How Countries Go Broke Quotes

“because it is more enjoyable to borrow and spend”
― Ray Dalio, How Countries Go Broke: The Big Cycle

“Example 3: Interest Rates Spiral Upward to Keep Buyers in the Debt Assets In this example, I consider a government that has numbers similar to the US government now. Let’s say nominal income is growing at 3.9% a year, interest rates are 3.5%, and debt levels start at 580% of government income. In this example, we’ll assume that the government spends 32% more than it collects in income, including interest payments. Since this government is running a 12% primary deficit (i.e., excluding interest payments), it collects $5.4 trillion in revenue and spends $6 trillion in Year 1. It must pay $1 trillion in interest because it started with debts at 580% of government income, and interest rates are about 3.5%. Let’s assume that about 35% of the existing debt is coming due this year (which is about how much US government debt matures every year) and will need to be rolled over—so $10.5 trillion of existing debt will come due this year and will need to be paid back. In total, this government needs to sell $12.2 trillion of debt in Year 1. What happens if the public is no longer willing to buy this debt, or is a seller at current interest rates? Markets must clear, so this means that interest rates will go up until someone is willing to buy these bonds. But as the interest rates go up, that makes the government’s borrowing even more expensive, meaning the problems get even worse, creating a greater desire to sell the bonds, which creates even more upward pressure on interest rates. A spiral of rising interest rates leading to worsening credit risk, leading to less demand for the debt, leading to higher interest rates is a classic debt “death spiral.”
― Ray Dalio, How Countries Go Broke: The Big Cycle

“When the Big Debt Cycle that we are in began in 1945, the ratios of US government debt and US money supply divided by the amount of gold the US government had were equal to 7x and 1.3x, respectively, whereas now these ratios are 37x and 6x, respectively. D”
― Ray Dalio, How Countries Go Broke: The Big Cycle

“Default or devaluation, I don’t care. What I care about is losing my storehold of wealth, which inevitably will happen one way or another.”
― Ray Dalio, How Countries Go Broke: The Big Cycle