Ray Dalio Says Risk is Rising as Political Leaders Give Sway to Mob Ruling

Ray Dalio, the founder of Bridgewater Associates, gave some insight to the markets in the Financial Times yesterday.

Ray Dalio Talks About Mob Mentality

Ray Dalio sees the world in the midst of a game-changing deleveraging but he thinks that the greatest threat to the success of efforts to manage this is hindered by the fact that everyone is at each other’s throats. Dalio says, “Our character and our political and social systems are now being tested in ways that have typically been tested in past deleveragings.”

In turn, the poor economic conditions are leading to “emotional reactions, social and political fragmentation, poor decision-making and increased conflict.” As frustrations increase, entire systems are called into question, even those that are well-established and it creates an environment in which there is a “perceived need for someone to gain control of the mess.” Dalio says that this is the same dynamic Plato spoke of and “the reason Hitler was elected in 1933.”

Ray Dalio’s View on Efforts to Manage World’s Debt

Ray Dalio says that this mentality is causing the financial systems to be question even though it was those systems and the same people that helped forestall depression, like the Fed Reserve and Ben Bernanke. Now that governments are in a position in which further easing will not help, they cannot get more money into the hands of people who will spend it or stimulate private credit, the “mob” is stepping in. They are blaming immigrants for taking their jobs, accusing the government of manipulating currency unfairly, criticizing the financial system for not being able to help as it did in the past and blaming those who have profited from the system for its faults. Politicians are making it worse by fanning the flames in hopes of getting elected and nobody is reacting calmly enough to engage in any real dialogue about a solution. Dalio says that everyone can “calm down and work together” a solution is possible but if not, “we may experience an economic, social and political collapse.”