Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail

by Ray Dalio

At the time of this writing, this late-cycle debt dynamic is now playing out in the United States at both the state and federal levels, with the main difference between them being that state governments can’t print money to pay their debts while the federal government can. The federal government and many state and city governments have large deficits, large debts, and large wealth gaps, and the central bank (the Federal Reserve) has the power to print money. So, at the time of this writing, the central bank is printing a lot of money and buying a lot of federal government debt, which finances the government spending that is much bigger than the federal government’s intake. That has helped the federal government and those it is trying to help, though it has also cost those who are holding dollars and dollar debt a lot in real purchasing power.