The Nomad Economist
Premiered Jul 30, 2022
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.
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;
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