Ten years ago this month, the world’s financial system nearly ground to a halt. It was a dramatic and pivotal time, which has had lasting effects on many people’s lives. But, as the founder of the world’s largest hedge fund, Bridgewater’s Ray Dalio, notes, it was also something that has happened many times in history and will happen many times in the future.
As you know, I believe that everything happens over and over again and that by looking at those things happening many times, one can see the patterns and understand the cause-effect relationships to develop principles for dealing with them. Prior to 2008, I had studied these relationships for debt crises with my colleagues at Bridgewater, and because we understood these relationships, we were able to navigate the crisis well when many others struggled.
Today I am sharing our understanding of how debt crises work and how to navigate them well in a new book called “A Template for Understanding Big Debt Crises.”
I am making it available for free because I am now at a stage of life where what’s most important to me is to pass along the principles that have helped me. My hope is that sharing this template will reduce the chances of big debt crises happening and help them be better managed in the future.
The template comes in three parts.
The first explains the template for understanding how debt cycles work and provides principles for dealing with them well.
In the second, I look at how three big debt crises worked in depth – the 2008 financial crisis, the US Great Depression of the 1930s, and Germany’s inflationary depression of the 1920s.
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