Principles By Ray Dalio
Principles By Ray Dalio
@principlesbyraydalio·3.1M subscribers·621 videos

The Debt / Credit System

Posted

June 8, 2026

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The credit system functions like a circulatory system that delivers nutrients and buying power to various parts of the economy. A system is considered healthy when borrowed money is used to generate productivity, which in turn produces income. However, it becomes unhealthy when debts and debt service costs increase relative to income. This debt service acts like plaque in the circulatory system, squeezing out spending. Because one individual's debt represents another individual's asset, with holders expecting a good return, increased selling leads to supply and demand issues. When combined with high debt service, it ultimately impairs the system's mechanics.

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