Billionaire investor Ray Dalio has cautioned that policymakers are unlikely to take meaningful action to defend the value of money until inflationary pressures reach devastating levels.
According to the Bridgewater Associates founder, history shows that central banks and governments tend to delay intervention until inflation becomes severe and harder to control, he said in an X post on July 22.
“Judging from the lessons of history and current readings, I think that it is clear that the value of money won’t be defended until the classic weak money/inflation problems become intense—and perhaps not even then—because the pains those problems produce are intense,” Dalio said.
He emphasized that defending the value of money is critical but politically unpopular, as it requires fiscal and monetary discipline. Dalio noted that politicians often prefer loose policies to stimulate spending and markets, while central bankers try to strike a balance between growth and inflation control.
This tension, he noted, tends to intensify during extreme conditions, posing a threat to the independence of central banks.
Balancing political pressure
In the analysis, Dalio referenced the ongoing feud between President Donald Trump and Federal Reserve Chair Jerome Powell, with the White House pressuring for rate cuts, even fueling speculation that Powell could be dismissed or forced to resign.
Looking ahead, Dalio warned that without much intense inflation, significant tightening is unlikely in the near term.
For instance, the expert cited the inflation cycle from 1970 to 1982 as an example of how policymakers often act only when problems have already become acute.
At the same time, Dalio, a longtime critic of U.S. fiscal policy and the ballooning public debt, pointed to mounting signs that money is losing value.
In this context, he noted a 14% rise in stocks to record highs, coupled with a weakening dollar, 27% against gold, and 45% against Bitcoin. Tight credit spreads and 10-year real interest rates just above 2% keep borrowing costs low, suggesting monetary conditions remain too loose.
As reported by Finbold, Dalio had warned that the United States economy is heading to a ‘period of great concern’ as the Fed balances pressure to cut rates against threats to the dollar’s value.
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