Ray Dalio is one of the world’s largest hedge fund managers. he published an article entitled “The world is crazy and the system is broken”, in which he talks about cheap money for the rich and vice versa about the unavailability of money for those who do not have.
The gap is widening
According to him, the gap between rich and poor is constantly growing. Literally, Dalio says that money is free for those who are creditworthy because investors who give it to them are willing to recover less than they have issued. They do this because they have virtually unlimited amounts of money and are “forced” by central banks to invest, believing that by constantly printing new money they will somehow disrupt the economy. Unfortunately, by investing money in financial instruments such as stocks, this money does not reach people who alone would have the potential to pump up a stagnant economy.
In his article, Dalio shows how large banks and investors who simply have to invest money invest in companies that do not bring any tangible benefits to the economy because these investors want to invest in financial instruments, not spend money. Money thus remains in the financial system and does not enter the real economy. As a result, financial asset prices continue to rise, while real economic growth lags behind them. So here we have artificially overvalued assets on the one hand, and on the other, for example, a pension system that ceases to be sustainable.
System not working
Put simply: although there is an increasing amount of money in circulation, it does not reach the “ordinary” people who could spend it and thus revive the economy, as they remain in the virtual world of financial instruments as the investment of those who already have money . This inoperable system can not work the same way indefinitely. It is therefore logical that the first major global problem will act as a detonator for further changes that necessarily have to come.
Dalio recommends physical gold as an investment in this situation. It is worth noting that the same Dalio also wrote an article about paradigm shift in society. The article mentions the regular cycles that the markets go through every 10 years and that change the functioning of these markets. When the previous cycle was over, there was a global financial recession and a bank crash, leading to Bitcoin. We are now in a similar situation. Thus, cryptocurrencies have a great chance to prove that they are able to function in a crisis as a secure, transparent and uncensored payment method, as Bitcoin was originally designed.