The Big One Is Coming – Are You Ready?

I have been reading How Countries Go Broke – by Ray Dalio. Don’t read it. If you do, you will sell everything and buy gold (and crypto).

Let me give you a line from page 19 – “When the Big Debt Cycle that we are in began in 1945, the ratios of US government debt and US money supply divided by the amount of gold the US government had were equal to 7 times and 1.3 times, respectively, whereas now these ratios are 37 times and six times, respectively.”

He lays out the five stages of a debt cycle. Bonds are an early warning sign. So don’t look at this chart.

He looks at 65 historical debt crises. The US debt cycle is of most concern/relevance/importance at the moment.

As of Aug 7, 2025, total federal debt (“total public debt outstanding”) was $36.996 trillion. Of that, roughly $29.5 trillion is debt held by the public and $7.3 trillion is intragovernmental (mostly trust funds). Debt held by the public is about 97% of GDP (Q1 2025). That’s near post-WWII highs. On current policies, that goes to 150% by 2040.

In June 2025 alone, net interest outlays were $84bn (gross $145bn due to large semi-annual payments), running at an annual pace close to $1 trillion. Is it any wonder the US Congress constantly argues about increasing the US debt ceiling – some politicians understand where it’s going.

The CBO (Congressional Budget Office) projects debt held by the public to keep rising for decades under current law, driven by the cost of primary deficits plus the costs of managing the government policies related to ageing, health, and higher interest. Long run, net interest is projected to climb from 3.2% of GDP (2025) to about 5.4% by 2055 without reforms.

On current policy, debt is growing faster than the economy, and interest is consuming a rising share of revenue. The US fiscal trajectory is unsustainable. To pull it around, the US needs to restrain spending (good luck with that) and earn more (hence the idea of tariffs).

The longer they delay, the bigger the issue.

Near term: the US won’t “run out of money” in the mechanical sense. It issues the world’s reserve currency and its Treasuries are deep and liquid. Market access is intact. Money printing is available.

So we’re OK for now and, anyway, the lead into a real debt crisis will be marked with many signposts along the way (read the book). All things we can react to (react, don’t predict, remember). There is no need to throw the baby out with the bathwater yet.

You can get fearful far too early.

But we all need to be aware of what’s possible, in our lifetime. The end of the debt cycle is what we keep referring to as “The Big One” – the end of the US and Western economies as we know it, as debt markets freeze (as they were beginning to do in 2008) as a consequence of the US trying to print its way out of a debt crisis, until that money printing becomes unsustainable and the US defaults on its debts with untold consequences for the reserve currency and the rest of the world. Think you are safe? Think Macquarie and ANZ going bust.

As I say, don’t read it or you will find yourself at Bunnings buying shovels and barbed wire and a safe to hide your physical gold.

I have friends who have broken their savings up and deposited $250,000 into a variety of ADIs (Authorised Deposit-taking Institutions) under the FCS (Financial Claims Scheme).

In Australia, the government guarantees deposits up to $250,000 per account holder per authorised deposit-taking institution (ADI) under the Financial Claims Scheme (FCS). So if your bank, building society, or credit union (that’s an ADI) fails, the government will repay you up to $250,000 of your combined deposits with that institution. This covers savings accounts, term deposits, and similar, but not investments like shares, bonds, or managed funds. The limit applies per institution, not per account – so if you have multiple accounts at the same bank, the total covered is still $250k. If you want to protect more than $250k, you need to spread your deposits across different ADIs. It is a safety net to prevent small savers from being wiped out in a collapse.

Search APRA’s registry of ADIs. There are a lot of them. As of now, there are 140. That includes all the obvious banks – and a whole host of institutions you’ve never heard of.

The FCS, of course, assumes that the Australian Government is able to pay you and that what they pay you isn’t toilet paper.

This is Germany in 1923. Those are bundles of Deutschmarks.

Look up Zimbabwe 2008, Venezuela 2013, Sri Lanka 2022.

Of course, I think that I can protect you from this in the Strategy Portfolio – we’ll just sell all equities, buy gold and make a fortune. But come the day, it won’t be that simple.

There will be nowhere to hide. We won’t be worrying about the price of equities and gold, we will be worrying about the institutions that hold our money and our investments. We will be worrying about the integrity of the equity markets, settlement, a run on banks, ETF providers going bust, custodian banks folding, non-existent liquidity (you can’t sell), political turnover and broken political promises (maybe the newly elected Australian government reneges on the FCS).

When it goes properly wrong, it goes properly wrong.

Timing is everything. But not today.

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Equity Market Corrections

The only one of these that came close to “The Big One” was the GFC – a 57% fall.

Most investors see these as disasters that they went through – Marcus Today Members think of these as opportunities that they did or didn’t take advantage of.