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something worse than a recession comes along ? I know what you're thinking : "Mark, shut up, dude. We don't need such vibrations here. " Well, that's not me saying that. This is, damn it, Ray Dalio, okay? Of course, a recession is two quarters of negative growth, layoffs, lost savings, and hard times.
This was already in 2022 under Biden. But they say it will happen again. Low rates and money printing, of course, should revive the economy when things go awry. But Ray Dalio says it's just a walk in the park compared to what he believes is coming— catastrophic deleveraging. And Trump's tariff war could be the spark that ignites the powder keg, threatening markets like never before.
So let's dissect Ray Dalio's dire warning to see if we can weather this financial storm. So, Ray Dalio, the legend of legends, the billionaire founder of the largest hedge fund Bridgewater Associates, warned us about what he calls the long-term debt cycle and inevitable deleveraging. This will obviously happen.
The question is, is this already happening now, or soon? That's the real question. In his next post, Ray asked, "Are we at a turning point in this cycle?" Well, what exactly does that mean? Let's figure it out. The long-term debt cycle is a pattern that unfolds over decades. It all starts with borrowing to fuel growth.
Governments, businesses, households— all borrow to spend and invest. That feels good, man. Debt is good, greed is good, baby. But there comes a time when it becomes a little too much. You drink too much tequila, find yourself without pants, and things get crazy. This is unstable. When lenders stop lending and borrowers cannot pay, the deleveraging cycle begins.
This is not just a recession. This is much worse. Think back to the Great Depression of the 1930s after the stock market crash of 1929: deleveraging caused the market to fall by 90%. Market decline of 90%, unemployment of 25% in the US, GDP decreased by about 36% from 1929 to 1933. And taxes are like salt in a wound.
World trade fell by 66% due to tariffs such as the Smoot- Hawley Act. However, Dalio's warning is not new. He has been studying these cycles for years, and his book on how countries go bankrupt delves deeply into how nations collapse under the weight of debt. The question is, are we there yet? So, before we delve into the answers, friends, if you are trading in the cryptocurrency market, Bitcoin, Ethereum, Solana, Dogecoin or anything else, you need a great platform to do it.
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For many crypto traders, leverage is simply borrowed money to open a larger position. Of course. In short , leverage is borrowed money, and deleveraging is the complete opposite. But let's hear it directly from the legend himself, Ray Dalio. So, the economy begins the process of deleveraging. During deleveraging, people cut spending, incomes fall, credit disappears, asset prices fall, banks get into trouble, the stock market collapses, social tensions rise, and all of this starts to spin in reverse.
It sounds, to be honest , pretty crappy. He describes it as a vicious cycle, which of course it is. When debt payments rise and incomes fall, borrowers find themselves in a vice, credit resources run out, they cannot borrow money to repay debts, and so on. This is real horror. They are forced to sell assets, flooding the market with them while spending is cut , and they cannot find buyers, causing prices to fall even faster, causing the stock market to crash and the real estate market to collapse.
Everyone is selling everything, literally at any price, to get cash in hand, so as not to go bankrupt. Think of it as a cryptocurrency crash. Big red candles on the charts, stop losses are triggered , traders are panicking, buying is slowing down, everyone is going to "lick their wounds." But this is the stock market, so everything happens slower here.
This is the real estate market, everything happens slower here. What Ray Dalio is warning about is much worse. This is not just a market correction that we will come out of in a few months. This is a systemic reboot, a kind of terrible ten-year reckoning . Dalio notes that this happened in the US in 2008, in Japan in 1989, and during the Great Depression of the 1930s : unlike a recession, where lower interest rates can stimulate borrowing, deleveraging does not respond to this.
Rates fall to 0%, as in the 1930s and 2008 , and stimulus ends. The difference, says Ray Dalio, is that during deleveraging, the debt burden of borrowers becomes too great and cannot be alleviated by lowering interest rates. Look, I know that a zero interest rate on borrowed money is usually a good thing, but when debt levels get so high, people just can't afford to borrow any more.
If someone is drowning in debt, offering a cheaper loan won't really solve their problem. The global financial order is starting to show serious cracks under the mountain of debt we see, and let's just say it doesn't look very fantastic right now. The United States national debt has ballooned to $36.7 trillion.
Yes, trillion with a "T" in 2025, and projected interest payments will reach 1 trillion this year alone—that's more than the entire defense budget. Madness. With a US GDP of $27 trillion, this debt- to-GDP ratio is 122%—a level not seen since World War II, and a level that usually indicates an imminent large-scale economic disaster.
Although the US is a global hegemon and has the world's reserve currency, it can therefore postpone problems longer than most other countries. According to the Institute of International Finance , global debt has risen to $318 trillion , and emerging markets such as China hold huge positions in U.S.
bonds. If trust in the system is shaken, the consequences could be absolutely catastrophic. Trump's trade wars could be the spark that ignites the deleveraging of the entire global financial system. Tariffs can trigger a spiraling collapse of everything. It will be a time of extreme despair, when people will tear their hair out and gnash their teeth.
According to research by JP Morgan, tariffs raise costs, restrict liquidity, and slow trade, creating stress for businesses and markets. Due to tariffs, global real GDP growth is expected to be just 1.4% in the fourth quarter of 2025, down from 2.1% at the start of the year, meaning that countries' debt-to-GDP ratios are likely to continue to deteriorate.
These tariffs, of course, take us back to the 1930s, when protectionism not only failed to help us get out of the crisis faster, but actually deepened the Great Depression. instead of helping, it only exacerbated the problem. As trade slows, economies contract, and countries, companies, and of course, heavily indebted households face a very harsh reality.
They can no longer borrow funds to cover their debts. And since debt payments are someone's income, many people's incomes are also starting to fall. All this creates the conditions for a terrible test for the global economy: a large-scale reduction in the debt burden, the sale of assets for next to nothing, spending cuts, and outright defaults of companies, households, and in some cases, entire countries.
Unlike recessions, which can last only a year, the process of debt reduction can drag on for decades. A lost decade for stocks. I've been hearing about this more and more lately , especially in the context of customs issues. We are approaching a lost decade for American stocks. Similar to the situation after the dot-com bubble burst in 2000, the global monetary order could collapse, threatening markets with a crash worse than anything we have seen in our lifetimes.
So now we know that if Dalio was right, this is a mess. Uh, anyway, is there anything we can do? Of course, you need a hedge. Those who have been watching us for a long time know what the answer is. This is Bitcoin. But, of course, Bitcoin is not the only answer. Bitcoin is currently holding up very well during the current market turbulence.
Gold, of course, became the real star here. Cash, real estate, your own business—something that would ideally be recession-proof. And look, I know about Bitcoin. You don't need much convincing if you watch this video. But for those who are still hesitant, think about this . Bitcoin has a fixed supply of 21 million.
Of that 21 million, millions are probably lost forever, effectively making the offer smaller. All this means is that you have an asset that is relatively deflationary over time , which is the exact opposite of a paper money system. Because no matter what crisis comes, you have to understand: this is a very, very simple truth for you.
The answer comes down to printing money, because that's how it's always been. During the coronavirus pandemic, when global stimulus caused debt to soar, Bitcoin went into parabolic growth, as did money printing. Big money has also taken an interest in Bitcoin. Bitcoin ETFs in the US currently hold between 5 and 6% of the total Bitcoin supply.
The US is considering creating a strategic reserve and could buy up to a million Bitcoins if proposed bills are passed. And look, the fate of Bitcoin, despite the fact that it is bought by governments, banks, and similar structures, does not depend on any of them. It is a neutral asset, a reliably neutral global asset.
So it cannot be devalued like fiat, and no one can control it. A bit like gold, but for the modern era. Given this, no one has a crystal ball, and we don't know whether Ray Dalio's prediction will come true, or, let's say, it will come true, but with an error of several years. We'll see. Will this tariff war ultimately be a good thing?
Will it be possible to reach an agreement? Will world trade become freer than ever before? Let's see. We also cannot predict what the price of Bitcoin will be in the future. However, I do know that Bitcoin was created as a lifeboat after the 2008 global financial crisis , and it has stood the test of time during the pandemic.
He survived. Although the volatility was huge, don't get me wrong, he persevered. I also know that the largest institutions are buying it. Larry Fink from BlackRock has become the world's biggest Bitcoin advocate, you know? Literally saying that Bitcoin is a hedge against global uncertainty and the collapse of fiat.
So I'm paying attention to this. My Bitcoin wallet is ready. And yours? Thanks for watching.
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