Ray Dalio: Don't Assume That Germany Will Bail Europe Out; Consider The "Fat Tail" A Significant Possibility

Tyler Durden's picture

Lately, more and more professional investment "advisors" and newsletter recommendations boil down to just one catalyst: wait for either Germany, the ECB or the Fed to step in, as usual, and bail the world out, because, well, they have to, and any additional thought is rendered moot as fundamental analysis is meaningless under central planning (plus it is actually more work than just repeating the same stuff over and over while charging $29.95/month for it). Of course, when these same snakeoil salesmen are asked the simple question: what if said bailout does not happen, or if it happens late (for the purposes of this exercise let's assume one is not a central bank that can print its own money, have an infinite balance sheet, and can afford to be wrong almost into perpetuity), they give a blank stare, start mumbling something and walk away, especially if one mentions Lehman brothers and the simple detail that, oh, it failed. Which is why if Ray Dalio, head of the world's largest hedge fund, is correct, it may time to summarily fire and stop subscribing to each and every broken record Oracle whose template is "X will bailout Y" for the simple reason that it is wrong.

From Bridgewater's Daily Observations:

Be Careful When Betting Against Human Nature


Alliances are shifting in a logical manner. The German-French alliance is breaking down in favor of contributor (higher rated credit) countries aligning against recipient (lower rated credit) countries. Similarly, the terminology to describe who is reasonable and who is unreasonable reflects these parties' respective interests. Those who don't have to contribute use terms like "inflexible" and "irresponsible" to describe the contributors' reluctance to "do enough" to prevent collapse by lending more to recipients who can't service their existing debts, while those who have to contribute use terms like "inflexible" and "irresponsible" to describe the recipients' reluctance to "do enough" cutting of their spending and borrowing to service their debts. Students of human nature and deleveragings know that this is to be expected.


Similarly, talk of a fiscal union to resolve these problems has to be looked at in light of the question of whether it is in the interest of fiscally strong contributors to have a fiscal union with fiscally weak recipients in which the majority rules how the money is divided.


For this reason, we think the popular assumption that the Germans and the ECB (which requires agreement of the key factions within it) will come through with the money to make all these debts good should not be taken for granted. Said differently, we think there are good reasons to doubt that European bank and sovereign deleveragings will be prevented from progressing to the next stage in a disorderly way, without a Plan B in place. This "fat tail" event must be considered a significant possibility.

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RobertMugabe's picture

Ray Dalio speaketh truth! Time for the MSM to begin attacking him again, calling him a "cult" leader and wut not.

stocktivity's picture

Germany will cave in by the end of July. The alternative for them is even worse.

fightthepower's picture

Never under estimate what total losers the Germans are. They have lost every war for the last 100 years. They are still occupied by the USA. Hell, even Iraq caused enough chaos to make us leave. Germany is the world's bitch. They will pay what ever it takes and will remain the shittiest losers in the world.

Bend over German losers!

Pegasus Muse's picture

ooh, you Stinky Monkey!  Drop in .... deposit a nasty turd ... leave without flushing.  

Western's picture

"they give a blank stare, start mumbling something and walk away"


mumbling? oh that must be alan greenspan.

francis_sawyer's picture

Yeah ~ Now try to imagine WHIRRLED PEAS while you're fucking at it... ENOUGH with this horseshit!...

Michael's picture

Is today the lul before the shit storm?

markmotive's picture

Mario Monti is essentially pitching the shit-storm theory. Of course, he'd be a recipient of bailout funds. But for the 3rd largest EU economy to have such dire predictions tells me this will not end well.


Fish Gone Bad's picture

Someone might want to cut this out, blow it up, and frame it.  I have said this before and I will repeat myself.  This will be the first market crash/collapse everyone saw coming, yet did little to get out of its way. 

mkucstars's picture

I don't think it's quite the same thing, but I do understand your perspective!

Sabibaby's picture

...and while the Germans are bending over you'll be breathing their gas? Do you remember what happened last time the Germans gassed you?

sablya's picture

Ray Dalio is one of the few people associated with Wall Street capable of independent, logical, thought.  His conclusions are the result of unbiased analysis among his team of top notch thinkers.  If he says that Germany probably won't bail out Europe, then it's probable that Germany won't bail out Europe.  Or at least they may not do it in the way you think.  They may let Europe nearly fall into oblivion and then pick up the pieces at the last moment.  Why pay top dollar for a bunch of junk that you can wait to pick up for 10 cents on the dollar in a year??  

macholatte's picture


Germans tend to forget now that the euro was largely a Franco-German creation. No country has benefited more from the euro than Germany, both politically and economically. Therefore what has happened as a result of the introduction of the euro is largely Germany's Schuld -- its responsibility.

And remember, just as Germany is grateful to America for the Marshall Plan, Italy would be grateful to Germany for helping it lower its refinancing costs. If it did that, Germany could set the conditions. And Italy would be happy to meet those conditions, because it would benefit from it. Not to recognize this opportunity is a tragic, historical mistake by the Germans.

She is trapped. Merkel has realized that the euro is not working, but she cannot change the narrative she has created because that narrative has caught the imagination of the German public, and the German public has accepted it.

George Soros on the Euro Crisis 'A Tragic, Historical Mistake by the Germans'


bankruptcylawyer's picture

false. the banking systems of every country benefitted from the creation , and along with them , the politicans, and lastly the people. 

it was first in, last out. the people are now losing, soon the politicians will lose and lastly the bankers will finally lose. 


banking systems rely ultimately on the power of devaluing money supply ( stealing people's savings ) in order to upkeep their 'solvency'. without theft of deposist, the run by depositers eventually produces a default for the bank ( the end of trust in the bank results in the bankers inability to continue stealing deposits which shuts down his business ). 

so------if you want to guarantee someone's right to take deposits , to take without consent,  you must rely on the very same soveirgn power that guarantees the states' right to take income and property---to tax. 

taxing power is political power, it is police power. the banks have maxed out their ability to steal their depositers money because the depositers are fleeing and buying gold and just getting their money OUT of the banks. If you want to put a stop to this with an even bigger bank, you must first create the political arrangement for forcing the depositers to be confident enough to keep their money in the bank. this will not happen just by 'papering' over the bank. At the best, that will only buy time until the next deposit run. oh yea, and by depositers , i mean at this point the institutional depositers who are dealing with the shadow banking liabilities which boggle the mind in how large they are. actual human beings with small deposits below 100k are basically just hostages along for the ride. 

You must convince the people that they have No-where else to save their money, no where to hide, and no inflation to fear. This requires a political authority . America has it, and guess what-----the american banking system will continue to devalue the dollar against gold for the next 20 years as a stable form of stagflationary demise occurs in a controlled manner by the authorities. the plan is assured because of the political will of the police state to enforce the banking systems 'quantitative raping' i meant easing of the quantitative pole up the collective asses of americans for decades to come. i can't wait until obamney gets elected in november for another 4 years.

BigJim's picture

On the whole I agree with you, but

 because the depositers are fleeing and buying gold and just getting their money OUT of the banks.

remember we now have an endoegenous money supply - when depositors are taking their money out of the banks and buying gold, the money isn't destroyed. If the seller of gold deposits the money back into the bank, there's been no net reduction in bank deposits.

lewy14's picture

Soros fundamentally misunderstands human nature. Bailing out nations engenders humiliation and resentment, not gratitude.

Dalio fundamentally misunderstands power. Germany is slowly being led to understand that it has no real choice in the matter; even now it is merely positioning for the best deal it can get. 

Dalio might fundamentally understand his own credibility and be looking to create one last big spook in the markets to buy some assets cheap before the next round of global thermonuclear CTRL-P.

Trust no one.

trebuchet's picture

The Germans have made it very clear that the conditions for progress towards banking and fiscal union is political union. The incentives to do so are obvious: Germany as pay master wants to set up a system of sticks and carrots that, as paymaster to Europe, it must control. 

In Europe the politicians recognise this but find it impractical and hard to sell to their own electorates. 

UK for example have laid out their table: they will back the German push for political union in the Eurozone as long as the sinlge market remains intact. That is their "Red line" - no going back.  

ALL EU countries want the EU to stay and to stay in the EU. So they recognise they have to sign up to greater political union.

So the choice for each country becomes one of single market or single market + single currency. For Euro-member bailout countries, now and in the past, Germany +ECB is clear: No change in conditions for bailout; possibly some change in timing of fulfillment. 

The "carrot package" was agreed between Spain, Italy and Germany: 1% of EU GDP to fund growth. 

The summit now is about negotiating with Germany over the nature of the "stick" the Germans will bring to the table.  MY guess is thast this was already agreed between Spain, Italy and Germany as the former two countries will have to bear the brunt of the stick and there is a lot of politicking behind closed doors about how to structure this because it will not be pleasant for the "socialist/left" leaning governments. OR, they havent come to an agreement as yet.  A lack of text in the Von Rompuy/Barrosso/ECB document as reported here in ZH (10 pages became 7") suggests some progress on political accountability but no clear mechanisms in place, it is possible that Germany is making a play for more power behind the scenes and this has not been agreed by everyone. 

IF countries do accept more political union/Federal Republic of Deutsch-Eurozone then the negotiations around the summit will centre on the extent of Fiscal control that will be exercised by Germany and the AAA paymasters over national budgets. 

But if there are one or two countries that have balked at the idea of the Federal Republic of Deutsch-Eurozone then there will have to be discussion about how they exit the euro and join the UK camp of single market but independent currency.  

Merkel has said it with Cameron - Your position implies a "two speed Europe".  So there is a significant potential for a surprise out of this summit - where a clear plan for a two speed europe is presented as the way forward, and countries must choose their path of "in the Euro" or "out of the Euro".  

I have no idea how the markets will react...


Edit: for those who took the time to read my comment, here is an interview with FinMin of Germany - assuming translation is accurate, it is very insightful into their current thinkig imho - http://www.spiegel.de/international/europe/finance-minister-schaeuble-euro-crisis-means-eu-structures-must-change-a-840640.html






The Monkey's picture

Good note. I believe the markets will rally simply on getting some clarity (even if temporary), but iI wouldn't expect it to last too long.

trebuchet's picture

Thanks, as ZH keeps saying " all the rest is noise", there is only one voice to listen to: Germany.

I try to do that. 

The Germans are advocating an EU finance minister and directly elected EU president, plus EU law transferred from EU commission to EU parliament. 

They are going hell ofr leather on this one - this summit could be the biggest overhaul to the EU since the Maastricht Treaty

Gavrikon's picture

Those in Germany who advocate any such nonsense are suicidal.  This would only end with the total financial destuction and disolution of sovereignty in Germany.  And "Der Spiegel" is a leftist trash publication.

trebuchet's picture

That is what Schauble said, read the interview.  So they are advocating it. and all news today out of the Finmin meeting yesterday evening, including France - is that EU integration is being discussed -

Rajoy today went back on political promises, says EU supervision on fiscal budget is coming, get used to it; French Finmin saying " we discussing integration, French will have to get over the loss of sovereignty", Italians are for Integration, Greeks voted it in, so who is standing in the way?


And the rest will happen rapidly - banking union, fiscal union, 


may be a good time to shift towards a  long position .....  on the banks................... while market talk is still about "Nationalist interests are going to crash this summit, no deal expected, etc.... " market and media are talking down expectations below what I'm reading but hey ho each to their own


vft2212's picture

yea I remember we took over your checkbook hollywood and wall st. now swallow shnuck

Sabibaby's picture

and while running to the Germans for help! You insult them... 

fightthepower's picture

No, but I remember how Germans were barbecued in Dresden I bet it smelled like a hot dog on the 4 th of July.

Will Germany ever learn they are the world's slave?

sablya's picture

Germans weren't bombed in Dresden because they were the world's slaves, pup.  They were on the verge of being the world's masters.  Seriously close to global domination.  That is what is in the German blood - never forget that pup, and be afraid instead of arrogant.  Or maybe you are afraid and that's why you're talking trash...brave here on the board but a real coward when things get real...right??

narnia's picture

World domination is overrated. It's as noble an aspiration as getting mounted by a horse.

JR's picture

The Dresden instance, it turns out, was the most famous act of cowardice combined with treachery and pointless killing in history.

Is this not now the era of terror and the era of lies?

Perhaps that “greatest generation” in World War II learned a lot about terror and government trust. Every word of the Associated Press reports in the war, for example, moved through U.S. government censors and direction…

Thus the significance of AP’s coverage of the horrendous and relentless bombing of Dresden, Germany in February, 1945.

“This unprecedented assault in daylight on the refugee-crowded capital, fleeing from the Russian tide in the East,” the AP correspondent reported from Supreme Allied Headquarters in Paris, showed that “the long-awaited decision had been taken to adopt deliberate terror-bombing of German populated centres as a ruthless expedient to hasten Hitler’s doom.”

Note the objective of the Allies: “terror.”

The gloating in those words rings all through our era, from the unconcern for women and children burned in the streets of Dresden because they were Germans to the apathy concerning families slaughtered in the Middle East because they are Muslims

Now, the AP tells us the King of Terror is dead. 

Look in the mirror cheering youngsters: do you know if you can recognize the real face of terror?

The ancient cultural center of Dresden, a city rich in 18th century architecture, was not a military or industrial target so it had little or no anti-aircraft weapons as an air attack was not anticipated. As the war was winding down, Russian forces were sweeping across Germany from the East and Dresden’s normal population of 600,000 had recently swollen an additional 300,000 to 500,000 with refugees fleeing the Russian advance, now only 70 miles away.

Dresden had no air raid shelters; every public building was crowded with refugees, mostly women and children, and many were camped in the streets.

The first attack came at night…about 9:30 p.m. … as the British Royal Air Force sent in more than 800 heavy bombers.  All planes returned to base safely.  And while heavy black smoke covered the city next day, an armada of bombers went back to give it everything they had - 1,350 Fortresses and Liberators.  The following day, 1,100 U.S. 8th Army Air Force bombers hit the devastated Dresden a third time.

In 36 hours, perhaps, 250,000 people were killed…funeral piles of 500 bodies each burned for days.

Some isolated anguish over the Dresden attack brought to light details of a pattern of RAF terror bombing under the Linderman plan first used in March, 1942.  Professor Frederick Linderman, scientific advisor to Churchill, reasoned that bombing German residential working-class areas and smaller cities would be easier to hit than military and industrial targets, would provide greater concentrations of death and destruction, wouldn’t be as dangerous to pilots and would help the population urge their leaders to surrender

Salamanda's picture

For God's sake JR! Really?

Yes, the bombing of Dresden was one of WW2's 'nominees' when put on the scale of 'Morally Questionable Acts', but let's just keep it in perspective, when considering all the acts of horror and evil committed by the proven 'aggressor' that started the whole abhorrent episode that's blotted mankind's history ever since. Sure... 250,000 germans were killed in an horrific episode in Dresden... but would you care to comment on how that compares to the 6,000,000 systematically murdered at Sobibor, Treblinka and Auschzwitz? (For the record, I'm in no way, shape or form a supporter of Israel and its despicable record of similar acts of intolerance and cruelty and segregation against the Palestinian people, in a manner which mirrors how their fore fathers and mothers were treated between 1936 - 45 with shocking similarity.)

When one considers the shear magnitude of what the Germans did to the Jewish people of Europe for near on a decade… the manner in which it was coldly, brutally and systematically undertaken and what the psychotic, hysterical and hate-felled rationale behind this 'final solution' actually was in the minds of both the Nazis and German people alike, to then attempt to turn around and accuse England of committing the '... the most famous act of cowardice, combined with treachery and pointless killing in history...' is nothing short of truly pathetic, unbelievably ignorant, grossly ill-informed… and basically nothing more than a tragic display of shear stupidity, from a mind that's clearly delusional beyond measure.

It's pretty clear that who ever the owner of this redundant grey jelly is, should be closely monitored by professionals at all times and under no circumstances ever be allowed to venture out in public unsupervised for fear of what they could potentially attempt to try and tell people about their version of history that they believe is based in fact. Even worse, they could potentially congregate with other equally retarded people once a year and protest en-masse, the Dresden Bombings and accuse England and her allies of 'war crimes' or 'crimes against humanity' or some other such equally idiotic claim, for which the insanely enormous hypocrisy inherent in such a moronic accusation is totally lost on many younger Germans who are intent on giving credence to this ridiculous claim that their parents and grand parents were innocent victims of Churchill's barbaric acts of slaughter, when in fact they were probably standing guard to the entrance of Oven 4 as another few thousand men, women and children were made to assemble for their 'shower', before being blasted to ash in the furnaces below.

Instead of trying to rewrite history and make yourselves out as the innocent by-standers to your former leaders' mass murder and atrocities, why not just stick to making really good automobiles, continuing to produce high-grade 'Porn' that, even though fascinating in one sense, in all honestly actually just boarders on being 'sick' and pooh'ing all over your partners breasts while having sex!


Just sayin.

mkhs's picture

But we are the good guys.  Aren't we better?

mkhs's picture

Kill them all and let God sort it out.

Max Fischer's picture





If you think that post was "truly pathetic, unbelievably ignorant, grossly ill-informed," you should read what some of these other whacked-out goofball libertarians have to say. The super-goons who bury canned hams and shiny metal in their backyards are typically the same ones that also think the holocaust was entirely fictional.... and 9/11 was an inside job and Osama had been frozen since 2003..... and death panels.... and etc etc etc....  

Weirdos and eccentrics TO THE MAX!!

Yet truly fascinating, nonetheless... in a "Jerry Springer Live from the Lincoln Park Zoo" sorta way.  


Gavrikon's picture

The murder of the Jews is an historical fact, and an abomination.  As was the bombing of Dresden.

I do not see how one justifies the other.  The big difference is that the victors hung the losers.

Lebensphilosoph's picture

Well, there is no guessing as to your ethnic origins.

ZippyBananaPants's picture

Are the negative arrows from the use of the word pooh'ing?

cahadjis's picture

So you are saying just because they were bad, we have the right to be as bad? Is that your solution? Genius.

Keeping the higher moral ground counts a lot more than terror. If only the USA had learned that before randomly bombing Iraq.

JR's picture

@ Salamanda…

In the years following the end of WWII and the trial of surviving German leaders conducted by the victor, the Western press has been the constant spokesman for the Zionist view of history, the constant drumbeat of Holocaust stories, the intimidation of any individuals who do not repeat constantly the “never again” mantra. This lack of press freedom I am not debating here. I am suggesting here the cowardly act of hate involving primarily the Royal Air Force and Western allies as completely unappreciated in the so-called moral high ground of the Allies.

My emphasis on this greatest act of cowardice was meant to underline an importance to it that is still in our modern life being ignored.

I am just sorry I was not here to refute you earlier; you will do and say anything to bring up your Holocaust, not every year and not every month and not every day, but continuously. And no heinous act, no matter how great, is allowed to compete with that message. And you say the power and the horror lies with the German people.

“And for those who are sick of all the Hitler parodies…”

Consider developments after WWII:

In 1947, a defeated, divided, truncated, occupied Germany was a mass of rubble, its economy a desperate scratching for subsistence.

Although the Marshall Plan enabled Germany’s people to rebuild a free society and a free economy, a predecessor blueprint for genocide became the on-going principal occupation policy directive – a policy that aimed at the destruction of a nation’s people. It was the Morganthau Plan, drawn up by America’s wartime Zionist Secretary of the Treasury, Henry Morganthau, and his closest advisory, Harry Dexter White (a member of a Communist espionage ring in Washington while he served as Assistant Secretary of State).

It aimed at the permanent destruction of Germany’s industrial heart and the consequent death through starvation and disease of millions and tens of millions of Germans. Time magazine has aptly called it “history’s most terrifying peace”.

The conservative newsletter, Review of World Affairs, quotes the plight of the German people after the war as follows from a confidential memorandum prepared by an eminent European economist:

“Since the end of the war about 3,000,000 people, mostly women and children and over-aged men, have been killed in eastern Germany and south-eastern Europe; about 15,000,000 people have been deported or had to flee from their homesteads and are on the road.  About 25 per cent of these people, over 3,000,000, have perished.  About 4,000,000 men and women have been deported to eastern Europe and Russia as slaves….” Quoted by Sen. Homer Capehart in speech before U.S. Senate, Feb. 5, 1946.

Dr. Lawrence Meyer, executive secretary of the Lutheran Church, Missouri Synod, after a tour of Germany at the time stated: “About 16,000,000 German refugees east of the Oder are being deported from their homes.  It has been estimated that already 10,000,000 have been driven out.  The human tragedy and suffering caused by this ’Volkswanderung’ are unparalleled in history…”

An authentic eye-witness reported…

“A large barge is slowly being towed across the Oder River.  In it, lying on straw, are 300 children ranging from 2 to 14 years of age.  There is hardly a sign of life in the whole group.  Their hollow eyes, their swollen bellies, knees, and feet are telltale signs of starvation.  These are merely the vanguard of hundreds of thousands—millions of homeless, shattered, hungry, sick, helpless, hopeless human beings fleeing westward – west of the Oder and Neisse rivers.

“A trust in God—in his goodness and mercy—these are the only hope of Germany today.  And thank God in many there is still faith in God against which the gates of hell have stormed in vain during the past decade.” (Capehart)

RECISION's picture

Dresden was the communications and transport hub of the Germans Eastern front. 

The attack was designed to foil resupply of German armies in the east (largely at the request of the USSR, prior to a large offensive if I recall correctly), and it was quite successful in achieving that.

Civilian casualties were collateral damage of minor consideration at the time, albeit the morale effect was valued by Allied planners.

verum quod lies's picture

You are just regurgitating a rationalization given by the air force years after the event. Undoubtedly one reason was morale/psychological; but to say that killing almost exclusively women and children is a justifiable war aim seems evil in the extreme.


Ghordius's picture

+1 particularly because the planners were very keen on finding out if their theory of the "ring of fire" would work: by bombing Dresden in a concentric circle and starting a solid line of fire that would suck itself in and kill everything inside - using less bombs than the usual carpet bombing. And this plan was already old by then, with Dresden being "spared" until "ripe" for it. In the context of WWII there were many of those "total war" plans and techniques being explored, and many planners fully expected that they would be needed for a second round against Russia.

disabledvet's picture

"Slaughterhouse 5" Kurt Vonnegut. American POW sent to work at a Slaughterhouse on that fateful day if you want a full account.

Gavrikon's picture

No, it doesn't SEEM evil, it WAS evil.  Not a difficult thing for Churchill, as he WAS evil.  Then again, one of the first thngs propagandists do is to dehumanize the enemy.  Hence, Germans became the "Huns."  This was particularly egregious, as the Brits and the Germans are virtually from the same genetic stock.

Gavrikon's picture

May Churchill roast in hell ALONG with his allies Joe the Butcher, FDR, and his enemies Tojo, Benito and Adoph.  Bastards all.

tulip_permabull's picture

There was no "gassing". Never happened. That's just Holohaux BS. If you visit http://www.codoh.com/ you can get some facts on this issue that -- and this should be a red flag to you -- in many countries is illegal (and even dangerous) to freely discuss and research.