Market Watch: Founder of World's Largest Hedge Fund Doubles Down on 'Cash is Trash', Warning of Debt-fueled Inflation

April 08, 2020

Article by Chris Matthews in The Wall Street Market Watch

“I believe that increasingly there will be questions by bondholders who are receiving negative real and nominal interest rates, while there is a lot of printing of money, about whether the debt assets they are holding are good storeholds of wealth. I believe that cash, which is non-interest-bearing money, will not be the safest asset to hold.”

That’s billionaire investor Ray Dalio making the case that U.S. dollars, perhaps, any currency, will prove a losing bet in this new era of COVID-19.

During a question-and-answer session on social-media platform Reddit, the founder of hedge fund Bridgewater Associates underscored a point that he’s made in the past, but one that has more resonance as the infectious disease that was first identified in Wuhan, China in December wreaks havoc on global economies and forces central banks and governments to unfurl an array of unprecedented fiscal and monetary stimulus efforts. Those measures are intended to help limit the severity of an economic downturn that looks certainly to amount to a world-wide recession.

Back in late January, in an interview with CNBC, Dalio made a similar call, saying “cash is trash.

Dalio defended his skepticism toward cash by pointing to history. “Now, like in the 1930-1945 period, interest rates have hit 0% and printing money and buying financial assets doesn’t get the money and credit to go where policy makers want it to go, so the central government borrows a lot and the central bank prints a lot of money and creates a lot of credit to buy this debt, which the central government spends to target what they want to save,” he wrote.

This money printing and government borrowing, Dalio, argued in a July article on LinkedIn, has sowed the seeds for coming inflation, a major shift from the persistently low inflation that has marked the past two decades.

To read this article in Market watch in its entirety, click here.

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