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Sure! Here’s a simplified explanation of Ray Dalio’s Big Debt Cycle:
💡 What is the Big Debt Cycle?
The Big Debt Cycle is a long-term pattern that shows how economies go through phases of borrowing, spending, and eventually paying back debt or defaulting.
It usually unfolds in three stages:
1. The Good Times (Boom Phase)
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People and governments borrow money easily.
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Debt helps boost spending, which grows the economy.
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Asset prices (like houses, stocks) go up.
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Confidence is high, and borrowing continues.
2. The Bubble Bursts (Debt Crisis Phase)
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Too much debt builds up → can’t be paid back easily.
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People and companies cut spending to pay debt.
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Asset prices fall.
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The economy slows down or goes into a recession.
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Central banks may cut interest rates or print money to help.
3. The Deleveraging (Recovery or Collapse Phase)
There are 4 ways to reduce debt:
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Austerity (spend less, save more)
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Default (don’t pay debt back)
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Transfers (rich help poor, or government helps economy)
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Print Money (inflate away debt)
If handled well: economy recovers slowly.
If handled badly: currency falls, inflation rises, or social unrest increases.
🔁 The Cycle Repeats
Over decades, this pattern repeats — we get boom, bust, recovery, and back again.
Dalio says understanding this cycle helps us predict financial crises and respond wisely.
Let me know if you want a visual, real-world examples (like 2008 or Japan), or the "short debt cycle" too.
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