With a number of recession signals blaring of late, billionaire Bridgewater Associates founder Ray Dalio says the chances of a recession this year or next are about 25%, and that the U.S. Federal Reserve has little power to fix things once it inevitably hits.
The Fed, EU and Japan central banks “have to face the fact that when the next downturn comes, there will not be the power to reverse it in the same way that existed before,” Dalio said Thursday in an interview on “The David Rubenstein Show: Peer-to-Peer Conversations.”
Dalio also said he would advise the Fed to cut rates slowly, 25 basis points (0.25%) at a time for an undetermined period.
When considering when the next recession will hit, Dalio said growing wealth inequality, the 2020 elections and the growing global influence of China all need to be considered.
The U.S. Federal Reserve cut rates in July for the first time in over a decade, and it’s widely expected to make another quarter-point cut when the Federal Open Market Committee meets again Sept. 17-18. Fed Chair Jerome Powell called the July cut a “mid-cycle adjustment,” rather than the beginning of a number of incoming rate cuts.
Dalio noted in a recent blog post on LinkedIn that we are in the late stages of the long-term debt cycle, lamenting the current state of interest rates for the past several months.
He’s also bullish on gold and says it will be the place for investors to go as central bank stimulus reaches its limit of effectiveness.
I get many good questions that I answer on a daily basis on social media so I have been sharing the questions and answers weekly in this format so you and others can see them all:https://t.co/PyhnCu813j
— Ray Dalio (@RayDalio) September 5, 2019
Dalio has been speaking out on aspects of the current economic system in the U.S., saying it has sparked rampant income inequality and created gaps in education and social mobility, which he thinks will ultimately lead to a clash between the rich and the poor.
Dalio also mentioned that while he speaks out for the little guy, he has no plans to go into public service, and also mentioned he doesn’t think the Brexit mess in the U.K. will have much of an impact on American markets.