Hedgefonds manager Ray Dalio warns of “heart attack”

“Derexal heart attack”

Entrepreneur warns: USA in situation like before World War II

Ray Dalio sees parallels to the world situation in the 1930s and complains of a wall of silence among investors.

The American hedge fund manager Ray Dalio warned of a autocratic change from the United States under Donald Trump. In an interview with the “Financial Times”, the founder of Bridgewater Associates pulled parallels to the political situation in the period before World War II and complained that many investors held their criticism out of fear.

“I think that what is currently political and socially is comparable to the events in the 1930s and 1940s is comparable worldwide,” said Dalio. The multimilliarist sees the causes in growing assets and value differences as well as in dwindling trust within society. This leads to a policy “that is more extreme”.

Dalio was particularly critical of Trump’s economic policy course, such as his decision to participate in the US chip manufacturer Intel with ten percent. Such government interventions indicated a “strong autocratic leadership” that wanted to gain control of the economic situation, said Dalio.

The investor’s statements are rare public criticism from the financial world. The concern about Trump’s policy is spread among investors, but many were not open: “By the way, most people are silent in times of such times because they are afraid of retaliation if they criticize,” said Dalio.

Another point of criticism: dealing with the US Central Bank Federal Reserve (FED). Dalio warned of political weakening. The reasons for this are the attempt to relieve a central bank governor, as well as the nomination of a close ally for the vacant board position. This could damage the credibility of the FED: a central bank that keeps interest on interest under political pressure would “undermine confidence in the Fed as a defender of the monetary value”.

The market has already reacted to this. International investors are committed to withdrawing from US state bonds and increasingly investing in gold, said Dalio. The US debt level is also alarming: “The major excesses, which are now forecast as a result of the new budget, will probably lead to a debt -related heart attack in the relatively near future,” he warned. His forecast: “In three years, plus/minus one or two years.”

Washington spends around seven trillion dollars a year, but only take five trillion. A financing gap that can only be closed by new debts. This will increase the range of US bonds, but the demand cannot keep up.

Once again, the author criticized several bestsellers of growing state control. Although he avoids Trump’s policy as “authoritarian” or “socialist”, but: “Governments are increasingly taking control of what is done by central banks and companies.”

His conclusion: If big differences in assets and social values ​​together, both the left and right populism increase. “Democracies are weakened and autocratic leadership styles are gaining in importance,” said Dalio – because many people wanted a government to “take control of the system so that things go well for them”.