Money, Credit, and Debt

Ray Dalio, one of the most successful money managers alive, is both a phenomenal investor and a rigorous thinker. Over the past decade, he’s spent a growing amount of time sharing how he operates and makes sense of the world.

A recent example of this is a newsletter series he’s been writing on LinkedIn called “Principled Perspectives.” He’s been sharing a post every 2 weeks or so on his notes on the changing world order.

This week’s post on “Money, Credit, and Debt” was an education in how to think about money, credit, and debt. It is dense, long, and would fit in well into a thesis written for a graduate school finance class. He takes the time to explain how our financial system works, what long and short term debt cycles are, how currencies rise and fall, and why reserve currencies matter to the strength of nations.

I am grateful to him for taking the time to educate us. It is an amazing way to spend 20-30 minutes.

PS: My synthesis of his post –

• • We are approaching the end of the long term debt cycle that started at Bretton Woods in 1944
  • While there have been many short term recessions and expansions, the long term debt cycle will likely be a reset that will involve a deflation of major reserve currencies (in this case, the dollar
  • While the US still benefits from being the dominant reserve currency, the end of a long term debt cycle typically brings major domestic and international changes