Ray Dalio highlights the absurd world of free money
Ray Dalio says 'The world has gone mad and the system is broken'
Hedge fund superstar Ray Dalio has long warned that we're in a terrible place in the debt cycle and at risk of stoking extreme political shifts.
He highlights some of the problems today in an article he posted on LinkedIn.
The Bridgewater founder illustrates the plight of venture capital fund managers who are virtually forcing startups to take money because they're so flush and need to distribute investor funds to justify their fees.
For governments, he says deficits "will almost certainly" increase substantially via central bank-fueled issuance.
This whole dynamic in which sound finance is being thrown out the window will continue and probably accelerate, especially in the reserve currency countries and their currencies-i.e., in the US, Europe, and Japan, and in the dollar, euro, and yen.
The flipside is that pension and healthcare liabilities will be coming due and that there is no way to generate the returns to meet the obligations. For healthcare the obligations are pay-as-you-go and there isn't the money to pay for it. The shortfall will be met by 1) cutting benefits, 2) raising taxes, and 3) printing money.
Because the "trickle-down" process of having money at the top trickle down to workers and others by improving their earnings and creditworthiness is not working, the system of making capitalism work well for most people is broken. This set of circumstances is unsustainable and certainly can no longer be pushed as it has been pushed since 2008. That is why I believe that the world is approaching a big paradigm shift.
Dalio leaves it there but he's warned many times that we're headed towards the political extremes.