Ok, so there’s considerable debate about whether or not Ray Dalio’s “beautiful deleveraging” ever actually took place.
As a reminder, here’s what Ray said some years ago about what the hell a “beautiful deleveraging” looks like:
A beautiful deleveraging balances the three options. In other words, there is a certain amount of austerity, there is a certain amount of debt restructuring, and there is a certain amount of printing of money. When done in the right mix, it isn’t dramatic. It doesn’t produce too much deflation or too much depression. There is slow growth, but it is positive slow growth. At the same time, ratios of debt-to-incomes go down. That’s a beautiful deleveraging.
To be fair, “beauty is in the eye of the beholder,” so in that regard, if Ray wants to call a given “deleveraging” “beautiful” well then that’s his prerogative.
But while the “beautiful” part of a “beautiful deleveraging” is subjective, the “deleveraging” part kind of isn’t. There’s an element of objectivity there.
And as I was casually scrolling through a UBS presentation called “Where Are We In The Credit Cycle?,” I came across a couple of familiar charts that are probably worth running again just in case you haven’t seen them before or otherwise want to see the updated versions.
So, there’s this:
And then if you break it down by age cohort, it’s pretty clear that for folks 21-34, there’s not much in the way of “deleveraging” going on, and in fact, the opposite seems to be true courtesy of America’s twin trillion-dollar bubbles (student loans and auto loans):
But the by far the most amusing visual in the entire deck is the following chart which shows that, when respondents who thought they might soon be unable to service their debt were asked to explain why, the most popular response was basically “because fuck it“…
Again, I’m not sure how “beautiful” any of that is.