Ray Dalio: We No Longer Have Free Markets

Ray Dalio says capital markets are no longer "free". This, apparently, is news to some folks, but certainly not to the perpetually irritable crowd who spends an inordinate amount of time every week waxing hysterical about moral hazard (as opposed to just riding the wave in, for example, high yield, which would have delivered you a record return in the second quarter). Dalio spoke to Bloomberg's Erik Schatzker on Thursday via teleconference. "I've heard you say, Ray, that central banks control

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5 thoughts on “Ray Dalio: We No Longer Have Free Markets

  1. [quote]Perhaps most importantly, Dalio characterizes “the whole economy” as being systemically important”. Although it’s not entirely clear what he means by that (it’s tautological if taken literally)[/quote]

    I cannot believe you would miss the reference to some banks being declared systemically important in the aftermath of the 08 crisis and thus forbidden to fail…

    Here, his argument goes, all jobs, all companies are declared too important to fail i.e. the creative destructive cycle is effectively suspended b/c we cannot take the pain, physical and political.

    TBH, like you, I’m very mildly worried about the issue. The pandemic – and our decision to stop the economy to save our elders – makes it hard to pretend this is normal business/credit cycle.

    OTOH, your point about the last, on its face, justified meddling leading to that borrowing binge by corporations that made them so fragile we can’t even contemplate raising rates anymore is exactly the kind of stuff Dalio is talking about… You may not be so far apart after all…

    1. I was thinking the head of the Fed is now as powerful as the President minus the military and nuclear codes.

      Very recently the Republicans were only too happy to scream “Socialists/Socialism!” at the Democrats.
      Lo, and Behold! We now have MMT and a controlled economy especially if the Fed starts buying equities.

      Do we laugh or cry?
      Or just elect a Democrat

  2. My problem with Dalio is that gold currencies are what he believes in. He never ventures where the economy would be if Nixon did not make the move to FIAT. I find it impossible to believe that GDP and velocity of money would have kept the world population from being hungry. Malthusian economic philosophy may have been more likely with a strict gold standard. Of coarse bond trading would be more straight forward and depressions more likely. Underneath all the lofty intentions of the founding fathers was a Depression in the North and a Credit crisis in the South caused by British insistence on re-instituting a gold standard in the colonies.

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