Friday, May 3, 2019

Billionaire Hedge Fund Manager Ray Dalio Goes From Bad to Worse

Ray Dalio
 By Robert Wenzel

Multi-billionaire hedge fund manager Ray Dalio recently hit the airwaves declaring that capitalism needs to be "reformed." 

That apparently has not gotten him enough attention.

He is now out with an essay stating that "something like" Modern Monetary Theory is inevitable.

He writes:
I believe we will have to go to Monetary Policy 3, which is fiscal and monetary policy coordination that is of a form that we haven’t seen before in our lifetimes but has existed in various forms in others’ lifetimes or faraway places. It is inevitable that this shift will happen because it is inevitable that central bankers will want to ease when interest rates are pinned at 0% and when quantitative easing will be ineffective in achieving the goal...
Modern Monetary Theory is one of those infinite number of configurations that is in my opinion inevitable and shouldn’t be looked at in a precise way...
Of course, MMT is that whacky money printing theory, so to the degree Dalio is endorsing it rather than just saying it is inevitable (It is kind of unclear, he is a terrible writer), it is a blessing in disguise. We no longer have to counter-attack him with just the charge that he is a self-hating capitalist but we can also justifiably claim that he is a nutty MMTer.

He doesn't seem to understand this but, his advancing of MMT is simply advocating a method of money printing, nothing else. This is not new. It has always been understood by keen observes that money printing could come in a variety of ways.

In The Mystery of BankingMurray Rothbard wrote:

From the point of view of the money supply it doesn't make any difference what asset the Fed buys; the only thing that matters is the Fed's writing of a check...
And MMT is about writing lots of very large (electronic) checks, that's all. And the MMTers don't want to stop writing checks even when price inflation gets serious.

I recently reached out to Prof. L. Randall Wray, a leading proponent of MMT and co-author of a new textbook on MMT, Macroeconomics, to get his take on at what point the Fed should battle price inflation.

His response:

Not 2 or 2.5%. at a level that low you cannot tell if there is even inflation. could be measurement error. if it was sustained above 4 you'd be pretty sure there was actually inflation pressure (especially if broad based)
Dalio's economic thinking is nothing but extreme Keynesianism, heavy doses of confusion about the fundamental nature of government money printing, a lack of fundamental understanding of Say's law and a lack of understanding concerning Austrian school business cycle theory.

Robert Wenzel is Editor & Publisher of and Target Liberty. He also writes EPJ Daily Alert and is author of The Fed Flunks: My Speech at the New York Federal Reserve Bank and most recently Foundations of Private Property Society Theory: Anarchism for the Civilized Person Follow him on twitter:@wenzeleconomics and on LinkedIn. His youtube series is here: Robert Wenzel Talks Economics. More about Wenzel here.

1 comment:

  1. In Dalio's book he talks about the single moment that formed his outlook as an investor, which is when Nixon suspected gold redemption and he believe the market would crash when instead stocks rallied strongly. He learned from that to not consider ideology when investing but rather to simply set himself up to profit from what is most likely to happen.

    MMT is obviously crazy but its far from impossible that the dimwits elect someone who will implement it. Plan accordingly.