The Invention of Capitalism in Building Powerful Empires

2025-07-18

What happens when a country mismanages its debt?

In 1990, Japanese policymakers decided to deal with its debt obligations by printing a lot of money to buy bonds. They further devalued the currency by giving bondholders significantly lower interest rates than in the US.

As a result, Japanese bonds lost 45% relative to US bonds and 60% relative to gold over the next few years.

That had a real impact on the average Japanese worker, who lost a significant amount of buying power — and those impacts are still felt today.

My new book, How Countries Go Broke: The Big Cycle, breaks it all down for you.

#raydalio #principles #politics #economics

2025-07-07

An order is a governing system that helps people deal with each other in a structured way.

There are internal orders for governing within countries, and a world order for governing between countries.

Orders typically change after wars, when revolutionary new forces defeat weak old ones.

When this happens, new agreements and treaties are signed that detail how global governance and monetary systems will work moving forward. And a new world order begins.

#principles #raydalio #history #bigcycle

2025-07-03

History tells us the preferred path for government policymakers trying to deal with too much debt is lowering interest rates and devaluing the currency the debt is denominated in.

Doing this is a very hidden way of reducing wealth, because as your currency goes down, it makes it look like other things are going up. But despite the downsides, this wealth shrinkage and reduction in buying power is favored by policy makers precisely because its impacts are less obvious than the alternatives.

At such times, you should expect interest rates and the currency’s value to fall.

#debt #raydalio

2025-06-06

Remember that one man’s debts are another man’s assets. That means if you both weaken a currency and produce more of it, the value of that currency decreases.

This tradeoff is particularly challenging when a country has a large debt burden, like the U.S. today. In my new book, How Countries Go Broke: The Big Cycle, I outline a plan for how we can navigate this tricky situation. You can find it available to order here: https://bit.ly/3F5OFvN

#principles #raydalio #economics #debt