Tags: ray dalio | downturn | economy | recession | dollar

Ray Dalio: Recession to Hit in 2 Years as Dollar Will Fall 30 Percent

Ray Dalio: Recession to Hit in 2 Years as Dollar Will Fall 30 Percent
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Wednesday, 12 September 2018 11:55 AM

The U.S. is probably two years away from its next downturn and will see a significant weakening of the dollar, billionaire hedge fund manager Ray Dalio said.

The impact of the nation’s current tax cut-driven fiscal stimulus will begin to fade in about 18 months, just as the U.S. ramps up its borrowing to help pay off pension, healthcare and other unfunded obligations, he said in an interview with Bloomberg Television Wednesday.

Domestic and foreign demand for U.S. debt won’t keep up with the nation’s borrowing needs, and the Federal Reserve will ultimately need to print money to fund the deficit rather than raise interest rates. That will result in a steep depreciation of the dollar, said Dalio.

The greenback could fall as much as 30 percent, he said.

“Two years out is when I’m worried about,” said Dalio, who runs the world’s biggest hedge fund at Bridgewater Associates. “It’ll be more of a dollar crisis than a debt crisis, and I think it’ll be more of a political and social crisis,” with greater internal conflict than in 2008.

The effectiveness of monetary policy in reversing the downturn will be limited, as interest rates will already be low and with quantitative easing at its maximum, he said.

Dalio said current regulations don’t necessarily provide the freedom to deal with certain financial emergencies.

“I think there should be an emergency economic powers act” that allows the President, the Federal Reserve chairman, and the heads of the two Houses of Congress -- when in agreement -- “to do the things that are necessary” if circumstances “are not properly anticipated in the law,” he added.

Dalio released a new book this week, "A Template for Understanding Big Debt Crises," which studies prior financial downturns.

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The U.S. is probably two years away from its next downturn and will see a significant weakening of the dollar, billionaire hedge fund manager Ray Dalio said.
ray dalio, downturn, economy, recession, dollar
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2018-55-12
Wednesday, 12 September 2018 11:55 AM
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