I can tell you one thing, if you’re in finance, and you don’t have this book, you might want to go out and get it because this is a masterpiece of macro economics as far as I’m concerned. 

What Stig and I are going to do is we’re going to talk about the overall layout of the book and kind of our general thoughts. Then what we’re going to do is we’re going to plow into a lot of the main content.

I would tell you, if you’re, if you’re new to finance or you’re just starting business school or something like that, it’s probably going to be a hard read for you. This is more like a master’s or doctorate level read. I would tell you to go out there and watch Ray’s video. It’s called “How the Economic Machine Works”. We’ll have a link to that in the show notes. 

I also want people to know that Ray has put this book out there completely for free on a PDF. We’ll have a link to that in the show notes. We will also reference some page numbers so if you’re listening to this and you’re kind of flipping through the book or you have the PDF open on your computer, you’ll be able to go to the exact spot that we’re talking about. You’ll kind of understand the context. If you also want to read more from that spot, you’ll be able to do that. 

With that said, just go ahead and start talking about the first book. When I got this in the mail, I was kind of surprised because it wasn’t what I expected. It came in like this case and then there were three books inside of the case. I really liked how he did this because the first book called Part One talks about the archetypal big debt crises. What it does is there’s no case study in here. He’s just talking in terms of a template. This is what debt crises can look like. 

He breaks them into two different crises. You have a deflationary depression and you also have an inflationary depression. He talks about all the different phases of both of those. Then he also provides an awesome introduction and his thought process of how he constructed this stuff before he gets into those two different types. We’re going to talk about that in much more depth. 

The second book that you basically pull out of this case is Part Two. These are detailed case studies. In this section, he has three main case studies that go into a lot of depth, 185 pages, just covering these three scenarios. 

The three scenarios are the German hyperinflation from 1918 to 1924. The second one is the Great Depression time period from 1928 to 1937. Then the last one in this second book is the US debt crisis from 2007 through 2011. 

Then the third book, which is 219 pages, this had 48 case studies of various inflationary depressions and deflationary depressions throughout the last hundred years. I know we’re really propping this up, but I think once you get your hands on it, you’ll understand what we’re getting at. 

Let’s go ahead and dive into the first book. Stig, you had some notes that you wanted to talk about at the introduction of this first book that I think are valuable for people to hear so take it away.

Stig Brodersen  4:11  

What I really like about his book is how good he is at categorizing. This is stage one, this is stage two, stage three. We will go through those stages afterwards. I think that’s extremely valuable compared to some of the other materials that you see out there, which more say, “We can’t really know. It’s just too complicated and too many factors at play.” I think Dalio has sifted through that and said, “This is the template.”

Preston Pysh  4:35  

What I like, Stig, and if you read “Principles,” you’ll kind of understand what I’m saying here. Ray is almost like a programmer and the way that he describes things. A lot of people write a novel and it kind of jumps around in space and time and then you got to try to piece it together. 

However, Ray writes this book as if it’s like he’s writing a line of code in how ordered everything is. It makes sense. He must have edited it 100 times in order to whittle it down and construct it in a manner that is just so synthesized. I think that’s probably one of the reasons I like reading his material so much is because it just makes sense the way that he organizes it.

Stig Brodersen  5:16  

Just in terms of the framework, something I’d like to point out before we go through the cycles is that debt is not a problem, per se, because you will hear us talking about credit and debt throughout this book. It’s not a problem, per se. 

The problem is more that if you obtain so much credit than you can’t repay it. He’s really shooting at policymakers here because it’s too easy, as a policy maker, to be too loose with the credit and focus on the near term rewards faster growth to justify this. So he’s more aiming at if we change the political system and if we include a more long term perspective, we can if not avoid those crises in the future than we can reduce the impact of them.

Preston Pysh  6:04  

What I’m going to do is I’m going to describe the two different depressions. You got the deflationary and you got the inflationary depressions that he talks about here in the book. 

The first one the deflationary depression. To give people some context, Ray would describe the 2008 crisis as a deflationary depression. This is how he describes it in the book. He says, “Policymakers respond to the initial economic contraction by lowering interest rates, but when the interest rates reach about zero percent, that lever is no longer an effective way to stimulate the economy. Debt restructuring and austerity dominate. In this phase, debt burdens rise because incomes fall faster than restructuring.”

The last thing that he really hits on he says, “Deflationary depressions typically occur in countries where most of the unsustainable debt was financed domestically in local currency, just like what we saw in the US so that eventual debt burst produces *inaudible* selling and defaults but not a currency or a balance of payments problem.”

Now when he describes the inflationary depression, the key difference that he typically talks about between these two is whether the country has their own currency or the country is dependent on foreign currencies. 

This is how he describes inflationary depression. He says, “Classically occurring countries that are reliant on foreign capital flows, and so have built up significant amounts of debt denominated in foreign currency that can’t be monetized. When there’s foreign capital flows, slow credit creation turns into credit contraction and inflationary deleveraging. Capital withdrawal dries up lending and liquidity at the same time the currency declines produce inflation.” 

Think of a country that’s heavily reliant on capital inflows coming into that country and then when that reverses, that’s whenever you typically have these inflationary depressions. 

Now, what’s really fascinating, I found an interview within the last month that Ray just recently had. I’m going to end up playing that for you guys to show you what he thinks is in store for the United States specifically in this next cycle. 

What I find really fascinating is based on what I just read to you, you would think that the only kind of cycle we could have here in the US would be the deflationary cycle. But after listening to this, it’s a little bit different than what you think. 

So just for a little bit of context, what Ray was asked here, he says, “The 2008-2009 was really bad. What do you expect in this coming cycle? What might that look like?” This was how he responded.

Ray Dalio  8:26  

I don’t think that it’s going to be as sharp and severe like that. I think it’s more going to grind on. All of these obligations will be a problem to be funded. I think it’ll be more back there of a dollar crisis than it would be a debt crisis. I think it’ll be more of a political and social crisis. 

We have to sell a lot of treasury bonds. We as Americans will not be able to buy all of those treasury bonds. 

If interest rates rise too much, the way it usually works is that constricts credit. We borrow less and that creates a weakness in the economy. So instead, because we’ll sell to foreigners, from a foreign perspective, when they look at it, they care not about inflation. They care about currency depreciation when they look at the interest rate. 

If a currency goes down, the bonds become cheaper. I think the Federal Reserve at that point will have to print more money to make up for the deficit. That’ll cause a depreciation in the value of the dollar. You easily can have a 30% depreciation in the dollar through that period of time.

Preston Pysh  9:35  

When I heard this, I was somewhat blown away that he would say that the dollar could depreciate by such a large figure. Now he doesn’t say what it would depreciate against. I’m assuming… 

Stig, I’m kind of curious if this is how you take it. I would think that he’s saying it’s a 30% decline compared to gold or other commodities that are like a basket of commodities that you’d be saying… because I don’t know how the dollar could depreciate that much against other currencies. I wish that that would be a follow up question but that wasn’t asked.

Stig Brodersen  10:07  

It would be natural to say a basket of other currencies. There’s an index where you can go in and track how the US performs again in the basket of other currencies. However, reading Ray’s book and knowing how Ray looks at the world of finance, I would be highly surprised if he wasn’t comparing that to gold commodities or perhaps a combination of the hard assets.

Preston Pysh  10:26  

Now, when I heard this, I immediately kind of flipped through his book to try to understand it, because what I found so confusing about that statement, which was just recently made, was it really kind of goes against one of the main themes that he talks about where the inflationary depressions are typically when a country doesn’t have control their own currency.

However, he says that it classically occurs and that it’s not kind of foolproof that that’s the scenario that plays out.  

So in the first book on page 40, if you guys have your PDF or your hardcopy there, if you go to page 40, the very last paragraph that says this, “Can reserve currency countries that don’t have significant foreign currency debt have inflationary depressions?”

Then the next sentence says, “While they’re much less likely to have inflationary contractions that are as severe, they can have inflationary depressions though they emerge more slowly and later in the deleveraging process after a sustained and repeated over use of stimulation to reverse deflationary depressions.”

What I find fascinating is so 2008, he describes as a deflationary depression that we use a significant amount of quantitative easing, which would be this stimulation that he’s talking about in this paragraph.  

What I think he’s getting at is, once you’ve swapped a significant amount of that credit for dollars that were printed through quantitative easing, and then you’ve put that into the hands of the people that were holding the assets and the bonds, and even over in Japan, I would argue that they’re doing it with equities. When that swap occurs, you kind of get to a point where you’re pushing on a string. You get into this situation where maybe the currencies, the next thing that has to devalue, and it seems like that’s how Ray was describing this next potential cycle. 

Without going into all that too much, because I think this gets very technical, but I found that soundbite extremely interesting and something that I had not heard him say anywhere else. We will have a link to that entire discussion in the show notes, if people want to go and listen to a lot more. There’s a lot more discussion that took place than what we just played for you. 

You can learn about what causes the phases of the inflationary debt cycle, which the great part about the book is Ray goes through all five phases of the depressionary and also the inflationary cycle. 

Something that I think is really important for people to understand is on page 58, Ray gets into what is called hyperinflation. What I find fascinating about this and I think because people who are hearing this might immediately correlate inflationary depression with hyperinflation, I would tell you that the way Ray describes it in the book is that they are very different events.

Hyperinflation is a much more one -off kind of event that is typically characteristic of a smaller country that is heavily heavily reliant on outside forces, outside capital, and policymakers that don’t necessarily understand what they’re doing that are printing and printing and printing all that money that just keeps flying out of the country. 

Just so you understand, the first book kind of splits those two different depressions: the inflation and the deflation one. Instead of talking about the inflation one which there are five phases, we’re going to cover the deflationary one which has seven phases. We’re just going to quickly go through this.

Stig is going to outline it for you so you kind of get an idea of the level of detail and kind of the way that Ray categorizes each one of these phases. Stig, go ahead and take it away.

Stig Brodersen  14:07  

Those two cycles do have a lot in common. It’s not as different as it may sound. The reason why we wanted to talk about the deflation or debt cycle, that’s because I think that’s easier to relate to. Most of us can remember what happened in the cycle from 2007 to 2011. It’s the same template here. 

Later in the episode, we’re going to talk more about the specific case studies. However, this is the general template of what we’re looking at. 

In the first part of the cycle, we have what Ray simply calls the “early part” of the cycle. It’s the early part because debt is not growing faster than income. This is a really vital point. We would like income to grow and debt is very efficient in doing that, but we don’t want it to outgrow income. That’s not going to be good. 

Then when you enter the second stage, which is now that you might enter the bubble, and what’s happening there is that you have self-reinforcing fact because with that rising income comes rising net worth, asset value arises again. The same is the borrower’s capacity to borrow. 

You can even argue that the bull markets are initially justified because the low interest rates make investment assets such as stocks and real estate, more attractive as they go up. 

Generally, you could say that economic conditions also improve, which would lead to economic growth and higher corporate profits. Another thing that’s very interesting here is that it increases the confidence with the population that this is ongoing prosperity. It really supports the levering up process. 

The issue here in this second phase, which he calls the bubble, is that as new speculators and lenders enter the market, and the confidence increases, credit standards also fall. 

This is a bit odd because you would suspect the opposite. You would suspect that things will go well. Companies are making money. They should hold on now. Banks should just allow everyone to borrow. That’s exactly what’s happening here.

In the third phase, which Dalio calls the top, that’s when you see central banks start tightening and interest rates rise. You might to some extent say that that is what you’re seeing right now in the US economy. 

As a result of all this, you also see the yield curve being flat or it even starts to invert, which is a very interesting thing. Something you are seeing right now.

Preston Pysh  16:32  

Stig, I just want to describe to people what that means because we say that a lot on the show. I don’t know that people or every listener would fully understand what that means when we say the bond yield curve inverts. All it means is if you were looking at a chart, and you look on the x axis of the chart, that would be the duration of a bond. 

A very short, the federal funds rate is what’s the rate for lending for tomorrow? Then the next one would be what’s the rate for a three month bond? Then you go to six months and then you clear out the 30 years on the far right. 

When you think about it intuitively, if I’m going to borrow money that I’ve got to pay back in 30 years, I would want a much higher interest rate than something that I’m just borrowing overnight or in a very short duration of three months.

When the bond yield curve inverts, what actually happens is you’re paying a higher interest rate for a three month bond than you are for a 30-year bond. In your mind, there’s absolutely no way that can make sense but this happens. At the top of credit cycles, you will see that the short duration bonds actually have a higher yield to pay back than long duration bonds.

Stig Brodersen  17:45  

Preston, would you argue that we are now in what Ray Dalio would call the third phase or the top, given how he describes it in the book?

Preston Pysh  17:52  

I think so but it’s really hard to say but I would say so. I think hearing him talk about how he thinks that things are going to be bad two years from now. A lot of that timing kind of aligns to seeing a top right now. 

The fact that you’re seeing the bond yield curve start to invert in certain areas, I think demonstrates some of that you’re seeing a lot of volatility in the equity market, you’re seeing the lowest unemployment we’ve had in I don’t know… 25 or 30 years or something crazy like that. I think all those things kind of lead to the idea that you’re seeing at the top right now.

Stig Brodersen  18:26  

Interesting. So the fourth phase, that’s called the depression phase. When Ray Dalio talks about depression, he refers to a severe economic contraction phase. This is the phase where you see last resort financial support and guarantees kind of have ejected capital into systemically important institutions. You might even nationalize some of them. 

Contrary to popular beliefs, this deleveraging dynamic is not driven by psychology. It’s more driven by the supply, demand and the relationship between credit, money, goods and service. 

Typically, the way that countries respond to this is that they do that with deep austerity. However, the issue about deep austerity is that it does not bring debt and income back into balance because whenever spending is cut, income is also cut. It then takes a lot of awful spending cuts to make a significant reduction that again won’t be sufficient. That is definitely a recipe of what not to do. 

The fifth stage he’s looking into is what he calls the beautiful deleveraging. It is beautiful when there’s enough stimulation, meaning printing money to offset those deflationary forces like austerity default. You have to make up for the money that’s now gone from the system.

The logical question to ask here is will this not cost inflation? If we just keep on printing money, that should create inflation. That is what we learn, but what Ray really gets that here is to think about that $1 spent is $1 spent. That doesn’t matter if it’s printing money or if it’s earned in this situation. You just need to fill the gap. 

Rather, the trick is not to print too much money. We’ll get to that when we talk about what happened in Germany after the First World War. 

However, in this case, it is really just all about printing that gap and then not doing it too much. 

Then for the final two stages of the cycle, which he refers to as pushing on the string and normalization, that is when eventually the system gets back to normal through the recovery in economic activity, but it does take a long time. 

Ray Dalio did a lot of research based on the past cycles and he found that on average, it takes six years for real economic activity to reach its former peak level. It takes even longer with the stock market.

For the stock market, it typically takes 10 years on average because it takes a very long time for investors to become comfortable in taking the risk of holding equities again.

Going through those six or seven cycles, you might already have an idea of why Preston and I think we are in the third, the top phase of the cycle. By reading the book, you can see how that is his template for how he sees cycles.

Then for the remainder of the two other books, he kind of put those case studies into those templates. To me it’s a very good way of illustrating with real life examples where we are and how we can recognize that as investors and perhaps as policymakers, if that is your position, to avoid that in the future.

Preston Pysh  21:37  

What’s great about the book is what Stig just went through was for the deflationary. He goes in the detail of all seven of those phases. If you want to know kind of where you might be at and one of those phases, you can read and kind of look for those indicators. 

At this point, what we’re going to do is we’re going to transition over to the second book and just kind of lightly cover some of these ideas. Like I told you earlier, it was the German debt crisis, the Great Depression, and then the 2008 crisis in this book. 

So much of what happened in Germany was really a result of how the war reparations from the First World War and how Germany was really kind of set up for failure right out of the gate with the way that the reparations were going to have to be repaid and the amount that was going to have to be repaid. Those pretty much laid the foundation for this event to occur. 

Stig, I’m curious if you have any more details that you’d like to kind of point out or the big piece that you kind of took away from the case study. 

Stig Brodersen  22:35  

One of the things that I took away was what it really means to be printing money. Germany definitely took that to a very different extent than what we’ve seen. This was all sparked by Germany taking up a lot of foreign debt. They actually wanted to take on debt in the German mark, but no one wanted to lend the money and perhaps that should tell them something that’s it’s a bad sign.

The German plan really was that if they won the war, the mark would appreciate and make the debt burdens more manageable. Of course, the losing countries would then be forced to pay for the German foreign and domestic debts in the war reparations. As we all know, that didn’t happen. They had to pay back the debt in foreign currencies, so in Sterling and US dollars.

They had this idea that they had to print more and more money so they could pay back the debt. Obviously, what happens if you just keep on printing money and just think the sky’s the limit, you will also depreciate your own currency compared to other currencies. When the hyperinflation began in 1922, we saw close to a 10,000% inflation rate, and it just went wild at the end of 1924. They had hyperinflation at 1,000,000%. 

Think about that: inflation of 1,000,000% a year. Clearly, that wasn’t good. I think one of the interesting things that really took away from this, aside from the good stories, if you can put it like that, because we don’t really hear about 1,000,000% inflation in the financial world. They did five different things in terms of getting out of hyperinflation.

One of the most important ones was to pick the currency, they issued a new currency, the reichsmark. It was backed by gold denominated assets and pegged to the dollar. That was one of the most important steps to get out of hyperinflation and to build trust again in the financial system toward the currency.

Also, it’s a very interesting segue into the Great Depression, where it was actually for the US to go off the gold standard that brought them out of the depression. I just think that this discussion about the gold standard is very interesting how it can be the solution, but also the problem for economies. 

Preston Pysh  24:52  

What’s fascinating is Ray also provides a lot of framework for a good way to handle the crisis and a bad way to handle the crisis. It’s such a useful tool for policymakers in any country to kind of look at what his guidance is, based on all the research that he’s done through all these case studies where he’s seen policymakers that have handled something really well versus how they’ve handled something really poorly. 

The way that he lays it out in the book, he literally lays the good framework right next to the bad framework to kind of give people an idea of how things should be handled, which is quite incredible. 

Moving on to the second case study in the second book, which was the the Great Depression, one of the key takeaways that I had, because Ray lays this out like month by month practically from 1927… I think he starts at …Let me see here. It is around 1928 up through 1937. He lays out the play by play of everything that went down. 

What I found fascinating was particularly the timeframe from 1929, right until the middle of 1932, because this downturn in the stock market particularly just kept grinding on. If you think about how long that plays out from the summer of 1929 into the summer of 1932, that is a very long period of time, like that is three years of downturn. 

When we think back to the 2008 timeframe, it just kept grinding from 2007 to 2009. That felt like that was just happening forever. I couldn’t imagine going through another year of that. I think the thing that I also find really amazing, he has a chart on page 71 of the second book.

On this page, he shows how when we initially had the 50% downturn in 1929, the market actually had a 48% resurgence. So any person who was experiencing this probably if you’re a market participant and you see a 50% downturn. Then you see the market recover at 48%, you will think, “Okay, well, that bout of terribleness is over. Let’s get back in.” Then only to find that it dropped another 40% and then it had another rise of 16. Then it went down like another 40% or 50%. It went through these phases, seven different times, where a person who is participating in the market would have thought, “Okay, this thing has to be over. Let me re-enter,” only to get clobbered once again. 

I think that he has something in here that he wrote that says, “If you think that going through this would have been easy to identify where the bottom was, I can assure you that that was definitely not the case because this thing just devoured all the market participants until there was just total capitulation and no one wanted to touch it.” 

I really find that quite interesting and very representative of what it’s like to be a market participant in something that feels like it’s over when in fact it might not be.

Stig Brodersen  27:57  

Yeah, it’s hard to read the label from inside the box. I can’t imagine how it would be like being a participant in the market back then. It’s interesting how he outlines what happened in 1927 and 1928. You saw the stock market nearly doubled in that time frame. He talks about how stocks were sold at extremely high multiples. Stocks were valued as much as 30 times earnings, which is actually what the US stock market is valued at right now. 

However, what he’s also getting at is that during the face of the bubble, the more prices went up, the more credit standards were lowered. What is very interesting is that in 1928, the Fed started to tighten monetary policy and you saw the rates go up from 1.5% to 5% for a very brief period of time. Just one year later in August 2019, they raised rates again.

If we look specifically at the stock market, because it peaked in September 1929, that was when Dow Jones closed at 381. It should take over 25 years before it would reach that level once again.

One of the issues that they had was that they couldn’t just print money. That is the solution Ray Dalio provides for a more modern context. At the time, they couldn’t do that, because it was tied to gold. They couldn’t just keep printing money, because then it would allow the population to redeem their money for gold, which they didn’t have. 

The policymakers at the time were working with the limited toolkit. It was not before they broke the link with gold that really happened. With the policies that you saw coming out in 1933 with Roosevelt, that’s really when you see the US… I wouldn’t say coming out of the recession. That’s probably using that prematurely, but they’re slowly working them out of it. 

One of the key things was really to leave the gold standard. Referring to the discussion before about what happened in Germany in the 20s, it was really interesting because Germany needed to peg it to the gold standard, whereas the US needed to leave the gold standard to get out of the recession.

Preston Pysh  30:06  

I want to highlight one other thing that I liked when I was going through these case studies. He broke the book into a right rail, almost like a web page, how you have a rail on the side. In that rail, he has 8 news headlines that encompass various points of time that match up with the the main body of the text that he’s talking about to give a person a qualitative feel for the headlines that were in the newspaper throughout the entire duration of the boom to the bust, to the recovery of what it looks like. 

I’ll tell you, I was just reading each one of these headlines. To me, it really gave me a good sense of what it would look like as you were going through it. I think this was such a great way of keeping the person in that moment as you’re kind of reading it. Just another attribute that adds to the way that you’re going through this and trying to experience the bubble as if you were going through it at that moment in time. I really liked that. 

Let’s go ahead and jump to the last one, which was the 2007 through 2011, more recent crisis. In this, there’s a lot more detail. I think that most of that is because of just the availability of data that he was able to use and kind of go through. 

He goes into great detail talking about all the mortgage lending, the CEOs, mortgage-backed security stuff. It’s quite extensive. Lots of charts, going through the inflation that occurred through that period of time so you kind of understand what the unemployment numbers look like. Again, all the headlines are on the side.

Of all that stuff, I found one thing very noteworthy that I want to talk to you guys about. In here, Ray publishes a letter that he wrote to clients and also policymakers. The date on this is July 26, 2007. This is what Ray wrote to his clients. 

Now, just to frame this, the 26th of July 2007 was probably within 30 days of the top of the stock market. It might have been within like 15 days of the top of the stock market in 2007. The title of this is “Is this the big one?” This is how it reads:

“You know our view about the crazy lending and leveraging practices going on, creating a pervasive fragility in the financial system lending us to believe that interest rates will rise until there is a cracking of the financial system.”

There’s a lot more I’m skipping through it, but then he writes, “A few months ago, we undertook an extensive study to see which market players held which positions especially via the derivatives market, and we concluded that no one has a clue. That is because one can only examine these exposures one level deep.”

He’s talking about his severe concern for the market conditions. Only a couple weeks later on August 10, he wrote another letter to his clients and policymakers. This one’s titled, “This is the big one,” and the letter reads… By that we mean that this is the financial market unraveling that we’ve been expecting. Deeper in the letter, he writes:

“We have a game plan developed over many years that we have confidence in because we plan for times like this.”

Realize this is the top of the market, like he is literally at the top of the stock market, and he’s writing these things. Anyway, so he goes through this letter and he’s saying, “There is going to be a financial crisis, a very bad financial crisis.” 

He wrote the letter at the very top of the market. He includes this in the book and it is just fascinating to kind of read and see the foresight that he had at that moment in time. It’s just mind blowing. 

Stig, I’m curious to here’s one of your key takeaways for the 2008 crisis from the case study in the book.

Stig Brodersen  34:01  

I think one of my key takeaways was how much credit standards were lowered through this bubble. As we talked about before in this episode, you would typically expect that they should tighten the credit standards as the good times are rolling on but the opposite happens. Greed kicks in. 

At the time, you saw a lot of self -reinforcing expectations that were drawing in new borrowers and lenders for that matter, who did not want to miss out on the action. You had cases where you could borrow more than 100% of the value of your house because you expected it to go up in price or value as you would probably be looking at it. 

You have the bottom quintile, so the bottom 20%. They increase their debt more than anyone else through this time period. This was a group who did not diversify into other asset classes, who had their net worth tied to that home and to that continued to go up. 

Hopefully, that’s a lesson learned. I don’t know if it is. I do not think that the credit standards are as low today. 

As a side note, I would also like to say it’s interesting how Warren Buffett has placed a huge bet on the American financial system, which kind of surprised me when I saw that. He’s usually right, I’m wrong. 

I do want to say though, in the bull case, if any for *inaudible* seems to be very different today than back then. 

One key takeaway is I would like to compare the Great Depression, so from 1928 to 1937, then to what we saw here in 2008. One of the big differences is the speed in which the policymakers made the crucial step to make an injection of capital into the system. On November 25 in 2008, you saw the Federal Reserve and Treasury announce an $800 billion in lending and asset purchase. You also saw the first quantitative easing program kick in. That really filled that gap in the credit that was so desperately needed, which you didn’t see during the Great Depression.

Preston Pysh  35:59  

Alright, so that’s going to conclude our summary of this book. This is really technical stuff. I know that if you’re listening to it, it might be difficult to fully understand everything that we’re trying to cover here. I would strongly encourage you to get the hardcopy on Amazon because if it looks anything like my book, it’s tabbed and highlighted. I just have notes all through this thing. It’s just a lot easier for me to read than on a computer screen. That’s just my personal preference. 

The outline of the book is very easy to follow and it’s really great for referencing if you want to reread sections over again. It’s so easy to find the way that he has it laid out. Big fans. We didn’t even cover the third book, which was the 48 case studies. It’s a treasure trove of examples of not just in the US but all over the world where these debt crises have played out. You really couldn’t get a better treasure trove of information as far as I’m concerned. So that concludes our summary of “Big Debt Crises” by Ray Dalio.

Stig Brodersen  36:55  

Alright guys, that was all that Preston and I had for this week’s episode of The Investor’s Podcast. We will see each other again next week. 

Outro 37:05  

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