Principles for Navigating Big Debt Crises

By Clayton M. Christensen

I read this book last December for the second time. It is an objective in-depth review of several debt crisis countries went through as well as the policy responses. The US is not immune to it yet and he does not hide his concern for it. In the 2008 financial crisis, I was wrong when I forecast that the policy measures could result in rampant inflation. So were all the Philips and Lafer curve advocates.

The damage will be big, and the recent Corona Virus crisis does not help in any way. The Obama presidency added 12T to the debt load. Trump had added 1T BC – Before Corona. Now, AC – After Corona, we have an additional 5T. Dalio’s view is at odds with Krugman’s and the MMT camp in the sense that the US Federal Debt is nothing we should be too concerned with nor the crowding out of the private sector by government spending. As much as I enjoyed the historical analysis, I struggled to agree with some of the prescriptions.

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