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Good day fellow investors. Ray Dalia recently discussed the situation on NBC, the risks and predicting something worse than a recession for us in developed markets. And there were this great comments from Claus how it can be manageable if not what is the ugly also here how would I fix the US budget and economy?
Maybe we are already at a point where there is no more fixing. Anyway, this was Dalio's interview. I have just quickly summarized it here. How tariffs are just the symptom of debt problems, the monetary issues and changing world order. Maybe if done really well, there can be some texture revenue and manufacturing, but for now those are done in a chaotic way.
They are just a rock in the production system. Lowering global production efficiency does a negative for the whole globe. We are close to a recession. But what he's discussing is worse than recession in breaking down of the monetary order. Unsustainable spending. And if that doesn't change, then a recession will be the last thing we should worry about.
He compares it to the 1930s, the changes to the world order, the debt situation, budget, how it has to go from 7 to 3% of GDP, how Congress should have bipartisan pledge. If not, there is a supply demand problem with debt that will lead in worse than a recession because of the value of money destruction.
Stohold of wealth is in jeopardy that will lead to disruptions more severe than 2008 1971 and further issues. The value of money, internal conflict, potential disruptive international conflicts solution policies to deliver things in an orderly way. Now people expect fixing but there is the bad and there is the ugly.
There is no miracle. Wow. Exuberant life ahead that we enjoyed the last 25 years. If we look at the federal finances, 27% of spending is borrowed, which leads to 7% and growing deficits and that all on the hope that GDP will just keep on growing. Everything looks well without two years of recessions here of something like that.
This is clearly unsustainable. And then the solution is to have policies to solve this in an orderly way. 3% budget deficits. You can get there by cutting entitlements, accepting a recession or two. You have to live from above your means as we have been doing the last 25 years to a bit below our means and better do that sooner than later.
Now look at these solutions here. Who's going to implement them? People vote for the people that are saying, "I'm going to increase your pension. I'm going to increase your entitlements. I'm going to lower your taxes. I'm going to give you jobs." All promises. Nobody votes. Oh, I'm going to lower your pension.
You are living above your means. We have to invest in education, productivity. We have to lower taxes for corporations, increase taxes for you, and manage long-term debt. No more overspending. We are going to tighten our belts. Nobody votes for them. Thus, there is no hope. Pray that the governments globally will do the right thing.
That's something we both know. So, how should you fix it? I really don't know because this is the situation. Debt levels are high, going higher. Interest costs are starting to bite. So Ray Dalio says sooner rather than later, but interest costs have already doubled over the last few years and now are biting and now you need to borrow more to pay those interest costs which creates a crazy situation.
Just to show you here, interest expense is now close to 1 trillion. It was half a trillion just a few years ago. And you can see that they are borrowing half of the deficit just to pay for interest costs. Thus you need to cut here, you need to cut here, you need to cut now double what you have had to cut a few years ago and things like that.
Then we have productivity going that demographics in the developed world are terrible and there is competition. There is 1 billion people in the developed world and 5 billion people now competing for the same global resources. As you probably know, I'm from Croatia. Beautiful, beautiful land. I'll be passing uh here in two weeks with the boat, but that's a different story.
The thing is that Croatia remains 70,000 seasonal workers short in 2025. There are now mostly people coming from Nepal and joining all the other import workers to Croatia. And speaking of Nepal, if you go to my website, we have charity here and all the money that I make on YouTube is donated. We have already paid for free projects to help the destroyed schools there in uh Nepal.
So, we refurbished the toilets and we save lives. Just a note there on Nepal. So, thank you for watching. You're doing a good thing. Okay, this is Croatia. at the blue line. It was 4.5 million people when I was a kid and now we lost almost 700,000 people. So over the long term that's a million people.
That's a quarter of the population down. And I think this is now where the rest of the developed world is going. At least Europe. I hear Trump with tariffs and manufacturing. and he wants to bring back jobs to the US. I'm very happy for you people in the US that you have so many young people searching for jobs.
Here in Europe, there is no such thing. There are simply no workers. So that's a different story. But this is where the developed world is going. If you look at the Euro area, government to debt to GDP, we are there at 3% deficits. So 3% deficit 3% inflation and then things are stable. You can see we are here around 90 87 87% of GDP.
But when you look at economic growth 1% 0.4% it's far from the 2.5% that you have in America. Plus if you calculate inflation properly I don't think inflation in Europe is at 2%. I would say it is at 4% and then if you take 4% you go back here then the actual economic growth wellbeing quality of life is -2 -1 -2%.
So if you ask me the situation in Europe that is doing what radalio is saying that the US should do is blleh that would be the best description. We have enjoyed a party of zero interest rates, of piling debts, of everything great for the last 25 years. And usually after a party comes a hangover. I don't know.
I don't drink alcohol. So, please let me know in the comments. If you get drunk the day before, how do you feel the day after? And then you see these things. The dollar is crashing as people now are starting to worry about this. The risk has been there as we discussed for the last seven years which is crazy.
So these are again gamblers, speculators working on that and we'll discuss in another video. I predict two recessions ahead going into the next I don't know 10 years and we have had a great period of 15 years no recessions. This is no recession and here also big recession and or we'll have one huge recession in the next 10 years or we'll have this every few years a few recession like we had in the 70s remember 71 big inflation big crisis one two three constant recessions and not such great times plus low debt here plus great demographics plus all new development, great technologies.
We are transitioning over the next decade into a new world order. Whatever we think about it, whether we like it or not, that will take some adjustments, thus increased volatility in the markets. We don't know what will happen. As always, as investors, if we focus on fundamentals where whatever happens, we are okay. That's the way to invest and that's what we
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