Founder of Bridgewater Associates, the world’s largest hedge fund according to “Meet the Press,” Ray Dalio said on Sunday that the United States stands at a fork in the road, the choices being something worse than a recession or an economy that is “handled well.”
Several factors could contribute to a breakdown of the monetary system worse than 2008, Dalio told NBC News’ Kristen Welker.
“Worse than a recession? You’re talking about the 1930s. What, specifically, are you warning of?” Welker asked. “Are you saying it could be as bad as a depression? What’s your biggest fear?”
“The value of money,” Dalio replied. “What is a storehold of wealth: that is a bond. In other words, one man’s debt is another man’s assets — bondholders. And so we’re going to be in a situation where if that storehold of wealth is in jeopardy because there’s too much supply and demand and so on, and we have a monetary inflation, we will have great disruptions.
“And that could be like the breakdown of the monetary system of ’71. It could be like in 2008. It’s going to be very severe,” he added. “I think it could be more severe than those if these other matters simultaneously occur.”
When pressed by Welker to be more “specific” on what could lead to a recession and such, the hedge fund manager answered, “The value of money, internal conflict that is not the normal democracy as we know it, and international conflict in a way that is highly disruptive to the world economy and could even be a military conflict.
“We have a new order that began in 1945, a new monetary order, and a new geopolitical order, and these go in cycles that can be measured. And I worry about the breakdown of that kind of order — particularly since it doesn’t need to happen because there are certain things that can be done in which this is better, a better restructuring of these debts and actions.”
As a solution to avoiding an economic downturn, Dalio suggested, pulling from his new book, that government deficit spending get at or below 3% of GDP, “and then internationally — on all of these issues — to use American strength, but to negotiate well, to lay out ways in which bad conflict and inefficient policies don’t create great disruptions, but get us through this in an orderly way.”
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