Part 4/8:
In a recent interview on the "All-In" podcast, Dalio elaborates on the actions that could stave off impending economic instability. He notes that the key indicators of a declining economy include the substantial debt load that must be serviced, which exacerbates the government’s fiscal challenges.
The Dynamics of Borrowing and Credit
Dalio likens credit to the circulatory system in an economy, illustrating how essential access to credit is for economic health. When debt levels become unsustainable, and the government must borrow more to service existing debt, it leads to higher interest rates, which further burdens already strained finances.