Monday, October 24, 2011

Ray Dalio making same mistake as Bill Gross?

CHARLIE ROSE: --So you have the same opinion that Standard & Poor`s had when they reduced --

RAY DALIO: Essentially.

CHARLIE ROSE: -- America`s credit rating.

RAY DALIO: Essentially. So I think -- and by the way I think it`s very important to understand that the government debt is the terrible challenging issue that we should talk about maybe but also more important is the private sector debt. So that resolving the public sector debt does not resolve the problem.

That individuals face the same problem meaning that they`re overly indebted and because they`re overly indebted and spend a lot of their consumption through borrowing and they had a -- it was like if you borrow you have a party and everything`s good and you have a prosperity and you -- you have your party, you hire the caterers, they`re employed and everybody`s happy.

So that there`s a private sector debt issue at the same time as the public sector debt. They`re both. So if you resolve the budget deficit, you do not resolve the private sector debt issue. Both of those things mean we`re both overly indebted. We cannot -- the amount that we owe and have promised in its various forms can`t be paid.

1 comment:

Anonymous said...

- He states that private leverage is the real problem, beyond public debt. (And I think public debt is a problem, because paper assets either these being government debt or money can't fix all problems, like real growth, income disparity, productivity, supply shortage or cost-push inflation just to name a few.)
- He divides countries between "those which can print and those which can't".
- He says that most probably problems in Europe will be solved partially with writedowns and money printing (my opinion too right now).

Maybe he does not use MMT but he obviously knows that countries can print money. but money printing is not the solution to all the troubles in the world in the slighless, indeed it can be just an other form of 'kicking the can' (see China, for example, for MMT on steroids not solving problems, but creating them).