Ray Dalio: beware a dollar slump
Ray Dalio, founder of Bridgewater Associates, the world’s biggest hedge fund, has warned the dollar could lose almost a third of its value.
Ray Dalio (pictured), founder of Bridgewater Associates, the world's biggest hedge fund, has warned the dollar could lose almost a third of its value in the relatively near future. He reckons the US currency could face a "crisis" two years from now, as the gap between government spending and tax receipts expands sharply in the wake of US president Donald Trump's tax cuts.
By then, the boost that the US economy has experienced from recent tax cuts will have faded and the economy will be weakening. However, at the same time the government will be forced to boost its spending on various long-term obligations such as pensions and healthcare.
The risk, says Dalio, is that the US won't be able to sell enough government debt (Treasuries) to fund its growing budget deficit. But nor will it be willing to risk choking off growth by raising interest rates. As a result, the Federal Reserve the US central bank will have to print money to fund the gap. This direct monetisation of the deficit will help weaken the dollar, sending it down by around 30% in all. "It'll be more of a dollar crisis than a debt crisis," Dalio told Bloomberg's Erik Schatzker, "and I think it'll be more of a political and social crisis."
Subscribe to 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
Dalio who has also consistently drawn parallels between the 1930s and today's surge in populist politics has recently released Bridgewater's exhaustively-researched guide to financial crises, A Template for Understanding Big Debt Crises, which can be downloaded free from his website, Principles.com.
-
Investors are snapping up gilts thanks to tax incentives – but is your money better off elsewhere?
UK government bonds, also known as gilts, are proving popular with investors so far this year, thanks to higher interest rates and the attractive tax incentives they offer. Should you invest in them?
By Katie Williams Published
-
Rightmove: Asking prices edge closer to record peak
Asking prices have been driven up by the top-end of the market, Rightmove has found. But how does the situation look in your area?
By Vaishali Varu Published