt problem, an imbalance of supply and demand for bonds where central banks revert to QE
But money printing widens the wealth gap, which creates social friction.
Ray Dalio explains that when central banks buy bonds, QE bids the price of those bonds higher, making asset holders wealthier, but the wealth doesn’t trickle down.
Monetary policy three is where the government and central bank coordinate to implement a fiscal and monetary policy.
“So all the central banks have significant losses on their bond holdings, and depending on how it is handled, it creates a financial problem”
– Ray Dalio
The government can only spend and tax and needs the central bank to fund its deficit.
In other words, the central bank, not the citizens, now decides where the government can spend money. If the secret shareholders of the Fed, a private banking cartel, decide war would benefit their agenda to maintain US hegemony and the USD on the throne as a world reserve currency, billions of dollars will be printed to build, equip and train armies, it will happen.
Put simply, monetary policy 3, fiscal and monetary policy, is working in tandem to fund and coordinate WW3.
Think about it. We have seen the money supply take a moonshot over the last three years, and they would only do that if they thought it didn’t matter.
One man’s debts are another man’s assets. If there is an imbalance, central banks buy that.
However, the imbalance results in massive printing, which debases the currency because the central bank creates excessive currency, to buy loss-making assets.
“So all the central banks have significant losses on their bond holdings, and depending on how it is handled, it creates a financial problem,” he said.
Ray Dalio sees a massive debt problem where it could end in a collapse in confidence in central bank currency.
“Red flag central bank switching to QE again,” he said.
Ray Dalio believes bonds are worse than equity when central banks print money.
