Ray Dalio, chief executive and founder of Bridgewater Associates, the world's largest hedge fund, believes the Federal Reserve's next move will be to launch another round of quantitative easing (QE). Dalio has a good track record, having predicted the global financial crisis back in 2007. Now, with asset prices highly inflated and central bankers' abilities to ease monetary policy reduced, he's worried what will happen in the next downturn.
Dalio sees no reason for the Fed to raise rates. He believes the central bank is focusing on the wrong areas, looking at the cyclical short-term debt cycle when it should care more about the 'secular' long-term one. It's like the lead-up to the 2008 crisis: the Fed "just gave attention to the GDP gap and missed the whole bubble and we had an economic collapse". Now "the risks of the world being at, or near, the end of its long-term debt cycle are significant" and shouldn't be ignored.
With deflation much more of a threat than inflation, Dalio expects the Fed to have to resort to further money-printing. "Raising rates is a restrictive policy... countries around the world shouldn't be tightening monetary policy, they should be easing it."
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
Disposable income divide – areas with the most and least cash at the end of the monthNot much left over after you’ve paid all your bills? You could be living in a low financial resilience area. Here’s what to do about it – and the picture across the country.
-
Why one in ten retirees are cutting back on giftingMore than one in 10 retirees plan to cut back on gifting to children and grandchildren, despite concerns we could see inheritance tax changes in the Autumn Budget
-
'Governments are launching an assault on the independence of central banks'Opinion Say goodbye to the era of central bank orthodoxy and hello to the new era of central bank dependency, says Jeremy McKeown
-
Will Donald Trump sack Jerome Powell, the Federal Reserve chief?It seems clear that Trump would like to sack Jerome Powell if he could only find a constitutional cause. Why, and what would it mean for financial markets?
-
Can Donald Trump fire Jay Powell – and what do his threats mean for investors?Donald Trump has been vocal in his criticism of Jerome "Jay" Powell, chairman of the Federal Reserve. What do his threats to fire him mean for markets and investors?
-
Do we need central banks, or is it time to privatise money?Analysis Free banking is one alternative to central banks, but would switching to a radical new system be worth the risk?
-
Will turmoil in the Middle East trigger inflation?The risk of an escalating Middle East crisis continues to rise. Markets appear to be dismissing the prospect. Here's how investors can protect themselves.
-
Federal Reserve cuts US interest rates for the first time in more than four yearsPolicymakers at the US central bank also suggested rates would be cut further before the year is out
-
The Bank of England can’t afford to hike interest rates againWith inflation falling, the cost of borrowing rising and the economy heading into an election year, the Bank of England can’t afford to increase interest rates again.
-
Interest rates held at 5.25% againThe Bank of England has kept rates at 5.25% again, in a widely anticipated move. We look at what it means for your money - and what the Bank’s next move could be
