Bridgewater Associates co-CIO Ray Dalio called the US debt limit a “farce”. “It works like a bunch of alcoholics writing laws to enforce drinking limits,” he said. The United States hit its $31.4 trillion cap on borrowing last week, raising the possibility of a June default. Something is loading.
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Billionaire investor Ray Dalio has criticized the concept of the US debt ceiling – and compared politicians who want to push it higher to alcoholics who don’t know their limits.
“We all know that there is no real debt limit because what is called a debt limit never actually limits debt,” the CIO of Bridgewater Associates wrote in a LinkedIn post published. Wednesday.
“It’s a farce that works like a bunch of alcoholics writing laws to enforce drinking limits,” he added. “When a limit is reached, they do a wacky trade that temporarily eliminates the limit that allows them to have the next binge until they reach the next limit, at which point they go through the next wacky trade and continue. to binge.”
The United States hit the $31.4 trillion borrowing limit set by Congress last week, forcing the Treasury to step in to prevent a default with “extraordinary measures,” including cutting investment in pension plans.
But these measures will only support public finances until June, with politicians debating whether to raise the limit or more creative methods like minting a $1 trillion platinum coin to deposit with the Federal Reserve for avoid a default in the longer term.
Congress has acted 78 times to extend the debt limit since 1960, according to the Treasury Department.
This shows that lawmakers are not committed to the idea of a cap, according to Dalio.
“Not only does this tragically comical ritual lead most people to believe that the debt limit will be circumvented, but it also tells us that those who run our political system either lack discipline or tacitly agree that excessive borrowing is acceptable,” he said.
Failure of the United States to pay on its loans or even the approach of a non-payment situation could lead to turbulence in the markets and send the economy into a recession, the chief economist at Goldman Sachs warned on Wednesday.
“That’s the concern: that you get financial market turmoil, a significant tightening of financial conditions and that adds to the downward pressure on economic activity,” Jan Hatzius told CNN.
But the constant extension of the limit could also trigger a crisis by undermining global confidence in the United States as a country ready to repay its debts, Dalio said.
“The long-term prognosis is that indebtedness will continue until a crisis ends this momentum,” he wrote.
Read more: US debt default or even near non-payment could push economy into recession, says Goldman Sachs chief economist