Question

Ray Dalio's article on Money, Credit, Debt discusses the long-term debt cycle.

The six stages are

1) It Begins with No or Low Debt and “Hard Money”

2) Then Come Claims on “Hard Money” (aka, “Notes” or “Paper Money”)

3) Then Comes Increased Debt

4) Then Come Debt Crises, Defaults, and Devaluations

5) Then Comes Fiat Money

6) Then Comes the Flight Back into Hard Money

1. Where do you think we currently stand in the US with respect to this cycle?

2. What do you believe comes next in this current state?

Answer 1

1 This is the stage 4 where there is a debt crisis and there is a huge possibility of default along with devaluation happening all around the United States as the global economy has crashed into the bear market and there is a recession around the corner as various industries are already announcing the layoff and cutting their growth targets as well as many of the airlines companies have already defaulted on their debt so they are highly devalued. One can see that even the legendary investor Warren Buffett had offloaded the shares of airlines companies as he feels that the whole industry would be in a total mess.

2.Next stage will be printing of the Fiat money as well as it will help the federal deserve to bail out the companies which are distressed by providing them with monetary stimulations and not letting them default and spread a contraction in the whole economy, so that the economy could be re stabilized.