I recently reviewed Ray Dalio’s new book “How Countries Go Broke” for the Financial Times Dalio has a great deal sensible to say on current fiscal policy, and although I arrive at the same conclusion quite differently in my own new book Our Dollar, Your Problem (which is a national best seller), the bottom line that the US fiscal policy is running off the rails is the same. His blistering critique of Japanese policymakers is refreshing. However, although I greatly appreciate Dalio’s emphasis on the importance of looking at very long data sets, (centuries, not decades), this is hardly novel given the explosion of research on financial history since 2009 especially.
““It is also curious that Dalio sees no need to reference well-known earlier books — including, full disclosure, my 2009 book with Carmen Reinhart, This Time Is Different — that predate his, employ extensive archival data research and reach broadly similar conclusions regarding the critical importance of looking at very long multi-country time series if one wants to assess the probability of rare debt, financial crisis and inflation events.”
As just one example, Dalio’s team, which wants to take a lot of credit for looking at long data series on government debt, seems unaware that for most countries, even OECD countries, there were NO long historical data series on public debt until the 2009 publication of This Time is Different: Eight Centuries of Financial Folly and, after that, the work of the International Monetary Fund to refine, advance, and maintain the data set. If one looks at how we had to construct the historical debt (described in meticulous notes in our book and accompanying papers), using rare volumes in the Fed and IMF libraries ( this kind of data was certainly not online back then!), one doubts it was done independently at Bridgewater.