Why Capitalism Doesn’t Work for Most Americans 

(Bloomberg Opinion) -- All financial crises have “the same basic structure repeating over and over again.” That is according to Ray Dalio, founder, co-chair and co-chief information officer of Bridgewater Associates. His latest book, "Principles for Navigating Big Debt Crises" was just published (free PDF here). (Dalio’s prior MIB appearance is here).

Why are all meltdowns so similar? Dalio researched 48 prior cases, finding the same basic steps occurring with startling predictability in each:

  1. Early cycle
  2. Bubble / Top
  3. Depression
  4. Beautiful deleveraging
  5. Pushing on a string
  6. Normalization

Blame human nature for creating what amounts to a template for future crises. Dalio suggests that policy makers and investors should study history to understand how these events unfold when the next crisis inevitably occurs. 

He also shows the parallels between today and 1937 from an economic, societal and political perspective. Reminiscent of the pre-World War II era, we are living through a period with a similar underlying problem: “Capitalism is not working for the majority of Americans.”

His favorite books are here; transcript of our conversation is posted here.

You can stream/download the full conversation, including the podcast extras on iTunesBloombergOvercast, and Stitcher. Our earlier podcasts can all be found at iTunesStitcherOvercast, and Bloomberg.

Next week, we speak with Scott Adams, creator of Dilbert, and author of "How to Fail at Almost Everything and Still Win Big: Kind of the Story of My Life," and most recently of "Win Bigly: Persuasion in a World Where Facts Don’t Matter."

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Barry Ritholtz is a Bloomberg Opinion columnist. He founded Ritholtz Wealth Management and was chief executive and director of equity research at FusionIQ, a quantitative research firm. He is the author of “Bailout Nation.”

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