Fortune interviewed the world’s largest hedge fund manager, Ray Dalio, and as always he had some interesting thoughts:

Although Dalio says he is not a particularly big reader, these days his desk is piled high with some 20-odd books on economic debacles, such as “Essays on the Great Depression” by Ben Bernanke and “The Great Crash of 1929″ by John Kenneth Galbraith. Inside each are Post-it notes and hand-scribbled thoughts in the margins. He also keeps close at hand a binder he’s put together with detailed, 100-page timelines of the four major deleveraging episodes of the past century – the hyperinflation of the Weimar Republic in the 1920s, the worldwide crash during the Great Depression in the 1930s, the Latin American debt crisis of the 1980s, and Japan’s lost decade of the 1990s. He says the timelines provide “a virtual experience of what it would be like to trade through each scenario.”

Out of those four historical examples, Dalio says that our current situation most closely resembles the Great Depression because of the global breadth of the problems. But he doesn’t like to use the term “depression.” He thinks it’s too scary, evoking as it does images of hobos and Hoovervilles, and distracts people from focusing on the mechanics of what is going on. He prefers to use a term he coined: “D-process.”

Most people, says Dalio, think that a depression is simply a really, really bad recession. But in reality, the two are distinct, naturally occurring events. A recession is a contraction in real GDP brought on by a central bank tightening monetary policy, usually to control inflation, and ends when the central bank eases. But a D-process occurs when an economy has an unsustainably high debt burden and monetary policy ceases to be effective, usually because interest rates are close to zero, and the central bank has no way to stimulate the economy. To compensate, the value of debt must be written down (risking deflation) or the central bank must print money (a trigger of inflation), or some combination of both.

In recent years the level of debt as a percentage of GDP in the U.S. has skyrocketed past previous highs last seen in the early 1930s. And the Federal Reserve’s benchmark rate is now hovering just above zero. To Dalio, therefore, it’s clear that a D-process is under way. “It seems very likely that stocks will get materially cheaper,” he says. “We have to go through an important debt restructuring process, and a lot of assets are going to be for sale, huge numbers of assets. And there’s going to be a shortage of buyers.”