Ray Dalio Reveals Shocking New Predictions 2020 Dollar Collapse & Stock Market Crash Pt. 5

by birtanpublished on October 1, 2020

okay back at it back to the ray dalio
stuff about debt cycles and where
everything is headed the world
order the changing world order we are
finally at the
end of chapter two such a long long
chapter about money credit debt and the
economic activity so you guys remember
the last part was the long-term debt
cycle
in detail which i'm about to recap
quickly here but before i do it remember
free training that teaches you the exact
strategy i use and all our fallible
members
definitely check it out there's a link
in this video and down below in the
description and comments
it's very important to get your strategy
in place as
the order keeps changing in the world i
guess you could say but markets change
and your strategy needs to account for
that check it out okay so the long-term
debt cycle the way it interacts with
money is in three different phases
every society or economy you could say
starts out with hard money which is
metal coins like gold
so people will be trading gold coins
with each other for services and goods
then they go on to paper money so they
keep all the gold in the bank and they
issue paper
saying this amount of paper is worth
this much gold and then they finally
move on to fiat money where the money
isn't tied to gold or anything it's just
tied to the
credit of the government that's printing
it that's where we are today so the hard
money system with straight up just coins
is the most restrictive because you
can't create new money unless you dig up
more gold or something money and credit
are easily created though on the second
type of system which is why people move
to it or not people but societies
because now you have all the hard money
or the gold in the bank and you could
print the paper money saying this much
paper money is worth this much gold and
you could change that ratio so that
gives you some leeway
so is it fifty dollars to one ounce of
gold or less
but eventually this leads to a run on
those banks because they end up printing
too much and people think hey i might
not get my gold back because there's
just way too much paper so this results
in defaults where the banks have to
close their doors and everyone loses out
and also devaluations which means like i
was saying the money is worth less so
depositors get back less
then finally they move into the third
type of system where you can just create
as much money and credit as you want and
it continues to work as long as people
have confidence in your currency and
your system
it's all faith-based so throughout
history every country has transitioned
through this
in a logical process because as a
country needs more money and credit than
it
currently has because you know they end
up piling up debts they have a few wars
and other problems
they move from type one to type two and
then two to three basically giving
themselves more leeway to print every
time but eventually once you're in type
3 like we're doing now you just print
way too much the money devalues any debt
held in that money devalues as well so
people end up dumping it all
and they lose faith in the currency and
then that's when they turn around from
that currency and head
back into hard assets so they go back
into the stage one and this usually
happens with some wealth conflict like a
huge wealth gap between the rich and the
poor
and there's a war usually and most
people want to leave that country so
that's why the country has to go back to
some hard
currency standing to help people gain
faith again in them so you basically
keep going in this cycle hard money to
claims on hard money to fiat money and
then back to hard money that's the cycle
now this whole money cycle that fits
with the long term debt cycle happens
every 50 to 75 years that's the total
cycle term and the end of these cycles
usually happens with a big debt
restructuring and a change in the
monetary system now those restructurings
themselves happen pretty quickly they
only last a few months to
up to three years but the effects of
them are very long-lasting and they
could lead to a change in the reserve
currency so during this period
of one currency having that power of
being the reserve there's typically two
to four big debt crises
and they're big enough to cause banking
crisis and debt write-downs
and big devaluations of the currency but
they don't break the system but
eventually you know the system does get
broken so in the system that we're
currently in the dollar
is king it's the main reserve currency
and that happened after the end of world
war
ii so the important thing to understand
is that there's huge huge power in being
the world's reserve currency because
you're able to print as much of this
currency as you want
other countries can't because only the
federal reserve can print dollars right
but those dollars are widely accepted
everywhere as a medium of exchange and a
storehold
of wealth so whatever country has this
reserve currency their financial
economic power is multiple times the
size of their real economic power
because you could do a lot of stuff with
a printing so that new world order with
the dollar on top began
after the end of world war ii in 1945
and this made sense because
near the end of that world the u.s had
around two-thirds of the world's gold
reserves
and they accounted for 50 percent of the
world's economic production plus they
were the dominant military power so
that's why dollar was king and this
monetary system was a type 2 so there
was gold in the bank and then there was
dollars issued on that gold and there
was a fixed price of 35
per ounce of gold and during this time
it was illegal for individuals to own
any gold themselves
because governments didn't want to
compete with you know their ability to
create money and credit so when they
established this new monetary system
there is 50
of paper money in existence for each
ounce of gold the us government owned so
there is a nearly 100
gold backing in the beginning so it was
tied very closely but
of course over time the u.s federal
reserve created a lot more claims on the
gold they printed more money and there
was way more paper than could be
converted into gold at the 35
price and as this was happening the
smart people were taking their gold out
of the bank the quantity of gold in the
u.s bank went down at the same time as
the claims on that gold continue to rise
so you already know what's going to
happen right we're about to switch to
system three
fiat money so the bretton woods monetary
system where we were linked to gold
broke down in 1971.
nixon took us off the gold standard and
what happened was that the dollar
devalued against gold and other
currencies
so this is when all of us the u.s and
every other country went into a type 3
fiat monetary system so now that we were
in fiat we were free to print right so
the federal reserve and the central
banks created a bunch of money and
credit which led to the
crazy inflation in the 70s and during
this time everyone was jumping out of
dollars and trying to get
into other stores of wealth like gold
and the panic out of dollar and dollar
related debts also led to interest rates
shooting higher and the gold price went
from 35 which was this fixed price
to a peak of 670 dollars per ounce in
1980 so everything was rebalancing
everything was recalculated by the free
market so another thing that was
happening in the 70s is that foreign
countries were borrowing a lot of
dollars to get things done so that
dollar denominated debt grew rapidly
around the world and the u.s banks made
a lot of money lending it out so this is
where the big bubble was forming and
eventually we hit the money and credit
crisis of 1979 through 1982 and that's
when the dollar and dollar denominated
debt were at the risk of not being
accepted as a storehold of wealth
already so the confidence was being lost
there is high inflation and high
interest rates so it's a big political
issue
so president carter went and appointed
paul volcker to fix
this problem so to deal with the
inflation crisis and to break the back
of inflation
volcker tightened the supply of money
and drove interest rates
even higher so this really squeezed
people that were holding the debt they
had to
sell their assets to pay for it but it
worked and inflation rates started to
fall
which allowed the federal reserve to
start lowering the interest rates again
now the people that were holding all the
debt they didn't get off scot-free
a lot of them went broke so the 1980s
was a decade where these debtors
especially the foreign ones who had all
this u.s dollar denominated debt they
went through a decade-long depression
and debt restructuring period now
american banks were doing a lot better
because again we had the reserve
currency right so the federal reserve
would back up any of these banks they
would protect them from going broke
and this whole debt management and
restructuring process lasted until
91 so this whole 71 through 91 cycle
where we got off the gold standard and
caused all this inflation and then the
huge debt restructuring it was all
because
of us moving into this new fiat system
so it was the cause of the inflation
and gold exploding in the 70s and also
all the restructuring that had to happen
the crisis in 79
through 81 and the 80s restructuring now
from that 79 to 81 peak
in the dollar denominated inflation and
interest rates interest rates have only
fallen from that period you can see it
in this tiny little graph right here if
i zoom in you can see interest rates
peaked right where we're talking about
and have only fallen since and now
they're near zero and of course the
federal reserve raised and lowered them
during that time which is the little
spice that you see
but overall the trend is lower because
to get out of the next crisis you gotta
lower interest rates even lower than the
previous time so it's lower lows and
lower highs
now after all the debt restructurings
happened in the 80s the 90s saw a new
increase in money and credit because the
cycle keeps going right
and all that increase in credit led to
the dot-com bubble and then that burst
which led to the economic downturn in
2000 and 2001 which made the fed
ease even more which pushed debt levels
higher and kicked the can down the road
to 2007 and 2008 the whole great
financial crisis
but now in 2008 we had to do a little
something special
because we lowered short-term interest
rates to zero percent but we needed more
so that's when the central bank started
printing money and buying financial
assets qe so dalio classifies them
differently so lowering interest rates
is monetary policy one
and then monetary policy two is the
printing and the last time they had to
do this printing was when interest rates
hit zero
in 1933 and continued through the war
years that quantitative easing
and what happened so by keeping interest
rates super low and then printing money
to buy assets like bonds this pushes
bond prices up and if bond prices are
pushed up then what's happening interest
rates they're falling even lower so
those people who used to depend on bonds
to get some type of return well now what
they had to do was borrow money because
borrowing money was cheap and then put
it in more risky assets like stocks
and this is why asset prices get driven
up this is the whole
risk premium curve that we've talked
about many times if you can't get enough
return from a safe asset like bonds then
you gotta move further out on the risk
curve that's when you start looking at
equities more investors increasingly
borrowed money to buy assets they
expected to have greater returns than
their borrowing costs
recipe for bubbles now eventually once
mp2 stops working you got to get into
mp3 for the next crisis
that's monetary policy 3. that's where
there's even more printing but now
you're giving like money directly to
wherever you need it to go so it's the
whole helicopter money idea
direct transfers to people and that's
what we hit with the coronavirus the
ccpv so because of that crisis the fed
announced a massive money and credit
creation program
along with programs from the federal
government so they included all the
classic mp3 techniques which includes
that helicopter money i was talking
about direct payments from the
government to citizens is the same
announcement that roosevelt made in 1933
and remember it's not just the us doing
this
everybody is doing it europe japan china
everybody but the us doing it has the
biggest effect because we are still the
reserve currency the dollar
is because you can see the u.s dollar
accounts for 55 percent of the world's
international transactions the euro is
only 25 percent the yen 10
and the chinese is only two percent so
like dalio says a reserve currency is
probably the most important power to
have
even more than a military power because
of this printing ability and the ability
to get you out of these problems now we
talked about before the eight measures
of countries rising and declining power
well the reserve currency which is
measured by the share of transactions
and savings in that currency around the
world
that significantly lags the other
measures of a country's strength so in
1944 when the dollar was the reserve
currency the u.s had around two-thirds
of the world's gold
and it also accounted for half of the
world's gdp today the u.s accounts for
only 20
of the world's gdp but it still accounts
for 60 of the global reserves and about
half of international transactions so
the dollar still reigns supreme but it
is the last thing to go so if you look
at the big
cycle this is how it looks first there's
a new world order like after
world war ii then you have a period of
prosperity because no one wants to fight
anymore
there's been massive destruction and
everyone wants to just build and be calm
so there's that prosperity but then
eventually you get into the printing and
you get the debt bubble and then the big
wealth gap
then the debt bubble bursts and they
start printing more money and credit
then there's revolutions and wars
which finally lead to the debt and the
political restructuring
and once again you got a new world order
so that's the big
long-term debt cycle with money now as
we move forward here
dalio what he keeps focusing on as you
saw in this article is the reserve
currency who has it and in his mind the
u.s
is close to losing it and then that
power is gonna move to
china and that bias right there is where
we kind of look at it and say
hey dalio are you objective about this
or are you saying that because you have
a big fund in china and a bunch of
interests over there in our research at
our macro research firm macroops
we don't see that transition if any
transition happening
anytime soon but the way dalio is going
to talk about it is like it's going to
happen
right now in the next few years and he
might be right because obviously he's
ray dalio right one of the smartest
people in the world
but his judgment may also be clouded
considering his
interests in china tough to say though
but that's why you need to take whatever
he says with a grain of salt either way
his framework though for how all this
stuff works is solid
that's why we're going to continue to do
these videos and learn more so if you
want to see them make sure you subscribe
also make sure you take this training
because all the stuff we talk about in
these articles is very long term you
know we're talking 50 to 75 years here
and while it's good to know and good to
know where you are in the cycle you
still want a strategy that's working
right now and will continue to work in
the future because we're still humans
living year to year like we need our
money now we need to be saving now and
compounding now so this strategy is very
simple very effective and it'll help you
do that and we'll teach you how to do it
in this training so there's a link in
this video and down below in the
description comments check it out and
make sure you subscribe for the next
dalio video
do that and i'll see you then stay
fallible out there bye

you

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