It’s an interesting and informative interview, but Ray Dalio is talking about what is happening as a ‘process’ and referring to ‘cycles’ and not addressing what precipitated this — government intervention.
Dalio, like so many other institutional economists, is simply referring to the current economic situation — which again was CREATED by the government — as if it were merely a weather phenomenon to which we must simply adjust.
He is also not suggesting what can be done to arrest, and even reverse, this ‘process’ — reducing, if not eliminating, taxes on income, savings and investment and shifting the tax burden to consumption. The regulatory burden needs to be re-evaluated and pared down dramatically also.
Away will go most of the liquidity problems. The economy would take off like a rocket. Along with it, domestic and international confidence in the American economy in particular — and the free-enterprise system in general — will be restored.
But even too many Republicans dismiss this as “voodoo economics.” Bear in mind that it was Bush’s father who coined that term when he was running for the GOP nomination against Reagan in 1980.
It is this terror of economic freedom that is our greatest threat and what promises to make gloomy economic forecasts like this one self-fulfilling prophecies.
Yes he does: Massive debt write-downs from everyone down to the individual mortgage holder, or barring that, massive numbers of bankruptcies until the debt level reduces to a point where expansion can happen again. Of course, these both have problems of their own, but at least once the bad debt is flushed, the economy can start moving again.
One further note though, the real reason that we are in the state we are in is not only because of debt, but also income. If somehow incomes could magically rise (creating inflation along the way), then the debt wouldn't be much of a problem, and massive clean-outs would not have to take place. So our choices are to let people go bankrupt or write down bad debt and cause deflation along the way, or inflate the money supply like mad and have inflation take care of the debt.