Billionaire Ray Dalio Warns NEW WORLD ORDER 2020 Stock Market Crash & Financial Crisis Pt. 4

by birtanpublished on September 15, 2020

Okay let's continue with chapter two of the changing world order with big daddy little commie dalio which yes he's a little skewed but very smart still lots of great information in here so let's go over it and we are now to the long term debt

Cycles and how it fits in with money if you remember we already went over in the previous videos the short-term debt cycles which are like the business cycles happen every six to eight years and are basically controlled by the fed

By them raising interest rates lowering interest rates us as people taking on a bunch of debt then that debt clearing out but it doesn't clear out fully which is why over a hundred years or so it keeps building and building and building

And then you find yourself in the long term debt cycle which is what we're going to talk about now and when i say long term i'm really talking long term so if you're looking for a strategy in the now that is profitable and simple

Then definitely check out our free training there's a link in this video and down below in the description and comments it'll show you the exact strategy i use and all our fallible members

Definitely take advantage of it while we still have this bull market it's free okay so the long-term debt cycle it begins with no or low debt and hard money so what's hard money well

It could be anything like back in the day it used to be grain and beads but mostly hard money is something that already has intrinsic value to itself like gold silver and copper so not like all this paper fiat money that we have

Right now so the reason people would use gold and silver and still do is because it has intrinsic value first of all and it can be easily shaped and sized to be portable

So you can easily exchange it as opposed to what like oil oil is worth something but how are you going to carry around a bunch of barrels of oil no no no much easier to have coins so intrinsic value which means it is useful in and of

Itself is important because there's no trust or credit behind these hard money things every transaction is settled on the spot even if the buyer and seller were strangers or enemies so

The old saying goes that gold is the only financial asset that isn't someone else's liability and compare that to say the us dollar what is the us dollar really well it's backed by the full

Faith and credit of the u.s government compare that to gold gold is just gold it doesn't have to be backed by anybody and that's what it's saying here something like gold has a widely accepted intrinsic value which is

Not like debt assets or other assets that require an enforceable contract or law to ensure that one side is gonna deliver on its promise because what is debt it's just saying

Okay i'm gonna give you this thing now and you got a promise to pay me back so that's a contract that's got to be enforced so if you transact with something like gold then there's a lot less risk and no lingering promises

So gold silver those kinds of things become a safe medium of exchange and a safe storehold of wealth and that's interesting because a lot of people argue for bitcoin being way better than something like gold but does

Bitcoin have that same intrinsic value that we're talking about here no it doesn't there has to be faith in bitcoin for it to work that's why it fluctuates so much and bitcoin also isn't something

You could hold in your hand which sounds stupid in this day and age because most of the things we deal with we can't hold in our hand like how is this youtube video streaming to you but in a collapse people go back to their

Baser instincts they want something shiny that weighs a little bit that they could hold in their hand and why gold has had intrinsic value forever is maybe just like a biological human

Type thing and maybe just like psychology doesn't change that part of our psychology that loves precious metals and shiny things maybe that won't change either bitcoin just

Isn't shiny enough so eventually an economy and a society moves from just the straight-up hard money to claims on that hard money so notes or paper money because carrying around all

Those coins was risky and inconvenient so credible parties which became banks but there were also temples back in old china they would put all that hard money in a safe place and then issue paper claims on it and then

This paper would be treated as money itself because the claims were good everyone trusted the bank or the temple because if you had that piece of paper then you could easily take it to the temple and redeem

It for that hard money that's kept somewhere and this type of system is called a linked currency system because the value of the currency is linked to the value of something typically a hard money like gold but then what

Happens as soon as you convert to paper well then you get increased debt because at first there is an equal number of paper to the hard money so 10 pieces of gold 10 pieces of paper but then the bank

Discovers hey if it's all paper then we could have credit and debt and that's when you start getting the credit system so people lend the paper back to the bank and then get it back with interest

And then the bank takes that paper and lends it out to other people who have to pay it back with interest and everyone's real happy with this system for a while because if you don't have money now you can get it and you

Can buy stuff and this does lead to productive activities you can buy that tractor that you couldn't get before now you can grow corn better sell that corn get money back and it's a

Productive process so the whole society likes it because it leads to asset prices and production to rise that's when you start getting the boom because people do it more and more and

More but then the economy starts running into problems when there isn't enough income to survive the debt that everyone's taking on because if you're borrowing to buy what is that it's debt and then also just in

General there become too many claims for money and the claims in the paper way outpace the amount of productivity that's actually going on so remember debt can be thought of as negative

Earnings or a negative asset and that's because it eats up earnings you have to pay off your debt with the earnings that you have if you don't have any earnings then it eats up your assets because you have to

Sell those assets to pay off the debt debt is senior so it gets paid before any other type of asset and what happens when there's too much debt and people can't handle it well then there's a restructuring or the central bank starts

Printing money like crazy to fill all those gaps in the balance sheets of everybody another problem that happens is when there is so much paper being printed that the holders of that debt and that

Paper don't think that they're gonna get adequate returns from it so the reason you're okay with paper is because you believe that there are storeholds of wealth right you can go in and exchange it for the hard asset the hard gold

And remember this is not fully a fiat system this is not what we have today because we are not on the gold standard anymore but we'll talk about that in a second in this situation they were talking

About here people still think that they could bring it into the bank and get their gold for it but if you have so much paper and so little gold you could end up with these bank runs because if people start losing faith in

That paper they come back to collect their gold the bank's like oh crap you know we don't have enough gold for everybody and when you think about debt assets like bonds because they have bonds

Here too well then the bank is faced with a choice are they going to let all these people sell their bonds which is going to spike interest rates and then you know if interest rates are higher than the debt burden becomes

Worse because you got to pay more on it or are they just going to print their way out of it so they print money for themselves and buy those bonds that everyone is selling

That way it prevents those interest rates from rising because remember if bond prices are going down because people are selling them then interest rates are going to go up and it's a natural supply and demand

Interest rates will go up because it's trying to become more attractive for people to buy again so instead the central bank steps in and buys those bonds and tries to keep the interest rates low and when they run

Into a corner where they still don't have enough money to buy up all these things they just print more and more and just devalue their currency that's what they do every time so that's when you run into this

Issue of debt crisis defaults and devaluations and you can really tell when the bank run we were talking about happens because the amount of money in banks whether hard or paper declines and they

Approach the point of running out because people are withdrawing so much and private banks they have to default but the central bank they could always print more and that's why as we said they devalue their way out of it then

Finally when everyone realizes all the problems with linking your currency to hard money that's when you get fiat money which is what we have now so like i said when the hard money and claims on that hard money

Become too painfully constrictive the government typically abandons them in favor of what's called fiat money so in a fiat system there's no hard money involved it's just paper money and then the central bank

Can print without restriction so that way there's no risk of that hard money being drawn down from people making withdrawals or problems from defaulting on promises to deliver it the risk shifts

To the fact that hey now this central bank has unlimited printing power so now that you're holding the fiat they could keep printing and printing and printing until everything you're holding is completely devalued that's the real

Risk so you get a shift from a system which the paper is convertible to a tangible asset like gold at a fixed rate to a fiat system where you don't have to convert anything and this last happened in 1971 when nixon

Took us off the gold standard and when dalia was working on the new york stock exchange at that time he thought everything was going to collapse the next day but in fact the stock market shot up higher so in the years leading

Up to that nixon announcement the government spent a lot of money on military and social programs it was the guns and butter policy and it paid for that by borrowing money and creating debt and the debt was a claim

On money that could be turned into gold so investors bought this debt because they would be paid interest on that government debt and the us government promised they could exchange it for gold

But the spending grew and grew and the u.s had to issue more and more debt even though the amount of gold they were keeping in their bank didn't go up so naturally investors turned in their promises to get the gold because they

Were paying attention and realizing hey the us was running out of gold and they kept printing and printing so we got to exchange this stuff but of course the government wasn't going to default

Instead they converted and they converted to that fiat money that we're talking about now printing money isn't necessarily bad because it does spur on the economy so there's nothing wrong with having that

Increase in money growth as long as that money is put into productive use but the risk of all this printing is that eventually the market participants who are getting all that free money they fail to put that money

Into productive use and because they don't have to pay it back what usually happens is that a cycle is created where more and more money is printed and it's not used productively at all

And that's exactly what's happening now right that's why we have so many zombie companies but eventually if that's happening the people who are watching it and holding this currency well they're going to

Shift to different stores as well and here's the thing history has shown us that we can't rely on governments to protect us financially and to be responsible really what we should expect is if we

Give them the power to print then they are absolutely going to print because they're looking out for themselves no one policy maker owns the whole cycle you're only there for a few years so

They come in and they do what's in their best interest to do same reason powell won't stop printing now why would he so that he would be the one federal chair reserve that let the economy fail no when you can manufacture money and

Credit and pass it out to everyone to make them happy then it's very hard to not do that because anyways once you're done you're just leaving all your problems to the next guy it doesn't matter you're out of

There now another issue when central banks start printing is that asset prices do go up but that widens the wealth gap because the only people with financial assets are the ones that are a little more wealthy so

It leaves a huge number of people in the dust while the wealth of the richest keeps growing and we've talked about that before and all their printing and how they hold down interest rates and all that it's

Relatively inefficient in getting money and credit and buying power into the hands of those who need it the most once again what we're seeing now so it happened in 2008 and it's happened in most of the time since then and the

Thing is the reason why they're so happy with just printing is because it's a lot easier than imposing taxes so if you do this debt monetization and give money to people who need it the currency is

Getting devalued and as it gets devalued the people who are holding the debt well they're kind of getting screwed right and eventually they'll realize that like hey my dollar isn't as worth as much as it used to be

And that's when they start moving their wealth to other things like gold or certain types of stocks or somewhere else like a country that's not having these problems and the government does not like that either

Then they start to outlaw the flow of money into those inflation hedged assets and alternative currencies so eventually what you have is the flight back into hard money from the fiat money so as we said they usually go

Towards gold or other currencies or assets in other countries that aren't having the same problems or stocks that retain their real value and no you don't need another reserve currency to go to a lot of devaluation in the bank runs as

You can call them happen without that the second reserve currency like in germany they started buying rocks because they were used for construction and they were holding their value and this happens in the late stage of

The debt cycle right and this is when there's large wealth and value gaps and higher taxes and fighting between the rich and the poor and again as we said the government makes it harder to invest in those other

Assets like gold when they start outlawing gold transactions and ownership foreign currency they eliminate the ability to transact in them and foreign countries

They put foreign exchange controls to prevent money from leaving the country and if this sounds crazy to you it's happening right now in venezuela two my business partners are venezuelan and they've had to deal with all of this in

Real time it's such a mess their currency is getting blown up and they aren't even allowed to hold dollars so it's all black market transactions just to survive it's horrible so when this happens and

The money and the credit system breaks down governments go back to some form of hard currency to rebuild people's faith and their value of money so in the past many of the weak currency countries have linked their money back to the us dollar

As funny as because this has always happened even in the old testament they provided a year for the jubilee every 50 years in which debts were forgiven because this is a cycle that happens over and over again

And ironically the closer people are to blowing up the closer we are to the end of the long-term debt cycle the safer we tend to feel because the memories of the last blow up have faded actually most of the people in our case

From the last uh end of the long-term debt cycle they've passed away so no one remembers and that's when it's gonna bite us the worst so we're gonna keep going with this series hopefully that made sense so far

The more i do these articles the more i'm realizing that dalio really loves to talk in circles so for some reason it's getting harder and harder to separate what's the actual good stuff from him

Just talking and run on sentences but i'll do my best so if you want to see that next video subscribe and if you haven't already make sure you take this training way simpler than what we're talking about here

And it makes you money right away which is nice there's a link in this video and down below in the description and comments free training definitely take it hit that subscribe button and i will see you in the next video

Stay fowable out there bye you

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