Ray Dalio: A Deleveraging Period for Ten Years or More

Ray Dalio is founder of what the New Yorker refers to as the world’s largest hedge fund, Bridgewater Associates. The 61-year-old Dalio, with a personal net worth estimated at about six billion dollars, is known for his ability to anticipate and adapt to troubling macroeconomic conditions while consistently outperforming other funds.

Right now, he’s sensitive to the willingness of industrialized nations to forge ahead with stimulus, indebtedness, and “opt for printing money” amidst the backdrop of prolonged economic deleveraging that is likely to continue for ten years or more.

From the New Yorker:

“This spring, he told me that economic growth in the United States and Europe was set to slow again. This was partly because some emergency policy measures, such as the Obama Administration’s stimulus package, would soon come to an end; partly because of the chronic indebtedness that continues to weigh on these regions; and partly because China and other developing countries would be forced to take drastic policy actions to bring down inflation.

“Now that the slowdown appears to have arrived, Dalio thinks it will be prolonged. ‘We are still in a deleveraging period,’ he said. ‘We will be in a deleveraging period for ten years or more.’ Dalio believes that some heavily indebted countries, including the United States, will eventually opt for printing money as a way to deal with their debts, which will lead to a collapse in their currency and in their bond markets. ‘There hasn’t been a case in history where they haven’t eventually printed money and devalued their currency,’ he said.

“Other developed countries, particularly those tied to the euro and thus to the European Central Bank, don’t have the option of printing money and are destined to undergo ‘classic depressions,’ Dalio said. The recent deal to avoid an immediate debt default by Greece didn’t alter his pessimistic view. ‘People concentrate on the particular thing of the moment, and they forget the larger underlying forces,” he said. “That’s what got us into the debt crisis. It’s just today, today.’”

As he describes above, Dalio expects money printing to bring about “a collapse in [the] currency and in [the] bond markets” of overextended nations, and specifically targets 2012 or 2013 for another extremely difficult economic period. You can read additional details in this New Yorker piece on Ray Dalio and his world’s richest and strangest hedge fund.

Best,

Rocky Vega,
The Daily Reckoning