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Originally Posted by NoRush993/951
Yes his article makes sense but it won't play out like that this time. Study Latin America for your guide to what happens to equities during extended times of debasement.
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Are you suggesting the US would suffer an "Argentine-like experience"?
A core problem for Latin America, Weimar, and other nasty historical debt crises is that those countries were indebted in a currency not under the control of the borrowing/defaulting country. I.e., they owed money they could not print. Hence their debt spiral and devaluation was uncontrolled, protracted and extremely painful.
IMO, Lat Am is not a relevant comparison to the US situation. It could however provide insights for the Europeans (eg: Greece).
BTW, I posted a link to this (free) book previously:
https://www.principles.com/big-debt-crises/ It's also by Dalio and is an amazing distillation of the past hundred years of debt crises. It's also incredibly dry, but the first several (summary) chapters are truly informative. The other chapters give all the details of the big debt crises. It's interesting history -- stuff that's sure to repeat in a variety of ways. I'll go back and re-read what the equities markets did in Lat Am -- I honestly don't recall. I suspect equities probably did ok after the initial crushing of the devaluation (but I doubt they look good in real terms as measured pre-crisis). I think Dalio's recent article is suggesting that positioning to avoid being over-exposed to a likely future repricing of debt and equities is warranted. What happens after that repricing would be a new economic paradigm and subject to repositioning...
Disclaimer: I'm an idiot and have no affiliation with any of the above. This is not investment advice; merely economic discussion/speculation.