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MI271: The Long Term Debt Cycle & De-Dollarization “Fairytale” Explained w/ Alfonso Peccatiello

The Intrinsic Value Podcast - The Investor’s Podcast Network

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How to Avoid a Late Cycle Debt Cycle

Ray Dalio said a period of deleveraging can occur when interest rate tools are no longer an option. In Japan in the 90s, the Bank of Japan cut interest rates from basically 5% all the way to zero and it kept interest rates there ever since. The Japanese private sector has refused to lever up even if interest rates dropped so aggressively. Why? Because the deleveraging of the 90s was so painful for them that there was no interest rate cheap enough that could convince them to take on additional debt. If the US can get inflation down to 2%, maybe with a recession, but without a massive deleveraging episode first, then yes, lowering interest rates at 0%

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