Page 91 - Ray Dalio - Principles

limits and that the quality of my work, and my work-life
balance, are both suffering unacceptably.”

THE FINANCIAL AND ECONOMIC

CRISIS OF 2008

Recognizing that I was stretched wouldn’t by itself be enough

to slow the flow of things coming at me, especially in the
investment area at what proved to be a time of historic
turbulence.

Because too often I had been painfully surprised by
different types of events that hadn’t happened to me before but
happened in other times or other places—like the currency
devaluation of 1971, or the debt crisis in the early 1980s—I’d

developed our economic and market principles to be timeless
and universal. In other words, I knew that we needed to
understand all important economic and market movements,
not just those that happened to me, and to make sure the
principles we were using to position ourselves would have
worked in all past times and all other countries.

As a result, back in the early 2000s, we had included a

“depression gauge” in our systems that specified the actions
we should take if a certain configuration of events began to
play out in a way indicating a heightened risk of a debt crisis
and depression. In 2007, this gauge indicated that a bubble of
debt was nearing its bursting point because the costs of debt
service were outpacing projected cash flows. Because interest
rates were so close to 0 percent, I knew that central banks

could not ease monetary policy enough to reverse the
downturn the way they had in prior recessions. This was the
exact configuration that had led to past depressions.

My mind and gut flashed back to my 1979–82 experience. I
was now both thirty years more knowledgeable and a whole
lot less confident. While the dynamic in the economy seemed
clear to me, I was much less sure I was right. I remembered

how clearly it had seemed to me that the debt bust I’d been