Principles for Navigating Big Debt Crises: The Archetypal Big Debt Cycle / Detailed Case Studies / Compendium of 48 Cases Paperback – October 31, 2018

Big Debt Crises offers concise and lucid insight into evaluating how an economy works. The book is split in three parts: (1) key principles for analyzing debt cycles, (2) seminal deflationary and inflationary crisis, and (3) a compendium of various crises occurring since the 1900s. Beyond the core text of explaining how economic crises are developed, solved, and avoided, insights include:Banks look healthiest right before a bubble! Asset values are high and deposits are steady, while underlying debt growth is funneled into unproductive activity.Central banks do not take into account asset inflation or debt growth, resulting in the build up of bubbles in pockets of speculative activity.Nonperforming loans in speculative activity spills over into tightened lending for real activity, just as lower paper wealth spills over into tighter spending on goods and services.A classic investing mistake is to underestimate the future decline in earnings at the beginning of a recession.If you’re not thinking about what’s going to happen, you’re missing what’s happening.Right actions done too late or with insufficient strength are indistinguishable from wrong actions.An economy will continue to suffer despite any monetary or fiscal policies if the underlying structural problem causing economic distress remains unaddressed.Shadow banking evolves because it is advantageous, with borrowers getting lower rates as lending costs are lower due to less regulation. It is not intrinsically flawed until overconfidence and leverage negate positive outcomes.One person’s expense is another person’s income.Do not make decisions off of a single headline.Anyone interested in navigating the economic markets with greater acuity and sensitivity to financial assets will benefit from reading the book.

Ray Dalio is a student of history, and the rare one with a proven track record of success. His approach to looking at the macro situation, his ability to direct research through the great number of history and economic PhDs that he employs, his social connections, etc. make his perspective invaluable. All of his recent writings have been a great contribution, and my hope is that more great minds like his produce popular writing as opposed to niche esoteric writings. We need more Voltaire's.As a negative, I find his some of his asides - presumably to make it more digestible - as unnecessary, pedantic, and tedious.

Ray does an excellent job for the most part and all investors need to read this book. The market does move in cycles. It doesn't go straight up.My big disagreement is with Ray's assertion that QE has worked. He has way too much faith in central bankers. I don't believe, as he does, that QE worked in both the US and Europe; although after 30 years it is still making the Japanese situation even worse.In talking about the 2007-2011 Crisis he claims that "Beautiful Deleveraging" occurred. However, worldwide debt to GDP is now 12% higher than in 2009. Corporate debt is up 40%. There was no deleveraging - we've levered up even more. And now, instead of CDOs, we have CLOs as the next weapon of mass destruction.Ray's assertion that the Fed needs to be paying attention to debt levels is true. But they haven't. Ben's QE experiment did moderate the current crisis while only setting up the next. Creating even more bad debt is not a solution.

There are always "those guys" that like to stop at a car accident to observe the damage; I personally feel bad getting any enjoyment out of the loss of human life and turn away from such "disaster porn", as do most others. But the study of debt crises has always been a guilty pleasure of mine as it is always fun to observe economic disaster porn from a distance. And this book gives a thrilling tour through some of the lesser-known debt crises in the past, viewed from a decision-makers perspective which I feel is particularly gripping.Of course, the reality is that debt crises cause the same human suffering and loss of life as car accidents or natural disasters. Just as with accidents, we should learn from past crises in an effort to best mitigate their impact in the future. And that is the value of this book, that it is focused on providing the correct framework for our decision-makers to solve such crises in such a way that this human suffering is minimized. There is also plenty of quality investment advice here as well.