Ray Dalio thinks the dynamics of sound finance have vanished. Here are 3 reasons he sees an unsustainable future for a world that's 'gone mad.'
"This set of circumstances is unsustainable and certainly can no longer be pushed as it has been pushed since 2008," he penned. "That is why I believe that the world is approaching a big paradigm shift."
Three of his biggest gripes with the overarching economy are a system awash with cheap capital, burgeoning government deficits, and massive pension and healthcare liabilities coming due.around the world have been voraciously trying to stimulate their economies. However, the growth and inflation that these policies have meant to spur has largely been absent.
In short, the stimulus provided by central banks is being pumped into assets and not into the economy. This lowers the expected return for stocks going forward, which is causing a big issue we'll get to in just a bit. Some are relying on those returns to fund future obligations.
To Dalio, this means that central banks will have to be the buyer of this debt to keep markets afloat."This whole dynamic in which sound finance is being thrown out the window will continue and probably accelerate, especially in the reserve currency countries and their currencies — i.e., in the US, Europe, and Japan, and in the dollar, euro, and yen," he said.
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