Ray Dalio: The Low Inflation Paradigm is Over

Ray Dalio

Ray Dalio, founder of the hedge fund Bridgewater Associates ($160 billion under management), says:

I think that the [low-inflation] paradigm that we are in will most likely end when a) real interest rate returns are pushed so low that investors holding the debt won’t want to hold it and will start to move to something they think is better and b) simultaneously, the large need for money to fund liabilities will contribute to the ‘big squeeze...

At that point, there won’t be enough money to meet the needs for it, so there will have to be some combination of large deficits that are monetized, currency depreciations, and large tax increases.

Dalio has a spotty track record with his observations, as far as I am concerned, but I think he has this one nailed, though the money printing isn't something that is going to happen just in the future, it is happening right now.

-RW