How Countries Go Broke: The Big Cycle

Ray Dalio opens How Countries Go Broke by posing the central questions behind his research: Do nations face limits to debt growth? What happens to interest rates if governments keep borrowing? Can even a major reserve-currency country like the United States go broke—and, if so, what would that look like? These questions, he stresses, are not academic but practical, with major implications for investors, policymakers, and ordinary citizens.

Dalio introduces his idea of the Big Debt Cycle—a long-term, recurring pattern that has shaped economies and empires for centuries. Unlike the familiar short-term business cycle, the Big Debt Cycle unfolds over lifetimes as debt accumulates faster than income, eventually leading to crises, devaluations, and systemic resets. He explains that his insights come not from theory but from 50 years as a global macro investor studying hundreds of debt and currency markets across five centuries of history.

He warns that today’s conditions—high debt levels, rapid borrowing, and complacency among policymakers—mirror the pre-crisis stages of past collapses. To help readers recognize these warning signs, Dalio offers the book as both a diagnostic tool and a template for understanding how debt cycles evolve and break down. He places debt within a larger “Overall Big Cycle” shaped by five forces: debt and money, domestic politics, geopolitics, nature, and technology.