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Ray Dalio

@RayDalio

5 Jan

If the amount of money being lent to finance the debt is inadequate, it is perfectly fine for the central bank to print the money and be the lender of last resort as long as the money is invested to have a return that is large enough to service the debt. (1/4)

History shows and logic dictates that investing well in education at all levels (including job training), infrastructure, and research that yields productive discoveries works very well. (2/4)

In fact, improvements in education and infrastructure, even those financed by debt, were essential ingredients behind the rises of virtually all empires, and declines in the quality of these investments were almost always ingredients behind empires’ declines. (3/4)

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Ray Dalio

@RayDalio

2 Jan

This evolutionary cycle is not just for people but for countries, companies, economies—for everything. And it is naturally self-correcting as a whole, though not necessarily for its parts. (1/4)

For example, if there is too much supply and waste in a market, prices will go down, companies will go out of business, and capacity will be reduced until the supply falls in line with the demand, at which time the cycle will start to move in the opposite direction. (2/4)

Similarly, if an economy turns bad enough, those responsible for running it will make the political and policy changes that are needed—or they will not survive, making room for their replacements to come along. (3/4)

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Ray Dalio

@RayDalio

30 Dec 21

Write down what your one big thing is (such as identifying problems, designing solutions, pushing through to results) and why it exists (your emotions trip you up, you can’t visualize adequate possibilities). (1/4)

While you and most people probably have more than one major impediment, if you can remove or get around that one really big one, you will hugely improve your life. If you work on it, you will almost certainly be able to deal successfully with your one big thing. (2/4)

You can either fix it or you can get the help of others to deal with it well. There are two paths to success: 1) to have what you need yourself or 2) to get it from others. The second path requires you to have humility. (3/4)

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Ray Dalio

@RayDalio

30 Dec 21

I saw how these struggles happened in timeless and universal ways, and how these struggles had huge implications for all aspects of people’s lives... (1/5)

... starting with what happened with taxes, the economy, and how people were with each other through periods of boom and bust and peace and war, and how they unfolded in cyclical ways, like the tide coming in and out. (2/5)

I saw that when these struggles took the form of healthy competition that encouraged human energy to be put into productive activities, they produced productive internal orders and prosperous times... (3/5)

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Ray Dalio

@RayDalio

28 Dec 21

In fact, it seems good rather than bad to most people because:
- It helps to relieve debt squeezes.
- It’s tough to identify any harmed parties that the wealth was taken away from to provide this financial wealth (though they are the holders of money and debt assets). (1/5)

- In most cases it causes assets to go up in the depreciating currency that people measure their wealth in, so it appears that people are getting richer. (2/5)

This is what has been happening during the coronavirus crisis as central governments and banks send out large amounts of money and credit. Note that you don’t hear anyone complaining about the money and credit creation... (3/5)

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Ray Dalio

@RayDalio

23 Dec 21

That is because printing a lot of currency and devaluing debt is the most expedient way of reducing or wiping out debt burdens. When debt burdens are sufficiently reduced or eliminated, the credit/ debt expansion cycles can begin again. (1/4)

As I explained comprehensively in my book Principles for Navigating Big Debt Crises, there are four levers that policy makers can pull to bring debt and debt-service levels down relative to the income and cash flow levels required to service debts: ... (2/4)

1. Austerity (spending less)
2. Debt defaults and restructurings
3. Transfers of money and credit from those who have more than they need to those who have less than they need (e.g., raising taxes)
4. Printing money and devaluing it (3/4)

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