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Ray Dalio: Slow Economies Will Curb Debt-Market Growth

Ray Dalio: Slow Economies Will Curb Debt-Market Growth

Wednesday, 23 January 2019 02:49 PM

Slowing economies and tighter monetary policy will stymie growth in debt issuance, according to Ray Dalio, co-chairman and founder of Bridgewater Associates LP.

The world’s largest economies are in the later stages of a debt cycle that has been driven by looser monetary policy and has seen a “leveraging up,” Dalio said on a panel discussion at the World Economic Forum in Davos, Switzerland. That’s set to turn around, he said.

When, in the U.S.,“we cut corporate taxes and we also made interest rates low enough that it was attractive to borrow to buy financial assets,” it “caused a lot of growth in corporate debt, and that growth in corporate debt was used to finance those purchases which supported the financial markets,” Dalio said. “So that is going to be less.”

Because of the slowdown, the U.S. may find it difficult to find buyers for its sovereign debt in years to come, Dalio said. The question of who is going to buy America’s bonds “is going to be an issue,” he said.

In terms of quantitative easing, “there was an inappropriate mistake and desire to tighten monetary policy at a level that was faster than the capital markets could handle, and as a result we’ve had a correction,” Dalio said.

In the biggest economies of the U.S., China and Europe, there’s then a “reasonable chance” that the reaction to slowing economic growth will once again be looser monetary policy and fiscal policy than “what is now discounted in markets,” Dalio said.

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Slowing economies and tighter monetary policy will stymie growth in debt issuance, according to Ray Dalio, co-chairman and founder of Bridgewater Associates LP.
EUROPE, FRX, GLOBALMACR, GOV, LOANS, MARKETS, NORTHAM, US, WORLD
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2019-49-23
Wednesday, 23 January 2019 02:49 PM
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