Recession 2020-- The World Has Gone Mad & The System is Broken - Ray Dalio

The entire global financial world has indeed gone mad and is in totally uncharted waters. The personal debt, dollar, and government debt bubbles have yet to burst, but we are definitely getting closer each, and every day, the central banks of the world continue to print more "fake" money instead of tackling the problem head-on with spending cuts and raising taxes. Negative interest rates, $23,000,000,000,000 US national debt, crypto currencies, on and on. Anybody who thinks they know exactly how this will play out is either lying or has something to sell you. Welcome to The Atlantis Report. Ray Dalio, founder of Bridgewater Associates, the largest hedge fund in the world, his net worth, equals to $18.7 billion. Only a few days ago he stated that the world just got mad and the system is broken. Ray Dalio wrote on his LinkedIn timetable: Money is free for those who are creditworthy because the investors who are giving it to them are willing to get back less than they give. More specifically, investors lending to those who are creditworthy will accept very low or negative interest rates and won’t require having their principal paid back for the foreseeable future. They are doing this because they have an enormous amount of money to invest that has been, and continues to be, pushed on them by central banks that are buying financial assets in their futile attempts to push economic activity and inflation up. The reason that this money that is being sold on investors isn’t driving growth and inflation much higher is that the investors who are getting it want to invest it rather than spend it. This dynamic is creating a “pushing on a string” dynamic that had happened many times before in history (though not in our lifetimes) and was thoroughly explained in my book Principles for Navigating Big Debt Crises. As a result of this dynamic, the prices of financial assets have gone way up, and the future expected returns had gone way down while economic growth and inflation remain sluggish. Those significant price rises and the resulting low expected returns are not just right for bonds; they are equally valid for equities, private equity, and venture capital, though these assets’ low expected returns are not as apparent as they are for bond investments because these equity-like investments don’t have stated profits the way bonds do. As a result, their expected returns are left to investors’ imaginations. Because investors have so much money to invest and because of past success stories of stocks of revolutionary technology companies doing so well, more companies than at any time since the dot-com bubble don’t have to make profits or even have clear paths to making profits to sell their stock because they can instead sell their dreams to those investors who are flush with money and borrowing power. There is now so much money wanting to buy these dreams that in some cases venture capital investors are pushing money onto startups that don’t want more money because they already have more than enough; but the investors are threatening to harm these companies by providing enormous support to their startup competitors if they don’t take the money. This pushing of money onto investors is understandable because these investment managers, especially venture capital and private equity investment managers, now have large piles of committed and uninvested cash that they need to invest in order to meet their promises to their clients and collect their fees. At the same time, massive government deficits exist and will almost certainly increase substantially, which will require vast amounts of more debt to be sold by governments—costs that cannot naturally be absorbed without driving up interest rates at a time when an interest rate rise would be devastating for markets and economies because the world is so leveraged long. Where will the money come from to buy these bonds and fund these deficits? It will almost certainly come from central banks, which will buy the debt that is produced with freshly printed money. This whole dynamic in which sound finance is being thrown out the window will continue and probably accelerate, especially in the reserve currency countries and their currencies—i.e., in the US, Europe, and Japan, and in the dollar, euro, and yen. At the same time, pension and healthcare liability payments will increasingly becoming due, while many of those who are obligated to pay them don’t have enough money to meet their obligations. Right now, many pension funds that have investments that are intended to meet their pension obligations use assumed returns that are agreed to with their regulators. They are typically much higher (around 7%) than the market returns that are built into the pricing and that are likely to be produced. As a result, many of those who have an obligation to deliver the money to pay these pensions are unlikely to have enough money to meet their requirements. Those who are recipients of these benefits and expecting these commitments to be adhered to are typically teachers and other government employees who are also being squeezed by budget cuts. They are unlikely to accept having their benefits cut quietly. While pension obligations at least have some funding, most healthcare obligations are funded on a pay-as-you-go basis, and because of the shifting demographics in which fewer earners are having to support a larger population of baby boomers needing healthcare, there isn’t enough money to fund these obligations either. Since there isn’t enough money to fund these pension and healthcare obligations, there will likely be an ugly battle to determine how much of the gap will be bridged by 1) cutting benefits, 2) raising taxes, and 3) printing money (which would have to be done at the federal level and pass to those at the state level who need it). This will exacerbate the wealth gap battle. While none of these three paths are good, printing money is the most natural path because it is the most hidden way of creating a wealth transfer, and it tends to make asset prices rise. After all, debt and other financial obligations that are denominated in the amount of money owed only require the debtors to deliver money; because there are no limitations made on the amounts of money that can be printed or the value of that money, it is the most natural path. The significant risk of this path is that it threatens the viability of the three major world reserve currencies as a viable store holds of wealth. At the same time, if policymakers can’t monetize these obligations, then the rich/poor battle over how much expenses should be cut and how much taxes should be raised will be much worse. As a result, wealthy capitalists will increasingly move to places in which the wealth gaps and conflicts are less severe, and government officials in those losing these big taxpayers will frequently try to find ways to trap them. At the same time, as money is virtually free for those who have money and creditworthiness, it is almost unavailable to those who don’t have money and solvency, which contributes to the rising wealth, opportunity, and political gaps. Also contributing to these gaps are the technological advances that investors and the entrepreneurs that I previously mentioned are excited by in the ways I described, and that also replace workers with machines. Because the “trickle-down” process of having money at the top trickle down to workers and others by improving their earnings and creditworthiness is not working, the system of making capitalism work well for most people is broken. This set of circumstances is unsustainable and certainly can no longer be pushed as it has been sold since 2008. That is why I believe that the world is approaching a significant paradigm shift. The American Financial System is no longer able to offer much, if anything, to the sheep. The creature from Jekyll Island. We, the people, have been gamed since 1913. Fiat currency and the fed are there to steal from the people. It's rigged, and beyond mad. As George Carlin said, "...it's a big club, and you ain't in it." Only someone like Ray Dalio has the guts to say the truth openly, that the Reserve currencies are being depreciated by the overprinting and unaffordable (un-funded) government spending plans. Game of Monopoly has better restraint than these central banks and governments! The Ponzi debt scheme (quantitive easing) and inflation will eventually lead to loss of trust in the financial reserve currencies. When countries stop exclusively using it to do trade, as the BRIC countries already have, and other people find alternate currencies like Bitcoin, history may repeat itself, leading to the collapse of the system as it stands, leading to some newer "reserve currency." The ECB, along with other central banks, are seriously fearing their survival and want to prevent these independent digital currencies because THEY can't manipulate them. After we decoupled from the Gold reserve in the '70s, the so-called reserve currency group countries have been printing money and spending recklessly. Why? Why not? We have a perverse electoral system that allows politicians to spend on services and tax cuts, not from savings from the current generations, but instead from the future generations who can't vote or aren't even born yet. Surely that is the enslavement of the children and unborn, I hear you say! Well, yes, it is, but most people don't know or maybe don't want to know. These future generations don't get a choice on whether they want to take on the debt to pay for these services. By the time they are old enough to vote, they too will be promised services from their children's future. In short, we are living in a world where very few people are mature enough to take on responsibility for these things, be it on a personal, national, or global level. Telling the truth and solving the root causes of the problems just doesn't win the votes. Imagine you could buy things for free without having actually to pay for it in a real tangible manner! That is what the reserve currency countries have been doing for a while now, printing trillions centrally, passing this currency off to the government as debt; which the financial institutions buy from the government as Bonds, against which they can now leverage and borrow vast amounts of money to flush the markets. #1) The government can now provide services which it can't really afford. # 2) The Banks can lend money in a leveraged manner to everyone to spend. #3) The government can call this GDP growth (but its just a more significant debt). #4) The debts get pushed into the future for someone else to pay (just like the environmental debts). #5) Currency is printed even more rampantly to create inflation to reduce the past debt, And the cycle goes on and on and on. So who looses? In the short run, no one (that was in the '70s and '80s), in the midterm the middle class (2007 to 2011), in the long term everyone (at the next crash) as it will wipe wealth and create opportunity gaps, causing mistrust of the financial systems and governments. In the late 1930s, politicians used that fear and pain to incite racial haterade and division. This is reflected in our current global far-right politics and the rise of nationism and undercurrent racism. Currently, there are three options: #1) Pay down the debt; people and governments spend less and live within their means. As if, not likely. #2) Print more money and devalue the currency until someone calls the pyramid debt scam a scam. Not likely, as too many people are on the gravy train. Any item worth less tomorrow than today is not a preserve of wealth, and currencies are just that, they become worthless over time due to this fake money printing. #3) The children of middle and lower class earning families (ie, us) will be used to leverage debt further into the future, and if any country calls for the abolishment of central currencies, political and military might will be used to ower throw them. This is most likely, The reserve currency nations bully the non-reserve currency into insolvency or force them to sell their national resources, like oil, when they print their way out of debt (quantitive easing), but when they do its entirely correct? Only a unicorn and lots of fairy dust can solve this problem, but I guess we the ordinary people will have to work our way out of our debts, while those who are in elite echelons will print the governments' debts away and take a fat cut for this creative ("or what others may call fraudulent") solution.












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