Bridgewater's Ray Dalio on Deleveragings ~ market folly

Friday, March 23, 2012

Bridgewater's Ray Dalio on Deleveragings

Bridgewater Associates founder Ray Dalio recently put out a research paper entitled, "An In-Depth Look at Deleveragings." Given that Bridgewater is the top hedge fund by net gains since inception and that Dalio doesn't give his views in public that often, this 30+ page paper is surely a must-read.

In summary, the piece basically says that deleveraging in the purest sense of the word equals debt reduction and debt monetization. Dalio writes that "good" deleveraging stimulates economies via monetary stimulation and that "bad" deleveragings cause recessions and in turn, usually deflation.

To compare and contrast the two, he walks through six periods as examples of each: The Great Depression, Japan's lost decade, the UK from 1947-69, the US financial crisis, as well as Weimar Republic's hyperinflation.

Put your macro hat on via the full article below: Ray Dalio on Deleveragings

Those who have followed Dalio's scarce appearances also know that he has a dim view of the economy this year. For more from the legendary manager, head to Dalio's interview with Charlie Rose.

Be sure to also check out Ray Dalio on his principles.

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