Ray Dalio, leading economist and founder of the world’s largest hedge fund, Bridgewater Associates, recently published his views on the current global economy. The title of the article was alarming enough – The World has Gone Mad, and the System is Broken.
He raised critical economic issues in the world that “is unsustainable and certainly can no longer be pushed as it has been pushed since 2008.”
The world governments are in desperate need to sell their debt securities. This vicious cycle of raising money is going exceeding the threshold levels. Free money is being printed by Central Banks and forcefully flushed into the economy without sustainable growth.
Increasing Wealth Gap
While the injection of money is benefiting the stock markets and venture capitalists. The reduced growth is affecting the working class, “which contributes to the rising wealth, opportunity, and political gaps.”
Moreover, as the rich are getting richer, the trickle down to the poorest will occur. However, pension and health care funds and employees will face cut downs. Governments are also likely to increase tax to fund their commitments on debt securities.
The interest rates that currently even negative will eventually rise. However, the borrowers would then start defaulting on their payments.
Risks to Currency Markets
Increasing the supply of “free money” that cannot be monetized will cause adverse effects on the global reserve currencies. Currently, the dollar, euro, and yen act as stable currencies for investments and conducting business. However, he noted,
Big risk of this path is that it threatens the viability of the three major world reserve currencies as viable storeholds of wealth
I don’t even need to say Bitcoin here… but it’s just so obviously the escape hatch for those paying attention. It is really tragic how many people willfully remain tied to fiat and government money systems
The inflationary cycle of debt and printing money between the governments and central banks are mostly driving the economy to a “big paradigm shift.” In his earlier article, he spoke about the paradigm shift in detail.
Crypto enthusiasts, primarily Bitcoin investors, feel that the shift will be inclined towards these currencies as it would eventually free the economy of it.
Do you think that recession will occur, or we will escape it? Please share your views with us.
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