"How Countries Go Broke" by Ray Dalio - Book Review

Summary

"For decades, politicians, policymakers, and investors have debated these questions, but the answers have eluded them. In this groundbreaking book, Ray Dalio, one of the greatest investors of our time who anticipated the 2008 global financial crisis and the 2010-12 European debt crisis, shares for the first time his detailed explanation of what he calls the "Big Debt Cycle." Understanding this cycle is critical for helping policymakers, investors, and the general public grasp where we are and where we are headed with the debt issue. Dalio's model points toward surprisingly straightforward solutions for dealing with the debt problems that the US, Europe, Japan, and China face today.

How Countries Go Broke also shows how these debt problems are related to the other forces--political within countries, geopolitical between countries, natural (droughts, floods, and pandemics), and technological (most importantly, AI)--that together are causing what Dalio calls the "Overall Big Cycle" changes in the world order. By reading this book, you will improve your understanding of what's happening now and what to do about it."

Review

Ray Dalio is a brilliant economic thinker, and all of his books are exceptional. They convey timeless wisdom about historical patterns that often go unnoticed in our daily lives but have recurred throughout history in cycles of booms, busts, and shifts in power. This particular book is somewhat more technical and reiterates the theories presented in his first two books, which can feel a bit redundant. However, it clearly explains how countries can go bankrupt due to the unsustainable accumulation of debt and the necessity of monetising that debt, essentially leading to defaults and currency devaluation.

The United States is currently following this path, as many countries have before it, and we are entering a new era that marks the end of the post-World War II cycle. Turbulent years lie ahead, characterised by power shifts and the reformation of the world order, much like what has happened in the past. This book provides an excellent overview of how these cycles operate and what we might expect in the future.

Key Takeaways

• Economic cycles have occurred throughout history, often following recognisable patterns. Understanding these historical patterns allows us to grasp the bigger picture and our current situation.
• We are currently witnessing the decline of the World Order established after World War II, and turbulent times are ahead 
• The book emphasises the importance of examining the broader context and studying historical precedents that extend beyond our personal experiences

Who Should Read This

Readers seeking timeless investment wisdom and historical perspective to understand the turbulent times we are living in.

Favourite Quotes

"The problem of all sorts of people having all sorts of preferences that they will fight for and not being able to resolve their disagreements is to me the biggest problem that we face—i.e., as a country and a civilization—which is that there is so much arguing over the exact ways to prevent the disaster that it won’t be prevented."

"If you’re not worried, you need to worry—and if you’re worried, you don’t need to worry. That’s because worrying about the things that can go wrong will protect you, while not worrying about them will leave you exposed."

Rating

⭐⭐⭐⭐ (4/5 stars)