Ray Dalio

So you could watch the government do that. You can see that how interest is eating up and debt service is eating up and that means there's less money. And then you also can see how heart attacks take place. And they're very, you know, economic debt heart attacks. And the way they take place is by looking at the supply and the demand.

If you have a lot of debt and then you have a large supply of debt, That has to be bought. Somebody's got to buy it. And so that when you get to the point where there's debt risks, there's not only the new supply that has to be offered, but there is the possibility of holders of those debt assets selling those debt assets. And so the supply becomes overwhelming relative to the demand.

If you have a lot of debt and then you have a large supply of debt, That has to be bought. Somebody's got to buy it. And so that when you get to the point where there's debt risks, there's not only the new supply that has to be offered, but there is the possibility of holders of those debt assets selling those debt assets. And so the supply becomes overwhelming relative to the demand.

And then what that means is it's the same dynamic for the government as it is for an individual or a company, except the government can print money. So when that debt service burden rise or there's a big supply demand imbalance, if the government, most importantly the central bank, doesn't print money and buy it,

And then what that means is it's the same dynamic for the government as it is for an individual or a company, except the government can print money. So when that debt service burden rise or there's a big supply demand imbalance, if the government, most importantly the central bank, doesn't print money and buy it,

then there has to be a rise in the price of the debt to constrict borrowing, and that borrowing constricted, that credit that is not gonna come, will weaken the economy and cause bad economic conditions. And so they can let that happen, or they can print money and buy the debt and monetize it. When they do that, that's inflationary and it lowers the value of the debt.

then there has to be a rise in the price of the debt to constrict borrowing, and that borrowing constricted, that credit that is not gonna come, will weaken the economy and cause bad economic conditions. And so they can let that happen, or they can print money and buy the debt and monetize it. When they do that, that's inflationary and it lowers the value of the debt.

In either case, you don't want to hold that debt because either there's a debt service problem or there's a depreciation. You get paid back with a greater supply and cheaper debt.

In either case, you don't want to hold that debt because either there's a debt service problem or there's a depreciation. You get paid back with a greater supply and cheaper debt.

money and that is the dynamics and that's the mechanism and because it can be measured it can be seen in all countries you can watch it happen and so like you're going to your doctor you can measure these things you can see them and you can know what needs to be done so yeah i want to just

money and that is the dynamics and that's the mechanism and because it can be measured it can be seen in all countries you can watch it happen and so like you're going to your doctor you can measure these things you can see them and you can know what needs to be done so yeah i want to just

That's right. They're essentially making the money up. Right. And buying.

That's right. They're essentially making the money up. Right. And buying.

Very well described. And, you know, a good example was in covid. There were two waves. The first wave was the COVID wave in which the government wanted to, and actually did, deliver a lot more money to people, companies, than there was a loss of income. So they first waived a lot of that money. Where did they get the money from? They had to borrow it. The central bank then came in and lent them.

Very well described. And, you know, a good example was in covid. There were two waves. The first wave was the COVID wave in which the government wanted to, and actually did, deliver a lot more money to people, companies, than there was a loss of income. So they first waived a lot of that money. Where did they get the money from? They had to borrow it. The central bank then came in and lent them.

That was the primary. Then the second, when President Biden was elected, there was a second wave of that after COVID. It was mostly like a universal basic income thing. In other words, hand people money and we're going to be better off. And so they handed people money doing that same exercise again. And so naturally, all these people got a lot of money. And so they deposited them in banks.

That was the primary. Then the second, when President Biden was elected, there was a second wave of that after COVID. It was mostly like a universal basic income thing. In other words, hand people money and we're going to be better off. And so they handed people money doing that same exercise again. And so naturally, all these people got a lot of money. And so they deposited them in banks.

They went out and spent and so on. And it therefore shouldn't be surprising that we had a big wave of inflation. And we also had a lot of banks buy government bonds, which they lost a lot of money on. And that was that crisis. So that's how the mechanics work.

They went out and spent and so on. And it therefore shouldn't be surprising that we had a big wave of inflation. And we also had a lot of banks buy government bonds, which they lost a lot of money on. And that was that crisis. So that's how the mechanics work.

Very well said, Dave. You can't get richer by making money. You know.