Ray Dalio and Tudor Jones seem to think that “we will kill each other” if we don’t fix structural problems within the economy. This is a very dire warning from two financial magnates.
That’s not kind of scary, that’s very scary. I’m wondering if I need to join Judo classes or take some other martial arts lessons, buy more Bitcoin, and prep for a doomsday scenario like the super-rich.
Ray Dalio, Tudor Jones, and other financial market participants like Peter Schiff are warning about economic factors such as inequality, excessive government spending, possible lack of liquidity, global debt, and high valuations present within the markets today.
One of the most compelling strategies in these past few years is that of macro investing.
Why?
It is because of the times in which we live.
What Is Going on in the Economy?
The current period of economic activity seems to hinge on a Dickens quote, “These are the best of times and the worst of times.”
Global poverty is declining, but inequality is on the rise. The United States sees a period of low unemployment rates with a roaring stock market. At the same time, President Trump keeps calling for negative interest rates and continues to increase the national deficit to bolster growth and national competitiveness.
Dalio and Paul Tudor Jones see that our current stimulative actions may set the economy up for a substantial decline. They seem to think that we are in a world where everything is an economic bubble that has yet to undergo the inevitable pop. These financial magnates note that public company earnings are in a state of decline and that high growth companies don’t make a profit but rather sell dreams instead.
Protests around the world in places such as France, Chile, Lebanon, and other countries stem from tax hikes and economic distress.
Populism is in season.
The billionaires are troubled, and the people are protesting.
Remember the 2008 crisis, it wasn’t that long ago, and it created a bit of a reset within the financial system and affected many.
The 2008 financial crisis was devastating, and many experts still note that we have not bounced back from such a crisis. According to the St. Louis Federal Reserve, at least 10 million Americans lost their homes in the previous crisis. More than 8 million people lost their jobs during this part of the economic cycle. Banks in the United States went through a state of consolidation, with some banks absorbing the assets of others. Initial recovery took about eighteen months with government-based stimulus spending, but more excellent recovery would take much longer.
Millennials, those with a lower income, and other groups are still trying to recover from the recession and build wealth by balancing debt and trying to make their lives work.
Dalio on the Current State of Affairs and Solutions
Central banks around the world still keep interest rates at levels near the zero bound. Further, some prominent nations have even plunged into the negative. The Bank of Japan holds rates -0.10%, the Federal Reserve sets interest rates at 2.00%, the Bank of England has placed it at 0.75%, and Australia is holding at 0.75%.
Something doesn’t seem right with the current picture.
Much of the world is changing due to technology, globalization, and changing paradigms in the current world, yet we continue to operate as we did in the past.
Dalio believes that solutions lie in access to opportunity and equal division of the pie. He thinks the answer lies in the public education system in the United States. The leader of Bridgewater Associates also thinks that economic reform will come about voluntarily or by force from the markets.
What’s even more interesting is that these issues are the exact reason why bitcoin came about in the world. The bitcoin system is one that is run by consensus, conducts transactions without traditional players like SWIFT or others, and accrues value to a digital asset.
Economic incentives are present within the system that attract miners and speculators and allow for further use cases built on the bitcoin protocol.
Finally, other projects seek to work on other components such as governance, utilization of resources, and coordination of activities to produce ideal outcomes.
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