In the summer of 2007, the U.S. financial system began to show cracks.
The number of homeowners with weak credit who were delinquent or in foreclosure on their mortgages ticked upward that June, as the national average interest rate for a 30-year mortgage rose to 6.74 percent.
Later that month, the Federal Reserve released a statement on subprime mortgage lending practices, warning that "consumers may not fully understand the risks and consequences" of loans with adjustable rates, which started out with low interest payments but quickly became more expensive as interest rates rose.
On July 17, 2007, investment bank Bear Stearns revealed that two of its hedge funds, which held significant investments in subprime mortgages, had "very little value" left.
By August, the billionaire founder of hedge fund Bridgewater Associates, Ray Dalio, realized the U.S. was in a dire situation. So bad in fact, he sent out a memo to clients and policy makers on August 10, 2007 titled, "This is the Big One."
"That was when it really dawned on me," Dalio tells CNBC Make It. "We're going to be headed over a waterfall, and how do I handle that responsibly?"
Just over a year later, on Sept. 15, 2008, investment bank Lehman Brothers filed for bankruptcy protection, an inflection point in the worst economic downturn since the Great Depression. Saturday marks the event's 10th anniversary.
Dalio's memo, along with Bridgewater's in depth analysis of how the recession unfurled, is included in Dalio's new book, "A Template for Understanding Big Debt Crises." The book is available for free in a PDF version, or readers can buy a Kindle version through Amazon. Bridgewater Associates is the largest hedge fund in the world, with about $160 billion in assets.
In his 2007 memo, Dalio predicted the ripple effect that would grip banks and lenders across the country.
"This is the financial market unraveling that we've been expecting," Dalio wrote in his Aug. 10 note, published in the book. "This will run through the system with the speed of a hurricane (over the next four to six months), and it will leave weaker financial credits dead or damaged, and stronger financial credits in the catbird seat."
When he realized what was coming, Dalio's first reaction was to turn to the lessons of the past, he tells CNBC Make It.