Ray Dalio talks about the recent collapse of Silicon Valley Bank (SVB) and the impacts for venture capital and real estate markets. Dalio shared his thoughts in a LinkedIn post titled “My thoughts on the collapse of Silicon Valley Bank”. Bridgewater Associates founder RayDalio talked about how the collapse of SVB is a “canary in the coal mine”, joining other billionaires raising the alarm on fallout from the lender’s collapse. Ray Dalio is well known for his work on the “Economic machine”, where he describes how the economy functions. Particularly, the interaction between productivity growth, the short term debt cycle, and the long term debt cycle. He explains this concept in interviews frequently. Ray Dalio’s books include Principles, The Changing World Order, and Navigating Big Debt Cycles.
Here is what Dalio had to say: “I think that it is a very classic event in the very classic bubble-bursting part of the short term debt cycle in which the tight money to curtail credit growth and inflation leads to a self-reinforcing debt-credit contraction that takes places via a domino falling like contagion process that continues until central banks create easy money that negates the debt-credit contraction, thus producing more new credit and debt, which creates the seeds for the next big debt problem until these short-term cycles build up the debt assets and liabilities to the point that they are unsustainable and the whole thing collapses in a debt restructuring and monetization”
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