The Federal Reserve should more closely monitor the economic struggles of the bottom 60 percent of the economy when making policy since “average statistics” are camouflaging what’s really occurring in the U.S., billionaire Ray Dalio wrote in a report Monday.
Dalio noted wide disparities in factors including labor, retirement savings, health care, death rates and education between the top 40 percent and bottom 60 percent of the country.
The founder of Bridgewater Associates said it would be a “serious mistake” for the Fed to just focus on a national average as it could lead the policy makers to see a brighter economic picture than the reality.
“Because the economic, social, and political consequences of an economic downturn would likely be severe, if I were running Fed policy, I would want to take this into consideration and keep an eye on the economy of the bottom 60%,” Dalio said in his Daily Observations report.
“Similarly, having this perspective will be very important for those who determine fiscal policies and for investors concerned with their wealth management.”
The difference in the financial conditions for the two groups -- due in part to whether they can take advantage of the market rally -- is a major cause of slowing growth, he wrote.
The gap between the two economies will only intensify over the next five to 10 years, as changes in demographics will challenge the government’s ability to meet pension and healthcare demands, while changes in technology will continue to impact employment, he said.
The disparities he listed include:
- The top 40 percent now has on average 10 times as much wealth as those in the bottom 60, up from six times as much in 1980
- Just a third of the bottom 60 percent saves any of its income, compared to about 70 percent of the top 40
- Premature deaths among those in the bottom 60 percent are up 20 percent since 2000, and the odds of a premature death within that group are twice as high as the top 40
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