Bridgewater Associates co-founder Ray Dalio said it’s both “both naïve and inconsistent” to think that all the US central bank to check rising prices is to lift rates and “everything will be good”.
“Markets and economic movements are driven by much simpler and more commonsense linkages than most people articulate.” “The facts are that: 1) prices rise when the amount of spending increases by more than the quantities of goods and services sold increase and 2) the way central banks fight inflation is by taking money and credit away from people and companies to reduce their spending.”Dalio said lifting rates “just shifts some of the squeezing of people via inflation to squeezing them via giving them less buying power”.
“With debt assets and liabilities as high as they are and projected to increase due to the government deficit, and the Fed also selling government debt, it is likely that private credit growth will have to contract, weakening the economy.“