It has been reported that the billionaire Ray Dalio is predicting a new money printing spree. Check out the latest on the Federal Reserve below.
Federal Reserve and the money printing spree
Renowned investor Ray Dalio is of the opinion that the Federal Reserve will eventually relax its monetary policies.
In an interview with Fox Business, Dalio stated that central banks worldwide are losing money due to the current high-interest rate environment.
He added that the increase in interest rates over the past year has been expensive for many central banks, as they have to pay more interest whenever they borrow capital.
“We have central banks who have lost a lot of money. Central banks themselves have lost a lot of money…
All of them pretty much are not marking those losses to market, but they all have experienced big capital hits to the point of negative capital. In those countries where there are rules about negative capital like the UK, they have to go get capital from the government.”
He continued and said the following:
“That dynamic means that the government then has to come up with more money. That equals in the UK 2% of GDP. So that means the budget deficit is going to be 2% of GDP.
Where do they get the money? They have to borrow the money again or they have to tax it or print it.”
American investor Ray Dalio has explained how the Federal Reserve is losing money by keeping interest rates high for a longer time.
The billionaire warns that in the long run, the Fed will have to resort to money printing to cover its losses.
Dalio adds that these losses will create a compounding effect on debt, becoming even more costly over time.
The negative income caused by the spread between short and long-term rates further compounds the problem. Ultimately, the only solution is to print money, which creates a never-ending cycle of loss and debt.
