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Big Debt Crises

4.39  ·  Rating details ·  1,553 ratings  ·  119 reviews
“Ray Dalio’s excellent study provides an innovative way of thinking about debt crises and the policy response.” - Ben Bernanke

“Ray Dalio’s book is must reading for anyone who aspires to prevent or manage through the next financial crisis.” - Larry Summers

“A terrific piece of work from one of the world’s top investors who has devoted his life to understanding markets an
Kindle Edition, 456 pages
Published September 10th 2018 by Bridgewater
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Dhanar 1. It means the prices are too high relative to a thing. e.g. usually you can buy a house with a year of salary....salary goes up, so does the house p…more1. It means the prices are too high relative to a thing. e.g. usually you can buy a house with a year of salary....salary goes up, so does the house price...but suddenly a house is worth 10 year of salary...that is "high relative to traditional measures"

2. The prices are increasing too fast. In the first example, normally when salary goes up 5%, the house price goes up 5%... but then the bubble comes and suddenly the house is worth 10 years of salary (high level of price)...and next year its 20 years of salary (your salary only goes up 5%, house prices up 100%)

In this example, the house is on the bubble
Eric No, I think they are in fact countering the deflationary effects of the sharp drop in consumer demand by printing money.

Even that might not be enough…more
No, I think they are in fact countering the deflationary effects of the sharp drop in consumer demand by printing money.

Even that might not be enough to stop the economy from entering a deflationary period.

I think inflation is the last thing the Fed is worried about at this point.

This coronavirus 'bear market' is not like the GFC because there isn't much deleveraging that needs to occur. The economy was humming along nicely before this without excessive debt. We are also a much more diversified economy than we were in 2008. A lot of stuff has just moved online.

But who knows. It is an ongoing crisis and we are only a few months into it. (less)

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Edric Subur
Dec 27, 2018 rated it liked it
Key takeaways:

* Debt isn’t necessarily bad. In fact, having too little debt creates economic problems in the form of forgone opportunities. The key is to ensure productive utilization of the borrowed money to produce income needed to service that debt

* Crisis and debt cycles are inevitable due to human nature. During the bubble, people are blinded by the present market boom and driven by greed to participate. This continues until debt burden gets too big. Creditors worry, increase restriction an
Samuel Peck
Sep 17, 2018 rated it it was amazing  ·  review of another edition
Regular readers of Bridgewater's Daily Observations will be familiar with the thinking and sections presented here. Bridgewater's/Dalio's framework for thinking through debt cycles is historically grounded and pretty rigorous, and serves as a good reference and guide when thinking about markets - both in the past and future. The writing is easy to read, and the book does not need to be read from cover to cover - there are many parts and appendices that can be skimmed through or skipped and reser ...more
Oct 11, 2018 rated it really liked it
I received this book, for free, in exchange for an honest review.

This book is an excellent book for a specific audience.
This book needs to be read slowly and deliberately.
It is a work of great intelligence and research with a corresponding level of reading difficulty.
Much of the information was above my head and could only be understood if I were to devote months to read this. As a background, I have an intermediate level of finance/investing knowledge which is far better than average. That bein
Vagabond of Letters, DLitt
Jul 15, 2019 rated it liked it
Shelves: dont-own

Detailed analysis of *what*, void of cogitation as to *why*. Also very statist and interventionist (MMT echoes throughout), which is unpalatable but to a degree practical (i.e., one must trade through extant conditions, not ideals), but clearly is the author's (incorrect) ideal.

This book, without the historical charts, would not be worthy of four stars, and probably not three. It is a goldmine for the compendium of charts, which covereth a multitude of sins.

I recommend alongside this, for
Tomas Krakauskas
Mar 11, 2019 rated it it was amazing
Definitely TOP5 book about finance/economics I have ever read. For investors who want to get a deep understanding about causes for deflationary and inflationary financial crisis and processes that countries are facing during it this is a great manual. I especially enjoyed 2nd part of the book where anatomy of three devastating crisis (Weimar Republic 1920s, US 1929, US 2008) is presented in very detailed way by providing almost day by day chronology of event with iliustrations from newspapers an ...more
Akhil Jain
Sep 29, 2018 rated it really liked it
Fav highlights:
• To anticipate a debt crisis well, one has to look at the specific debt-service abilities of the individual entities, which are lost in these averages. More specifically, a high level of debt or debt service to income is less problematic if the average is well distributed across the economy than if it is concentrated—especially if it is concentrated in key entities. While some people think that the amount of money in existence remains the same and simply moves from riskier asset
Sanford Chee
Sep 25, 2018 marked it as to-read

It’s Time to Look More Carefully at “Monetary Policy 3 (MP3)” and “Modern Monetary Theory (MMT)”

The Next CRASH Causes & What Should You Do. Ray Dalio on The Economy

CFA review

"The pandemic will leave the rich world deep in debt, and force some hard choices" - Economist 23 Apr 2020
Sebastián Ortega
Jan 02, 2019 rated it really liked it
The first part of the book describes the archetypes of inflationary and deflationary debt crises in great detail. I suppose that for an economist it can be even too simplistic but for the layman is packed with insight and very illuminating.

The second part is a series of case analyses crisis by crisis taking into account extensive details, news of the time, etc. You don't need to work that part to get the takeaways of the book.

All in all, read it if you have a minimal interest on the next big cri
Jan Spörer
Jan 21, 2020 rated it it was ok
Here are my key takeaways from the book:
-Bad debt losses are when 40% of a loan’s value cannot be paid back and they account for about 20% of outstanding loans in a big crisis. This is 8% of the total debt. If debt-to-GDP is 200%, then the shortfall is roughly 16% of GDP. A society could spread these costs over 15 years to achieve yearly acceptable damage of 1% of GDP. Dalio concludes that a society's willingness and ability to spread out losses from bad debt is crucial. The ability of policymak
Mar 21, 2020 rated it it was amazing
Jun 02, 2019 rated it it was amazing
Dalio looked through all the financial crises and come up with crystal clear analysis of them. This is even better than Reinhart and Rogoff’s This Time is Different, because he tells both what economic theory says and what actually happens.

1. Deflationary Debt Crisis: Bubbles forms because of some real progress or innovation; then many investors joined the fray, driving asset prices and general income higher; this go on until the peak when debt is maximum; then the bubble bursts and depression
Marcelo Bahia
Dec 22, 2019 rated it it was amazing
Shelves: investing, economics
This is impressive by many metrics. Few people in the world must have devoted the same time and effort as Ray Dalio has to study big debt crises across global economic history. The book is huge but the actual template for understanding such crises is laid out in the first shorter section. Then it follows with a detailed, almost day-by-day analysis of three of the most extreme examples in recent history: the US depression in the late 1920s and 1930s, the Weimar Republic case in the 1920s and the ...more
João Cortez
Jan 06, 2019 rated it really liked it
Another great book from Ray Dalio. He presents a sound framework for understanding inflationary and deflationary debt cycles, and then analysis in details the German Debt Crisis of 1918-1924 as well as the US Debt Crisis of 1928-1937 and 2007-2011. There's also a chapter of 48 case studies with computer generated text. The book is very interesting but rather long and I wish the author would also explore and present the debt crisis from the perspective of the Austrian School of Economics. ...more
Worakan Vongsopanagul
May 09, 2020 rated it it was amazing
Shelves: investment, economy
This is one of the books that change my perspective about investment. Must read.
Stefan Bruun
Oct 18, 2018 rated it it was amazing
Probably the best book I've read on economics. Very easy to follow and thoroughly documented. I'd recommend it to anyone interested in finance or economics. ...more
Jan 30, 2020 rated it really liked it  ·  review of another edition
Some of it went over my head, but it was still eye opening blow by blow account of various financial crises with newspaper clippings on every page to break down what happened.
Maru Kun
Sep 24, 2018 marked it as to-read  ·  review of another edition
Shelves: investment-made
Looks like a very interesting book on financial crises from a source that might not be the first that the layman would want to turn to but which speaks with an authority based on actual practical experience rather than from political ideology.

A complementary review in the FT is here while a link to get the book for free is here.

Here is a quote from the FT review which in turn quotes the book. So a decade of austerity in the UK has been counterproductive has it? Well color me surprised, but inter
Sep 14, 2018 rated it really liked it
Previously this book was known as the Economic Principles, which included a separate section on what makes countries successful. This new book starts with Dalio's template on the different types of deleveragings (beautiful, deflationary, and inflationary), the underlying mechanics of different policy responses, and how investors reacted. The second part includes in-depth, week-by-week case studies on the Weimar hyperinflation, the Great Depression, and the 2008 financial crisis. The final part i ...more
Apr 26, 2020 rated it really liked it
Very thorough analysis on the debt crises happened from the several remarkable case studies, Weimar Germany , Great Depression, 2008 GFC
Mark Mitchell
May 23, 2020 rated it it was amazing  ·  review of another edition
Shelves: business
Dalio has a knack for explaining complicated macro-economic concepts clearly and concisely. In this book, he discusses how countries end up unable to repay their debts, and the actions that they can (and should) take when such a crisis occurs. Dalio distinguishes between inflationary deleveraging (in which prices, as measured in the currency of the debtor country tend to rise) and deflationary deleveraging (in which prices tend to fall). One of the most helpful observations in the book is that i ...more
Alex McLain
Feb 06, 2019 rated it it was amazing  ·  review of another edition
Shelves: favorites
If you have money in the stock market or real estate, the debt cycle is an important thing to understand. These books are an incredibly detailed overview of how the debt cycle works, how countries can manage the cycle, and in-depth case studies on three major debt crises from history. If you're like me and don't have a formal background in finance or economics the books may feel a bit dense. I recommend going slow in this case and spending time absorbing the concepts. Doing this really helped me ...more
Oct 29, 2018 rated it liked it  ·  review of another edition
Mr. Dalio, or rather his research team, have done a remarkably good job synthesizing a large data set of financial booms and busts.

I feel he falls into causal reductionism in attempting to describe systemic responses to financial crises. Admittedly, for those many states that suffer from chronic broken record syndrome, like Argentina, this analysis is useful. If we reduce our focus to the US, my only investment concern, his analysis is of little relevance.

There's abundant prima facie reasons to
Hashim Bhattee
Dec 31, 2019 rated it it was amazing
So useful it's comforting ...more
James Ford
Jul 27, 2020 rated it it was ok
Very, very dry. I expected more coverage of historical crises, but this only covers 3 crises in detail and gives an otherwise general overview of how debt crises play out.

The first section gives a description of the 2 types of debt cycle structures, i.e. the ones that end in deflationary deleveragings and the ones that end in inflationary deleveragings. The difference depends on whether the debt is held domestically or not, i.e. if the borrower can print away its problems. Dalio explains that i
Keith Wheeles
Mar 30, 2020 rated it liked it
Well-supported analysis of debt crises (reading this since it appears we are headed into a significant expansion of debt). A key takeaway for me is that during the reflation/recovery phase, wealth effects have played a large role (Dalio argues that they are primary over near term income effects). And that asset price inflation is its own sort of inflation (again, may be the primary effect). I came out of school in 1979 when US inflation was over 13% (the fed funds rate ranged up to 18%), and in ...more
Mario Peimbert
May 02, 2020 rated it it was amazing
It’s a great book. I’m not an economist but I use a little bit of finance on my work. I decided to read this book to try to understand the foundations of the crisis since I read the Prophecy of Robert Kiyosaki just before this one and left me with curiosity to deepen on economic crisis, specially now that is mixed with the COVI-19 phenomena.

This book -if you are not a economist or related professions- opens your world to the diverse factors that affect countries that experience recessions or de
May 17, 2020 rated it it was amazing
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Sep 02, 2020 rated it liked it
Mr. Dalio, or rather his research team, have done a remarkably good job synthesizing a large data set of financial booms and busts.

I feel he falls into causal reductionism in attempting to describe systemic responses to financial crises. Admittedly, for those many states that suffer from chronic broken record syndrome, like Argentina, this analysis is useful. If we reduce our focus to the US, my only investment concern, his analysis is of little relevance.

There's abundant prima facie reasons to
DeVante Edmonds
Jul 30, 2019 rated it it was amazing
I was in high school during the 2008 U.S. crisis, so I had little understanding about the causes of a recession. During the height of the crisis, I heard the a statement on the radio that stuck with me "a prominent Staples board members is willing to sell his share of the company for $1 due to the sheer amount of debt." I've always wondered why he would sell a multi-billion dollar retail company for such a paltry sum, and after a few google searches I couldn't grasp why. Years later randomly sea ...more
Apr 06, 2020 rated it it was amazing  ·  review of another edition
Shelves: worth-rereading
This shall definitely become the go to manual of the policy makers around the world.

Part 1 explains the Archetypal Debt Cycle and what Dalio calls "beautiful deleveraging", i.e. when the policy makers manage to soften the consequences of the inevitable accumulation of debt.

Part 2 has in debt analysis of the 2 most prominent debt crisis in history -> The Weimar republic hyper-inflation and the 1929 Great depression. Dalio and his team have collected a lot of information from this period, so we ge
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Raymond Dalio (born August 8, 1949) is an American investor, hedge fund manager, and philanthropist. Dalio is the founder of investment firm Bridgewater Associates, one of the world's largest hedge funds. ...more

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126 likes · 31 comments
“This way of thinking about risk caused many investors to increase their exposures beyond what would normally be seen as prudent. They looked at the recent volatility in their VAR calculations, and by and large expected it to continue moving forward. This is human nature and it was dumb because past volatility and past correlations aren’t reliable forecasts of future risks.” 2 likes
“A “beautiful deleveraging” happens when the four levers are moved in a balanced way so as to reduce intolerable shocks and produce positive growth with falling debt burdens and acceptable inflation. More specifically, deleveragings become beautiful when there is enough stimulation (i.e., through “printing of money”/debt monetization and currency devaluation) to offset the deflationary deleveraging forces (austerity/defaults) and bring the nominal growth rate above the nominal interest rate—but not so much stimulation that inflation is accelerated, the currency is devaluated, and a new debt bubble arises.” 1 likes
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