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Hello everyone and welcome. As you know, on this channel we talk about 360° growth and in this new video. Today we'll explore the insights of Ray Dalio, founder of the world's largest hedge fund, Bridgewater Associates, and author of seminal books like Principles. Dalio has over 50 years of experience in financial markets and has developed a unique perspective by studying historical cycles of the global economy.
Let's see together what his warnings are for the future and how we can prepare. According to Dalio, there are three important historical phenomena happening today that we have never experienced in our lifetime. The creation of debt and money, the amount of debt we have, the speed at which we are creating it, and the fact that the Federal Reserve and other central banks are printing money.
This phenomenon has never occurred at this level, except in the period 1930-1945. Internal conflicts, populism from both the right and the left, irreconcilable differences with the largest wealth gap ever. Political divides and populism are at an all- time high, with inequalities even greater than in the 1930-1945 period.
International conflicts. Throughout Dalio's life, the United States has clearly been the dominant power in the American world order. By 1945, the US had become the world's leading power, accounting for half of global GDP and holding 80% of the world's money. Gold was the currency at the time and a military monopoly.
Italio uses 18 metrics to measure a country's health, including Eltruneiru, percentage of world GDP, EFAL of exports, reserve currency status, level of education, and competitiveness. The United States is in decline, not only in relative terms, but also in absolute terms by some measures. Meanwhile, China has emerged as a major competitor.
Since 1984 when God began visiting China, per capita income has increased 26-fold. God explains that the business cycle is quite simple. When you create debt, you get a short-term stimulus, but a long-term depressive effect, because that debt must be repaid. The Fed and the government created a huge amount of debt and credit, causing a great leap forward and creating a bubble.
now they are slowing down , which will likely create a big leap backwards. Inflation is a simple matter, it is the amount of money and credit spent divided by the amount sold. To eliminate inflation, you need to make people spend less, which leads to an economic recession. The central government will borrow about 5% of GDP, while the Federal Reserve will sell or let expire assets worth another 5% of GDP.
Who will buy all these stocks? Pension funds and foreign investors are not affected. As a result, interest rates will have to rise to a level that limits demand for private credit, reducing spending. From there, he believes we'll find ourselves in a 1970s-like environment where the Fed will try to navigate two difficulties: not wanting too much inflation and not wanting an economy that's too weak.
The crucial question is: what constitutes a good store of value in a world where all currencies are losing purchasing power? Dalio suggests investing in assets that protect against inflation, saving for things you will need, your home, your children's education, health care. Look for countries that earn more than they spend, have solid budgets, and are politically stable?
Invest in cutting-edge technologies, as we are in an intellectual revolution. Diversify your investments to reduce risk by up to 80% without reducing returns. Avoid debt instruments, as real interest rates are likely to remain low. Dalio proposes what he calls the 3% solution. Reduce the US budget deficit from 7-12% to 3%.
This can be done through taxes, spending cuts, and, importantly, lower interest rates . If the economy is doing well, you will get a lower interest rate, which means a lower cost of debt. Because we have so much debt, the cost of interest is more important than spending and taxes. God’s main message is that we must prepare for a period of economic and geopolitical instability.
Understanding historical cycles allows us to anticipate future challenges and position ourselves strategically. The most important lessons are to protect your savings from inflation, diversify your investments, think long- term, consider assets that retain real value, and understand that we are living in a time of changing world order.
Thank you for watching this video. If you enjoyed this video, please like and subscribe to the channel for more content on economics, investing, and personal finance.
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