ray dalio principles for changing world order

And now if you have a five percent inflation and so on, the things are changing. One would have lost seven percent in buying power. I mean, from the investor’s point of view, think about how bad that debt is. And so, we’re in a cycle where there was a lot of money and credit. We know that you have a recession to a recession, and on average they’ve been about seven years, and they’re shorter when you start quicker. And so, what we’ve seen is that throughout history, we can go back literally thousands of years, as the debts rise and there’s somebody’s financial assets, there’s a balancing act that becomes increasingly difficult.Īnd so, when we look at what’s ahead, we do know how these cycles work. Also, one man’s debts are another man’s financial assets.

And I think that people are not looking, and the Fed is not adequately looking, at the fact that when there’s a lot of debt, and you create a lot of debt and money, which of course, is a great stimulant. Ray Dalio There’s cyclical inflation and there’s monetary inflation. So I think it’s a very, very difficult, probably as challenging a moment for monetary policy as we’ve had in decades. And that that is probably going to be a thing that’s going to come with a bunch of uneasiness, turbulence in markets, maybe even a recession. And that if we want to cool things off and get to anywhere near two percent inflation, if we want to maintain confidence in our currency, we’re going to have to make some fairly substantial adjustments. And I don’t think that the market in general and I don’t think many of the policymakers appreciate just how big that overheating is. My sense is that we’ve had a set of developments that you’ve studied over a long time period, but that we very dramatically, about a year ago, ramped up the level of fiscal spending, ramped up the amount of liquidity that the Fed was providing we did it at a time when, because of Covid, there were limits on how much consumers could spend, so they built up a big overhang and that the economy almost had to overheat that, to mix the metaphor, the bathtub almost certainly had to overflow. Larry Summers So Ray, let’s start on that question of inflation. You can watch the video above and read a full transcript below. Held in New York City, this conversation has been edited for length.

Ray dalio principles for changing world order