 Good day, fellow investors! In this video, I will summarize my economic research over the past four or five years and put it into an investing perspective. There is so much noise when it comes to investing the economy. Will there be a recession? What kind of a recession? Will it be the big crisis, the economic collapse, financial collapse, currency collapse that will destroy your portfolio or it will just be a 1991 mild recession and then the world will continue roaring onwards. I'll try to put the most important economic perspectives, facts, into a comprehensive overview of what's going on and what can impact your investing and your portfolio. Let's start immediately with the content. So we're going to discuss Ray Dalio's view. Dalolio is his right Italian name, he shortened it. Ray Dalio's view and Paul Tudor Jones, how they say the economic system is broken. There is no more effectiveness in monetary policies. There is a wealth gap. Put that into a global perspective, into an investing perspective and also show what's going on around the world, not just from a western, biased economic perspective. Let's start. In a recent interview at the Greenwich Economic Forum, Ray Dalio and Paul Tudor Jones, two of the best investors over the last 40 years, have discussed how the capital system is broken, how the world has gone mad because of valuations and how we are in for an ugly awakening, let's say. But they have been saying that for a while now. Ray Dalio has been announcing a recession for almost half a decade now. It isn't happening. So that's something we have to put into perspective. When investing, it comes to, okay, what are the risks? And how can they materialize? And if they materialize, what actually happens? Ray Dalio and he discussed that in his LinkedIn article, the world has gone mad and the system is broken, emphasizes three major problems for the economy. The wealth gap because all this money printing made the rich richer and the poor stayed poorer. So he forecasts that the poor will start complaining that there will be riots, populism, increasing populism that will lead to a 1930s situation that nationalism later led to the world, second world war. I will give my counter arguments later. The second issue is the inefficiency of global monetary policy. There is so much that you can't increase in interest rates to cool the economy. You can't lower them anymore to stimulate the economy. Even money printing doesn't have an effect anymore on the economy. So the only option is the third option, which is monetary policy free or modern monetary policy to simply put money into hands of people and governments, print money, put money to stimulate further the economy, which will probably lead to currency collapse. And the third point he is saying that China is rising as a dominant global power. And in history, always when such things happened, there have been strong clashes between the rising power and the established power, China and the US. And that will lead over the coming decades to trade wars. We're already seeing geopolitical wars. We already see the skirmishes in Hong Kong and what Western countries have to say about what's going on in Hong Kong, technology world and capital wars. So that's the environment. I would have a few counter arguments on Dalio's view. First, yes, there is a wealth gap between the poor and the wealth and that wealth gap is increasing. So of course, we might see some taxes, which are very important for Ray Dalio's clients and all those investing. If taxes are increased, your investment returns will be lower on average. But that also depends where you are investing, what you are investing for the Dalio. It's very, very important. Then thirdly, the poor, are they really, really that poor? Or I come, I was born in a communist country and I went out from poverty to pretty well off very, very fastly. All I needed is hard work, speaking English, willingness to learn. So everybody that is poor, it's not like in the 1930s, if you were working on a dock, there was no way out. Now, there is a fast way out. And even if you are poor, you have probably a mobile phone, you have a house, you have a car. So you are pretty good in the Western world. You are not poor in India. And that's also something that we have to, we cannot really compare to the 1940s and the consequences that had happened in the 1930s. On monetary policy printing, I completely agree, currencies have been and will continue to be sacrificed for repayment of debt for the service of debt debt. So if you have debt, you are okay. If you are lending money to people, especially if you're buying bonds, then you are a loser. On China, I think that Asia is really strong and we'll see some data later about what's going on in Asia and how can that impact our investments and everything. And the world isn't already and the key is that to understand is that the world is already so connected. I can now hire someone in India to do some work for me. We are buying so many things in Asia. Apple, Tesla are now selling cars and phones in Asia. There is more than 4,000 Starbucks stores in China already. So the world is already so connected. Yes, there will be skirmishes. There will be some bullying between those but at the end, even over the last year and a half, China and the US have been growing together. The world has been growing together and that's something thanks to information, thanks to communication that we didn't have in the 1930s that makes this environment different. However, there is always the uncharted territory of how monetary policy free will look like. What will be the impact on investments on returns will be positive nominal returns, negative real returns. That also depends on what you are buying. Ray Dalio is looking from a macro perspective. He's managing 160 billions but we as investors and individual investors, we have to look at the micro perspective and analyze each investment opportunity individually. So let's start with the global economy. The environment is full of debt and according to Dalio, in common sense already, we are at what should historically be explained as the end of the long-term debt cycle. The economy grows in relation to productivity growth. The more we can produce as a country, as a nation, the better is GDP growth over time. However, you can spur that growth by taking debt. There are short-term debt cycles and then there is the long-term debt cycle. You see the big line, the big curve here on the chart. And we are now somewhere at the end of the long-term debt cycle and according to Ray Dalio, this will be a big issue in the future because as we know it's inevitable for the debt to start hunting you back at some point in time because you are sacrificing future consumption to consume now. That is the nature of debt and it's naturally that it works in cycles and comes back at some point in time through interest and financing. Plus it's already happening in the United States. The country has to borrow more just to pay interest on the previously consumed debt. So the debt is not used to build schools, improve medical care, infrastructure or something that's adding value, know that debt is used to finance interest. Let me give you a short overview of the global debt environment that will also show the unsustainability of large public debts and deficits and later we'll discuss how those can be solved. So the elephant in the room is debt. Both public and private has skyrocketed globally over the last decades in the U.S. public debt that does not include future but certain and growing liabilities for healthcare and social securities. You should add 25 billion when we calculate that discounted value to the present day to the current already debt of 22 billion for the United States, the public debt and that is showing how that has increased 22 times since 1982. The S&P 500 has increased 32 times, 30 times since then. So there might be some correlation and the fact is that the slow growth of productivity, population growth, slowing population growth and increased global competition leads to a situation where to enable growth governments, corporations and people have to reach into debt, more and more debt to sustain the economic growth that developed countries have been enjoying for the last half a century and more. No government wants to beat the bad government and put this to stop. So they keep printing money and lowering interest rates to create a financially stimulating environment. This is called pushing on a string. At some point in time you can't lower interest rates anymore and you can't borrow anymore to finance the interest you're paying on the debt. The best example of how unsustainable this method is can be shown by looking at how 50% of the US budget deficits is used to pay interest on previously issued debt. A scheme where one has to borrow to pay interest on previously issued debt is often called the Ponzi scheme, but for now there is still trust in the environment. When there is trust in the environment then you can refinance all those loans at lower interest rates and also the dollar is a safe haven so compared to other opportunities globally in this uncertain environment it is still very very strong and the United States and other countries that have reserve currencies despite the debt that those can borrow at very very low cost especially as they have the printing printing press working for them. So it's a very interesting unusual situation that the world has never been really into and that's something we have to keep in mind when it comes also to investing and the deficits are projected to continue to be one trillion dollars and more over the next 10-20 years and as long as there is sufficient trust in the US dollar in the American economy it will be okay to finance debt albeit the net interest costs are already biting back. The key to understand is why there is no debt panic we see these huge piles of debt and then no panic so we have to understand okay will that turn into a crisis that was a liquidity crisis in 2008-2009 will it turn into a crisis like that or the hands-on approach that monetary policy and fiscal policy have now will smoothen the ride and perhaps even ease the way out by sacrificing currency. Let's see well if we look at that in Japan it has been skyrocketing since the 1990s and things there okay there is no economic growth but the well-being of people is continuing is okay the Bank of Japan owns 77.5 percent of all the ETFs in the country and it's on track to become the largest shareholder of publicly traded stocks in Japan owning 4.7 percent of the total market so in Japan if Japan is doing it why wouldn't we continue to do it the second reason is that all this money printed creates a lot of competition a lot of competition lowers prices and we see no inflation for example over the past 10-15 years since fracking oil has become hot especially in the United States the aggregate return to shareholders investing money there has been negative so aggregate investors didn't make money from the U.S. shale oil revolution but there has been so much supply of oil that has pushed oil prices from 100 to 60 where we are now and that impacted inflation so the money printing the new technologies really impacts also prices how they are measured so that's the second reason why okay there is no inflation we can print money so there is nothing to worry about and most developed countries have interest rates below 1% thus the 1.5 2% in the United States is still very very attractive and keeps the dollar very strong compared to other currencies like the euro for example the fourth reason why few are panicking is of psychological nature great alio has been warning about the debt cycle for half a decade now but nothing has really happened when something doesn't happen people tend to disregard it as a possibility as a risk it's like the fact that insurance sales spike just after a hurricane has struck people need to see risk to embrace it the last time long-term debt cycle was risky was in the 1930s the 1930s is something that probably nobody watching this remembers so when will all this really matter when will the chickens come to roost well as the dalio says in the next recession and when will the next recession come again nobody knows but let's see so the next recession everybody is expecting the next recession since 2010 from what i'm hearing and following the investment news but as soon as there is weakness dcb pushed another 20 billion per month for as long as it takes for the eurozone's inflation and growth outlooks to return to satisfactory levels the Fed as soon as it increased interest rates ban soon down down because we are slowing down growth so there is an immediate action from monetary and fiscal policy to prevent any kind of recession lower taxes more investments high fiscal deficits so that's something that we cannot know for how long can all this financial engineering today postpone recessions and then also we don't know the magnitude of a recession if there is a recession and there is so much money plowed into infrastructure into growth into perhaps even helicopter money through monetary policy free we might not see such a bad recession as ray delio is expecting they can print money there will be issues crisis around the world with those that have debt in foreign currencies for example but the united states china europe they can always print themselves out of their problems perhaps we will see it's uncharted territory a key to understand is there will be high investments in infrastructure and the new ecb president lagarde says that governments should have larger deficits to invest in infrastructure we tell us which tells us okay we have to invest in infrastructure related investments because there will be a lot of money coming in to build all those new bridges trains and whatever and then you have to find the best low risk high return investment vehicle to do that which gives you margin of safety now the next recession and the impact of it the last two recessions were very very bad for the stock market down almost 50% in both cases it didn't last long but that is what investors expect however we might see financial engineering and currency sacrificing that might not lead stocks to fall maybe we'll we'll see five years of zero returns but it's possibly that financial institutions like we see with the bank of japan buying five percent of the japanese market to do whatever it takes to protect it to to spore people to spend more money we might not see the 50% downturns we have seen after the dot-com bubble and the great recessions so the investing message is pretty simple invest in businesses that will do okay if there is a recession but will do great if there isn't a recession so again low risk high reward investing is the key what you have to think about if you're investing in businesses that have shady fundamentals that will go bust if there is a recession liquidity crunch too much debt then you are gambling and that's not really investing that's not really sustainable over the long term for most investors the long term solution to this debt cycle is simply to print money let inflation run a little bit higher print print print and of course those that have buying been buying bonds will be the suckers but that has been something going on since ever governments always debase their currencies and there are always their currencies always lose their value so it's better to be invested in real assets if we just look at inflation they say inflation is low but then it depends on how you're measuring it if you measure inflation as it was measured in the 1990s it's around it has been constantly around five percent not two percent and then if you look at the things you really need in life education Harvard education tuition went from 40 000 to the current 65 000 in 15 years that's more than a year if you wanted to buy a home in Amsterdam or New York it was 120 years ago now it's 500 that's more than two percent a year if you need a new hip it costs five times more than 20 years ago so those are the things that really matter and then your pension if you need to buy stocks now it costs 30 times more than in the 1980s and you retire on your yield on your income so now to retire costs 30 times more than it did 30 years ago so that's something you have to put into perspective there is huge inflation depending where you look aggregate statistical numbers don't tell you much what is my real focus and what I see as the predominant economic force over the next decade few decades is Asia and I really want to give you some facts about it that will put a completely different perspective on what's going on in the world if we look at real GDP growth in Europe in the United States is really really slow zero one percent two percent so not really a positive situation but if we expand and give it a global outlook global perspective we see a big chunk of the world Asia growing between three and ten percent that's 4.5 billion people while the developed countries have 1.3 billion people that's huge and I think really that the western media outlets bias our perspective on how the world really is developing what is really going on in the world 4.5 billion people growing at let's say five percent per year that's something huge that's something that has never been seen in the world India has just started to grow and that's really what has to be the main economic topic ever not a recession not crisis that's all local news you have to put things into global perspective plus the 4.5 billion people are mostly young the population pyramid is very very healthy so there is so much positivity there so much tailwinds that we cannot even imagine there is something that makes comparing things to the 1930s like Dalio is doing practically worthless in the 1930s the new deal saved America okay today we have the chinese one belt one road initiative working and developing the world trade wars or no trade wars this thing is moving forward the purpose of the one belt and one road idea is to construct a unified large market and make full use of both international and domestic markets through cultural exchange and integration to enhance mutual understanding and trust of member nations ending up in an innovative pattern with capital inflows talent pool and technology database the number of countries that have signed documents related to the initiative is staggering this is 5 billion people or and more growing fast that outweighs the issues that might be happening in the developed world over the next 10 20 years then there is so much that still has to happen that can easily outweigh the bad again just an example is urban urbanization 250 million people will move to cities over the next 10 years wish or whatever happens in the economy so 250 million more infrastructure more roads more buildings more growth more consumption and the fact is the world is so much more connected today than it was in the 1930s that really this connectivity i think is a safety net for long-term human well-being and if there is well-being i think we as investors can do really really well so what are the main points that we should take from this as investors currencies will be sacrificed that's a given that has been always the case in the history of humankind so we have to invest in assets great assets great businesses that will do well no matter what happens that's the best answer that i can give to any kind of economic macroeconomic discussions and focus on the micro find those good gems that if you look you will find them so secondly the global economy will do well developing asia is such a strong power that it is incredible really really incredible if you go to asia you will see how that works so what will i do i will park my money where it has strong tailwinds to grow where it has protection margin of safety normal value investing that works well all the time and then there is something i would close this that will really shift your perspective the world in 10 15 years will be completely different than it is now and we cannot even imagine how it will look like if somebody would have told anybody 12 years ago that we will have 10 years of zero or negative interest rates they would say oh this guy is crazy if somebody would have told the main economists 30 35 years that the dominant economic power will be china in the 1980s china was a pure communist country just exiting huge starvation famine in the 70s and the 60s and now they are the dominant power so see how things evolve change extremely fast 40 years ago we had no emails now we can do business all over the world sitting at our desk at our computer and you are watching me from who knows where that's the new world it will be completely different in the next 10 15 years but there are the fundamentals of value investing that will always work and that's why we have this channel so please subscribe i'll keep really giving you videos that give great perspective on what's going on we'll go into asset classes we'll go into education fundamentals analysis all the most important facts when it comes to investing we'll put it into a free book later so you can also read this on my website i'll put the link in the description below with a published article if you prefer reading to watching thank you for watching looking forward to comments please like this if it gave you value share it and thank you and i'll see you in the next video