Crypto Chart of the Day 11/6/19 — The System Is Broken by Ray Dalio
“…central banks will run out of stimulant to boost the markets and the economy when the economy is weak, and 2) there will be an enormous amount of debt and non-debt liabilities (e.g., pension and healthcare) that will increasingly be coming due and won’t be able to be funded with assets.
Dalio essentially called for a reform of capitalism and described wealth inequality as a national emergency.
Yesterday (November 5th), Dalio published an update to that post titled “The World Has Gone Mad and the System Is Broken”. While he doesn’t have any graphs in the post, he makes three points to support his thesis that the system is broken. I’ll illustrate each point with graphs.
- Money is free for those who are credit worthy
When investors have money burning a hole in the pocket, they do things like invest $10 billion in WeWork.
2. Large government deficits will increase substantially, requiring huge amounts of more debt which will be bought by central banks by printing money.
Because governments would need to raise interest rates to get more people to buy all the debt, governments find it easier to print more money:
3. At the same time, government liabilities like pension and healthcare will increasingly be coming due with no money to pay them.
There will be pitched political battles to determine how much of the gap will be bridged by 1) cutting benefits, 2) raising taxes, and 3) printing money (at the federal level and passed to those at the state level who need it). Rich people will increasingly move to places with less conflicts, while those with more conflicts will increasingly find ways to trap them.
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Dalio finished the piece by stating that
…the “trickle-down” process of having money at the top trickle down to workers …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 pushed since 2008. That is why I believe that the world is approaching a big paradigm shift.
In other words, we’ve been kicking the can down the road on these problems with extreme measures since 2008, and that road is increasingly “unsustainable”. Dalio believes in this environment the assets that perform best:
…will be those that do well when the value of money is being depreciated and domestic and international conflicts are significant, such as gold.
While Dalio is not a big fan of Bitcoin, yet, if Bitcoin is Gold 2.0, as I believe it is, than Dalio’s comments could not be more bullish for Bitcoin.
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