Ray Dalio Says Global Economy Is in a ‘Great Sag’
Ray Dalio, billionaire and founder of Bridgewater Associates LP, speaks during the Milken Institute Global Conference in Beverly Hills, California, U.S. (Photographer: Patrick T. Fallon/Bloomberg)

Ray Dalio Says Global Economy Is in a ‘Great Sag’

(Bloomberg) -- Billionaire hedge-fund founder Ray Dalio said the global economy is in a “great sag” marked by political extremes that recall the 1930s, but isn’t headed for a typical end-of-cycle crash.

Dalio, whose investment management firm, Bridgewater Associates, is the world’s biggest hedge fund, weighed in on topics from global borrowing levels to the U.S. presidential election, where he said a Democratic victory might lead to a reversal of President Donald Trump’s corporate tax cut.

Ray Dalio Says Global Economy Is in a ‘Great Sag’

“Big, unique things are happening” in a global economy awash with money, Dalio said on a panel in Washington. The impetus of measures such as interest-rate reductions and tax cuts is fading, “but we don’t have a circumstance to cause a classic crash-type event at the end of the cycle.”

“You don’t have the same tightening of monetary policy, you don’t have the same debt rollover,” he said. “But you have a lot of long-term debt maturities and you have a lot of obligations,” such as pensions and health care, “that are a burden.”

“So this cycle is fading and we’re now in the world in what I would call a great sag,” Dalio said on the CNBC-sponsored panel Thursday at the annual meetings of the International Monetary Fund and World Bank.

Capitalist or Socialist

Political polarization is making next year’s election crucial for markets and the U.S. economy, Dalio said.

“It’s really almost a -- most likely a capitalist-socialist question” that will have major implications for corporate taxes, he said.

“What we’re seeing in the United States and what we’re seeing around the world is really a greater conflict, with almost more populism of the left and populism of the right, much like the 1930s,” according to Dalio.

Asked about data suggesting that U.S. consumer demand may be softening, Dalio said one reason for slower growth is “that there’s such a large wealth gap,” a disparity that also leads to an education gap that he portrayed as a burden on growth.

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