Dalio & Tudor Jones Warn: “We Will Kill Each Other” If Our Broken Economic System Isn’t Fixed

Dec 1, 2019 | News

Two hedge fund icons – Bridgewater founder Ray Dalio and Paul Tudor Jones – joined Yahoo Finance for the 2nd annual Greenwich Investment Forum earlier this month. Speaking directly after Connecticut Gov. New Lamont, with whom Dalio is working to bolster Connecticut’s schools via a $100 million gift  – the largest charitable gift the state has ever received, PTJ and Dalio focused their “Fireside Chat” on the flaws of Fed policy, the dangers of America’s ballooning budget deficit, and the steps that must be take to “stop us from killing each other” in a violent revolution, as Dalio warned.

PTJ spoke first, starting with a few words about President Trump, praising him as “the greatest salesman” to ever enter the American political arena. After all, didn’t Trump convince the Republican Party – once the party of fiscal piety – that 5% budget deficits 10 years into an economic rebound are necessary to protect the economy. Similarly, didn’t he also convince the Fed – “through great moral suasion” – that returning to real negative rates with unemployment at 50-year lows was a necessity?

Both Dalio and PTJ agree that, while clearly stimulative in the short-term (obviously just take a look at the S&P 500), these decisions will set up the US economy for one of the most punishing downturns in history, which is why PTJ always laughs when Jerome Powell is quizzed about financial conditions and whether he sees bubbles anywhere. Because at this point, the whole market is a bubble.

“Clearly, the low interest rate policy we’re pursuing is creating an excess and that excess is in our public deficits. Which, at the current pace, in less than ten years we will have exceeded the threshold where Greece had its issues,” PTJ said.

And when we look abroad, the full scope of this heady “fiscal-monetary mix” becomes even more obvious.

“I look at our fiscal-monetary mix, it’s the most stimulative that I’ve ever seen – again, economically adjusted – no wonder the stock market is at new highs. It’s literally the most conducive environment – certainly in the short run – for economic growth and strength that I’ve ever seen. You add on that an 11% budget deficit in China, the second largest economy, and 3%.”

Dalio jumps in: Today, the number of companies producing earnings is the lowest since the dot-com bubble because “companies can sell dreams rather than earnings.” That’s thanks to the $15 trillion sloshing around the financial system that has been injected by central banks

“Because the world is looking for yield, companies can sell dreams rather than earnings. The number of companies that produce earnings is the lowest since the dot-com bubble in terms of their need because you can sell a dream.”

“As a result of the accumulation of the money at the top and technology we have a situation where, naturally, those who have a lot of money also have a lot of money in credit…but it doesn’t trickle down. And as a result, we have a situation with a large wealth gap.”

Dalio then moved on to highlighting his “1930s” hypothesis. There are three things that exist today that haven’t existed since the 1930s: A wealth gap that’s driving populism on the left and right, the absence of effective monetary policy, and an emerging world power (China) challenging an existing world power (the US).

Continue Reading / ZeroHedge >>>

Watch the full interview on the RTD YouTube channel here…


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