Ray Dalio warns of a a 'great sag' in the global business cycle, and central banks can't do much to stop it
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- Ray Dalio is warning that the world economy is in a "great sag" and central banks won't be able to fight it.
- According to CNBC, Dalio said that with interest rates so low around the world, central banks can't lift the economy through monetary policy alone.
- Instead the billionaire called upon a coordinated response from governments to lift the global economy.
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Hedge fund mogul Ray Dalio warned that the global economy is in a "great sag" and central banks won't be able to provide the stimulus to get out of it.
Speaking at a panel at the IMF and World Bank meeting in Washington, moderated by CNBC, the billionaire investor said the current business cycle is "the best we get, but it's not going to continue forever, you have this sag."
Because of this "sag," Dalio warned that monetary policy would not be so effective. "We have a situation where we don't have the ability to ease monetary policy," said Dalio, who added that "Europe is at the limitation of that [interest rate cuts], Japan is [too], and the US doesn't have much to go on for that."
Dalio said that as a result, fiscal policy and an appropriate government response should be utilized alongside central banks.
"Monetary policy it's not going to be so effective," he said, according to the video of the event. "Imagine if you have a downturn and you have not as effective monetary policy, then there has to be coordination. So how do you get coordination in this kind of political environment? Then you have to have coordination with fiscal and monetary policy to be able to do something and then you have to have political coordination between the various factors on what the policy should be."
The Bridgewater Associates founder also likened the current political and economic climate to the 1930s, touching on the idea that we have a rising power challenging an existing power in the form of the China and the United States.
"There's four kinds of war: there's a trade war, a technology war, currency capital war, and a geopolitical war - and that's a phenomenon happening at the same time, so internally we have a lot more conflicts," Dalio told the panel.