For as long as I can remember there has been expanding global debt. Intuitively this is quite unsettling, but its difficult to articulate why. The most developed nations are the ones with the highest debt, so maybe it’s not such a bad thing. Yet while the global counter soars toward $250 trillion, there is increasing economic inequality, class conflict and talk of an ‘everything bubble.’ In reading Ray Dalio’s work on economic debt cycles, some light has been shed on how these ideas relate, and what global debt means.
A brief summary of this theory: debt cycles are caused by the interplay of self restorative forces, an expansionary force and a contractionary force. The expansive force comes from credit, debts ability to increase spending today. Spending drives growth because its equivalent to another parties income, which enables further credit access, and the expansion continues. …
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