Ray Dalio warns of a doomsday scenario of stagflation

Investment legend Ray Dalio is convinced the US government should get money printers running again to fund the resulting shortage. In a recent interview with podcasting director Chris Williamson, Dalio said the US government would likely choose inflation to pay off its massive $31.45 trillion in debt.

According to Dalio, we are now at a point where the Federal Reserve’s aggressive monetary policy has caused the first dominoes to fall.

The first dominoes to fall

Dalio believes that the Fed’s monetary policy means that America is in a position where the government must quickly intervene with new support packages to boost the economy. “I think we are at the beginning of a cycle where the thumbscrews get tightened and the first dominoes fall. I think this situation is going to cause more problems,” Dalio said.

“The bottom line is that there is a lot of debt in the financial system and we keep adding a lot of new debt to it. That debt has to be paid off with hard money, which means that you can’t take out a few printers, or by printing a lot of money,” Dalio continues.

The investment legend goes on to say that he believes the money printer is the only realistic solution to the US debt problem. Furthermore, on Williamson’s podcast, Williamson warned of stagflation, which would be a dire scenario.

What is stagflation accompanied by?

Stagnant inflation is an economic term used to describe a situation where there is stagnant economic growth (stagnation) and high inflation at the same time. According to Ray Dalio, stagflation is a complex problem that can be caused by several factors.

For this reason, it is believed that it requires a flexible approach, in which governments can take monetary and fiscal measures. It’s particularly difficult, because in a stagnant economy, you’d usually say there needs to be lower interest rates and stimulus.

If inflation is high at the same time, this is dangerous, because this economic stimulus can push prices higher. In this regard, a truly exciting period awaits the global economy.