Ray Dalio: Be Ready For A Terrible Societal Collapse And Economic Collapse !
Central banks give cheap money to investors who put it in companies that are often unprofitable and not conducive to economic growth. This is what the billionaire Ray Dalio, the manager of the largest hedge fund, says..
«The system that makes capitalism work for the good of most people is broken», – he wrote.
The founder of Bridgewater Associates, the world’s largest hedge fund, recently created a LinkedIn post titled: «The world is crazy and the system is broken». In addition to the huge sums flowing to investors at ultra-low rates, Dalio also pointed to growing sovereign debt and disproportionate access to credit, which is contributing to widening the wealth gap..
Dalio suggested that investors are overwhelmed with cash as a result of loose monetary policy, but that they do not understand investment strategies and «buy dreams, not earnings and stocks».
«Large government deficits exist and will almost certainly increase significantly, requiring governments to sell huge amounts of debt – amounts that cannot be naturally absorbed without raising interest rates, while raising interest rates would have devastating consequences for markets and the economy, because the world so heavily loaned», – wrote by Dalio.
The U.S. federal budget deficit for fiscal 2019 was $ 984 billion. This was a 26% increase over 2018 and the largest gap in seven years.
The well-known investor’s post comes just days after the Federal Reserve cut interest rates for the third time this year to protect the US from a slowdown in the global economy and the ongoing trade war between the US and China. Dalio suggests that eventually the American central bank will have to buy up this debt by printing more and more money..
«All of this dynamic throwing sound finances out of the window will continue and likely accelerate.», – he wrote.
«Currently, many pension funds that have investments designed to meet their retirement obligations use projected returns that have been agreed with their regulators. They are generally much higher (around 7%) than the market return that is built into pricing and is likely to be earned.», – Dalio notes.
He argues that there are only three viable fundraising solutions needed to pay payments: printing more money, cutting benefits, or, as he told CNBC on Tuesday, raising taxes..
Regardless of which route the country takes, Dalio argues that all roads will exacerbate property stratification..
«If politicians cannot monetize these commitments, then the struggle between rich and poor over how much spending should be cut and how much taxes should be raised will be much sharper, he wrote. As a result, wealthy capitalists will increasingly move to places where income gaps and conflicts are less severe, and government officials … will increasingly try to find ways to catch them.».