How countries go broke - cycles or one bad policy after another

 

Ray Dalio's new book, How Countries Go Broke - The Big Cycle, is a continuation of his earlier work on credit and debt cycles across history. In some sense, what he is proposing is not new but a reformulation of many of his past ideas. Dalio is neither a historian nor a macroeconomist but a successful practitioner who has studied credit markets and debt cycles as deeply as anyone. If you are expecting a deep history of debt cycles, as one would in an academic treatise, think again. 

Through narrative, many charts and tables, and highlights from Dalio, you are reading the argument he has for big credit cycles mixed with smaller cycles. He believes there are clear, recurring cycles that are predictable through repeating patterns of excessive credit, which must be adjusted through changes in monetary policy and structural reforms. Credit cannot be separated from money creation and policies. Excess credit can be addressed, but it will be painful. In the case of excess government debt, the options are spending cuts, tax increases, or inflation. Much of the theory is well known, but Dalio focuses on the behavioral patterns that create a cycle. 

The strident tone of Dalio may be off-putting, but he clearly formulates his arguments, and you can then debate the specifics. If you are worried about debt cycles, this is a book worth reading to frame future discussions on how debt cycles may collapse.