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Dalio: "There Are No More Tools In The Tool Kit" - Complete Charlie Rose Transcript With The Head Of The World's Biggest Hedge Fund

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When it comes to reading the world's "tea leaves", few are as capable as Ray Dalio, head of the world's biggest (macro) hedge fund, Bridgewater Associates. So when none other than Ray tells PBS' Charlie Rose that "there are no more tools in the tool kit" of fiscal and monetary policy to help America kick the can down the road, perhaps it would behoove the respective authorities to sit down and listen. Or not... and just to buy S&P futures in hopes that record career risk is big enough to force every other asset manager in the market to do the dumb thing and follow the crowd of lemmings right over the edge. Luckily, there are those who have the luxury of having both the capital and the time to not be drawn into the latest sucker's rally. More importantly, Dalio shares some unique perspectives on what it means to run the world's largest hedge fund, his perspective on social anxiety, and Occupy Wall Street and thus the demonization of wealth and success (in a way that does not imply crony capitalism: see Omaha), his views on taxation, on China, on the markets, on Europe and its insolvent banks, and most imporantly on the economy and why the much pained 2% growth (if that) will not be nowhere near enough to alleviate social tensions, such as those that have appeared over the past two months. Dalio's conclusion, in responding to whether he is optimsitic or pessimistic, to the current environment of broad delevaraging of the private sector, coupled with record releveraging of the public, is that he is "concerned." And that's why, unlike the recently unemployed David Biancos of the world, who never exhibit an ounce of skepticism, Dalio is among the wealthiest men in the world (and hence a prime target of the #OWS movement). Well, that and also being smarter than most.

Full video interview after the jump

And complete transcript:

CHARLIE ROSE: Ray Dalio is here. He is the founder of Bridgewater Associates. He created the investment firm in 1975 out of a two-bedroom apartment in New York City. Today the company managed roughly $125 billion in global investments. Its clients include foreign governments, sovereign banks, central banks and institutional pension funds.

Over the last two years, Bridgewater ranked as the largest and best- performing hedge fund in the world. In 2010, his returns were greater than the profits of Google, Amazon and eBay combined.

I`m very pleased to have Ray Dalio at this table for the first time to talk about a perspective on the global economic scene and a whole range of issues having to do with where we see ourselves and also a look at his own philosophy and what has informed his own opinions and the way he looks at the world. Having said that -- welcome.

RAY DALIO: Thank you.

CHARLIE ROSE: It`s great to have you here.

RAY DALIO: It`s great to be here.

CHARLIE ROSE: What is Bridgewater Associates?

RAY DALIO: It`s a global macro firm. We assess what the world economy is like and what -- how asset classes will change and we are managing money for pension funds and endowments like you described; the Pennsylvania teachers, those types of pension funds. We`re trying to keep them safe.

CHARLIE ROSE: When you look at the world today, the global economic picture, I read today Goldman Sachs had a disappointing performance. JP Morgan did not do as well as some had hoped it might be. What`s happening with financial firms?

RAY DALIO: I think it`s important to understand that we`re going through a deleveraging. So we have to understand the big picture is -- there`s a deleveraging. Three big themes: first there`s a deleveraging; secondly we have a problem with monetary and fiscal policies are running out of ammunition; and thirdly we have an issue in terms of people most importantly who are at each other`s throats politically and globally in terms of having a problem resolving those.

Imagine you earned $100,000 a year and you didn`t have any debt. You can go to a bank and borrow $10,000 a year. You can spend, therefore, $110 a year. When you spend $110,000 a year, somebody else earns $110,000 and they can go to a bank and there`s a self-reinforcing process in which your debt rises in relationship to your income.

And that goes on for a long time and that goes on for 50 or 75 years through history. We`ve had 50, 75-year cycles and then you reach a point where you can`t anymore get more debt and the process starts to change. And you can`t leverage up. Traditionally the private sector leverages up, we leveraged up then we got to a point in 2007 where we had a bubble and that same sort of bubble that happened in Japan, same sort of bubble that happened in the Great Depression, meaning we reached our debt limits. Europe`s reached its debt limits.

So then we begin the process in reverse as you can`t spend as much you -- somebody else`s income falls. And that process works in reverse. So we`re in a deleveraging. So I think that this is important globally. That`s what Europe`s in.

So when we deal with Goldman Sachs or when we deal with banks and when we deal with Europe I think you can break the world into two parts, there`s the debtor-developed world which has reached its debt limits and is going through a deleveraging. Then there`s the creditor-emerging world, the countries like China which are competitive and are beginning to have those big surpluses and they`re lending us money. So we have this big imbalance in the world.

You can break the world into two parts. Debtor-developed countries and emerging-creditor countries and they have a big imbalance which is a debt problem. That`s the nature of the beast of what`s going on.

CHARLIE ROSE: And how long would the deleveraging take place? Ten years?

RAY DALIO: These take place over ten years. The key is to spread it out as much as you can. Make sure that it`s not disorderly.

CHARLIE ROSE: let me talk about the dysfunction issue. We can`t solve our problems domestically in the United States, our economic problems, unless there`s some sense of respect for other people`s views and some sense of it being able to come together and find solutions that are in the interest of the country, not necessarily always in the interest of the ideology or the party.

RAY DALIO: Yes. And I think that`s the problem so pervasively when we`re talking about culture. It is -- when people disagree and you can take thoughtful people disagree, you have then the potential of learning a lot. If people who were disagreeing can say why do we disagree and work through that conversation in an intelligent way to try to find out what`s true, you can learn, you can make progress, it can be a fabulous thing.

When you instead have people who were talking behind each other`s backs and all criticizing and all looking for blame, this is a problem. I think the real question is how we approach those -- can we approach that in a thoughtful way in which we work that through?

Let`s say for example the government budget balance.

CHARLIE ROSE: Right.

RAY DALIO: The government budget balance if you raise taxes -- if everybody just sucked it in a little bit, you raise taxes by three percent, you cut spending by three percent -- I`m using three percent as an example to say not much. Everybody should be able to pay three percent more or you should be able to cut your expenditures by three percent.

CHARLIE ROSE: If the government did that --

RAY DALIO: If the government did that, they would eliminate half the budget deficit -- it`s estimated about $8.5 trillion over the next ten years is what we`re going to have as a deficit, they will eliminate half of that. Now --

CHARLIE ROSE: Over how long a period?

RAY DALIO: The next ten years.

CHARLIE ROSE: The next ten years, all right.

RAY DALIO: Now, I`m asking you if we could have every American -- can everybody pay three percent more? Can everybody just spend three percent less? You can make a heck of a contribution to that.

Instead we have a division that`s going on in which we -- the basic division is Republicans will say that we shouldn`t raise taxes.

CHARLIE ROSE: Or even reduce deductions.

RAY DALIO: Yes -- in that way of raising taxes. So we -- and Democrats say that we must raise taxes because we can`t cut the spending. So the delineation that as we came into that was the debt limit issue, that remains the debt limit issue.

And there`s vested interests involved; 70 percent of the taxes are paid by the top 10 percent of income earners, income taxes. And so -- so what we have is a division here in which there`s not a coming together, I believe, and that means that in a deleveraging at a difficult time we`re not dealing with it in the best possible way. But it`s human nature.

CHARLIE ROSE: We are doing as they say, kicking the can down the road and not dealing with it. Suppose the super committee does not reach an agreement in terms of its requirement and therefore the mechanism -- the trigger mechanism kicks in? What does your team think about that and what impact will that be?

RAY DALIO: Charlie, I`m meant to be a realistic person and sometimes when there`s concerns it`s difficult to talk about difficult situation. So I want to try and answer your question as honestly as I possibly can but I want to say that I`m very concerned not just of that. I do not believe that we will find a political solution. I think that that would not be -- I`m pessimistic about that.

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.

Now we can accept is that right or wrong but let`s -- and I think we need to talk about it forthrightly whether that`s right or wrong. And if it`s right -- and I believe it`s right -- then we have to talk calmly and logically about how we can approach that and deal with it in the best possible way without having this battle of one side or another.

Like the issue of is it better to have austerity or stimulus? The basic problem there is that there`s not a quality conversation on the subject. So if people who disagree could sit down and work on a television show or something, work through, how does the machine work, how does the economic machine work? What does it mean to each of those? How has it worked in the past so that they can understand what exists. Get past the ideology part of it and get on with trying to say we have is very difficult situation and how do we deal with it in our best possible way together?

We can`t solve the problem easily because we still have too much debt. But we can move forward in being able to make the best of it. We can spread it out, we can keep orderly we have a situation now in which we have a very severe situation, not only because we have a deleveraging going on, but we have a situation in which monetary policy cannot work the way it worked in the past, that fiscal policy will not be stimulative.

CHARLIE ROSE: Some people say that they describe that as there are no more tools in the tool kit.

RAY DALIO: There are no more tools in the tool kit.

CHARLIE ROSE: In terms of fiscal and monitory policy.

RAY DALIO: Yes, so number one is we have a deleveraging. Now that deleveraging means we`re going to have more debt problems. You`re going to see -- no matter what is solved in Europe you will have a deleveraging. Banks will lend less and lending less will mean a contraction. That`s -- that is what I believe is the case, we should talk about whether or not that is the case. Thoughtful people should discuss that.

If it is the case, we should then approach how do we deal with that? Now - - so I`m saying there`s a -- I believe there`s a deleveraging going on. There are no tools in the tool kit and everybody`s at each other`s throats.

So that there is not a quality conversation of what is true; how do we best handle it?

CHARLIE ROSE: We have had that debate about the need for growth -- which would be a stimulative impact on the economy and at the same time the need to reduce spending because of the debt and the deficit as well as the long- term debt. You need also to make investments for the future in terms of science and research and a whole range of issues so that that the country - - this country can be competitive around the world. Make sure it trained scientists and doctors and people who make a positive long-term contribution to the economy.

What is your own analysis as to how we find the right balance between austerity and growth? Or austerity and stimulus?

RAY DALIO: I think -- I think it just comes back to the fundamentals same for us. Individually, the economics for government work the same as the economics pretty much for the individual that whatever we expend money on, we have to make sure -- there`re certain things that are critical.

First you have to make sure that it will -- it produces an income to pay it back. Investment, in other words, in some fashion or another. What we have to do is make sure that we put that money out and we -- let`s say we build infrastructure, I believe that you can build infrastructure. I believe that you can hire people who unproductive people -- people now who are idle, I think the worst thing now is not only the economics of it but I think the social impact of individuals who are not working or are living beneath their potential is a -- is a dangerous thing.

It`s a social tragedy. It`s not good for them; it`s not good for the society. It`s a cancer that exists. They have to be made productive. But you can`t waste money doing it.

So those jobs -- whatever they may end up being -- or those investments have got to have a payback. And then --

(CROSSTALK)

CHARLIE ROSE: Did the stimulus program that was enacted by the Congress after the President -- this President -- assumed office, did it make a contribution to growth at all?

RAY DALIO: Oh, it made -- it certainly made a big contribution --

(CROSSTALK)

CHARLIE ROSE: It did create jobs? Because some people would like to believe that that stimulus program didn`t create jobs and you`re here to say with your own analysis it did create some jobs.

RAY DALIO: Oh, a lot.

CHARLIE ROSE: Yes.

RAY DALIO: Ok but we -- at the same time -- and it created growth and it created some jobs. At the same time we have this overriding factor that is depressing jobs. So it created jobs in an environment -- and let`s -- so let`s turn to what is depressing jobs.

CHARLIE ROSE: Right. What is?

RAY DALIO: Ok. What`s depressing -- what`s depressing jobs is that the world supply and demand for labor has changed. In other words, there`s a lot more people working as China came on and India came on and they are competitive. There`s a world supply of labor has change -- has increased and technology has had an effect.

So we`re in an interesting era because I think almost and if you think of a person as -- in a machine, an economic machine as being tool, a part of that economic machine the demand for labor has changed in a very profound way. It`s an interesting question. We might enter into a period in which we don`t need people as tools. So what does that mean?

CHARLIE ROSE: The two reasons that people are enormously curious about you: number one, is simply the objective success of what Bridgewater has done and become. And secondly there are interesting questions as to how you think about the world and how you think about investments.

You have mentioned a couple times the economic machine. Give us a sense of what that means to you. Because my understanding is that`s central to a philosophy you have about the way the economy works.

RAY DALIO: Reality works in a certain way. You have to understand how reality works. If interest rates go to zero and you can`t ease monetary policy, how does the economic machine work? Ok, a central bank can make a purchase and get money in the hands of somebody else or blah, blah, blah, blah, blah.

There is a certain machine. It is operated this -- you can raise your debt relative to your income to so far but you can`t raise it more than that. And then when you reach that, that changes.

So the private sector cannot -- there are such laws of economics, such realities of if -- let`s say Europe. I`ll give you another one. We have a debt problem in Europe. You can either transfer the money from one rich country to a poor country --

CHARLIE ROSE: Right, Germany to Greece.

RAY DALIO: You can print the money.

CHARLIE ROSE: You can`t do it.

RAY DALIO: Or ECB could say I`ll find a way to do it, whatever.

CHARLIE ROSE: Right.

RAY DALIO: Or you can write them down. Those are the choices.

CHARLIE ROSE: So-called hair cut?

RAY DALIO: Hair cut.

CHARLIE ROSE: Machine for you is a theory of the way things work?

RAY DALIO: And so -- yes, that`s right. It`s a description of reality. If I ski and I`m putting my weight on my downhill ski I will make a better turn than if I don`t.

CHARLIE ROSE: And you always make a point that you know what you don`t know and that`s equally valuable.

RAY DALIO: More valuable. I want to say that -- so this is the whole philosophy. I -- I so, know that I can be wrong; and look, we all should recognize that we can be wrong. And if we recognize that we`re wrong and we worry about being wrong than what we should do is have a thoughtful dialogue.

(CROSSTALK)

CHARLIE ROSE: Ok, but that --

(CROSSTALK)

RAY DALIO: So the way I get to success. The way -- it`s not what I know. I`ve acquired some things that I know along the way and they`re helpful.

(CROSSTALK)

CHARLIE ROSE: It is -- it is -- it`s not what you know but it is --

(CROSSTALK)

RAY DALIO: It`s knowing what I don`t know or worrying that I won`t -- that I`ll be wrong that makes me find --

CHARLIE ROSE: Yes.

RAY DALIO: Well, I want people to criticize my point of view -- I want to hold down.

CHARLIE ROSE: Right.

RAY DALIO: Say I have a -- I think this but I may be wrong. And if you can attack what I`m saying -- in other words stress test what I`m saying -- I`ll learn.

CHARLIE ROSE: So that everybody knows so therefore people will be free to tell you what they think.

RAY DALIO: Of course.

CHARLIE ROSE: Because you know that it will not be held against you and you can benefit from it.

RAY DALIO: That`s right.

CHARLIE ROSE: So anybody in a meeting at your company can stand up and say Ray --

(CROSSTALK)

RAY DALIO: Absolutely.

CHARLIE ROSE: -- you`re absolutely wrong.

RAY DALIO: Of course.

CHARLIE ROSE: And you have not been precise, and your assumptions are flawed.

RAY DALIO: Oh it`s so essential, right. There`s -- the -- the number one principle at our place is that if something doesn`t make sense to you, you have the right to explore it, to see if it makes sense.

I don`t want people around who do things that they don`t -- they don`t think makes sense because I`m going to have not-thinking people.

(CROSSTALK)

CHARLIE ROSE: Right.

RAY DALIO: So that they have not only the right, they have obligation. Don`t walk away thinking something`s wrong.

CHARLIE ROSE: Failure teaches you more than success?

RAY DALIO: Of course. One of my favorite books is "Einstein`s Mistakes."

CHARLIE ROSE: Right. And because it showed you that even Einstein, the most brilliant person of the century in common judgment made mistakes?

RAY DALIO: The great fallacy of all -- I think of all of mankind practically -- I mean that`s a big statement -- but the great fallacy is that people know more than what they do and there`s a discovery process and so when you look at -- that`s the process for learning.

The process for learning is to say "I don`t know." Like, I`m -- I`m totally comfortable being incompetent. If I -- if I -- I like being incompetent. I don`t mind being an incompetent. If I don`t -- how -- how much can you be competent about?

And so that whole notion of do you like learning? Do you like finding out what`s true and building on it without an ego? And that becomes the problem. How many statements do you listen to people that begin "I think this, I think that," where they should be asking "I wonder."

CHARLIE ROSE: What`s in here? And why did you write it; because you wanted people who come to work with you to understand what your own philosophy was about openness, about management about dialogue, about the machine.

RAY DALIO: Yes. So what -- I think every place has to have a culture.

CHARLIE ROSE: Right.

RAY DALIO: And culture is the values. What -- when values are leaving (ph) out and so for example the number one value is it has to make sense to you, we have to talk about it, we have to work it through in a none egotistical kind of way. And so it`s an unusual place and it`s an unusual culture.

CHARLIE ROSE: Are you offended when people sometimes label it a cult?

RAY DALIO: I think that -- I think a cult -- when I think of a cult it means believe this. And where -- it`s the opposite.

CHARLIE ROSE: Yes, you`re taken from on high.

RAY DALIO: In other words a cult mean -- yes. Somebody`s telling you believe this --

(CROSSTALK)

CHARLIE ROSE: Because I said so.

RAY DALIO: And follow it.

CHARLIE ROSE: Because I have a superior wisdom.

RAY DALIO: Ok, it`s exactly the opposite of that, right? The number one principle is "Don`t believe anything; think for yourself." And now let`s go through a process of what is true together. But we can`t stop that with ego. We can`t let that barriers stand in our way. So we`re going to live in a culture in which we can do that.

Ok, now that`s opposite of a -- ok, it`s a belief system, in other words I`ll ask you do you believe that we should operate this way with each other. Ok, if you want to call that a cult, I think it`s the opposite of a cult, it means "think," right? Speak up. Don`t hide it; don`t talk behind people`s backs. Its talking behind people`s --

(CROSSTALK)

CHARLIE ROSE: Did you have these ideas for a long time or these ideas that you came to through, came to through your own experience and your own living and your own sense of what you read and what you question and you came to this?

RAY DALIO: Of course, of course through my whole life. Now as I say when I started at the markets, the knowing I don`t know and the liking to have people challenge me. So when I was young I did like that -- to know. I did know that I`m -- I`m an independent thinker and I know that for an independent thinker and I like to innovate. We like to innovate.

And if you`re going to have an innovative thinker, they made --there`s a high chance they`ll be wrong and if you have to have an independent thinker they`re going to have a different point of view than the next person.

So if you`re going to have innovation and independent thinking you`re going to have to have the ability to disagree, to find out what`s wrong and I learned through my whole experience day after day that the cost of being wrong is a terrible thing.

So I worry about being wrong and because I worry about being wrong I want to know what`s true.

CHARLIE ROSE: Yes.

RAY DALIO: And we have a community here, I want to know what`s true including my strengths and weaknesses so that I know how to deal with them and I want to be in a community of other people who want to do that.

CHARLIE ROSE: Do you believe as --

(CROSSTALK)

RAY DALIO: And by the way that`s connected to our performance.

CHARLIE ROSE: You have this dialogue with members of the Tea Party on the Republican side and the members of the President`s administration on the other side. What would you tell them about the necessity for revenue in the next ten years?

RAY DALIO: Well, here`s what I would be telling them.

CHARLIE ROSE: You`ve got to tell them more than just talk.

(CROSSTALK)

RAY DALIO: Ok, no but here`s what I would say. Can I, Mr. President -- Mr. Alternative Republican --

(CROSSTALK)

CHARLIE ROSE: Mr. Cantor, let`s say.

RAY DALIO: Ok, can we first just together sit down in a room, together with whoever you want to bring in, and go through an exercise of finding -- now forget what we should do at the moment -- just find out a discussion of how does the economic machine work? How does the machine work? We`re not going to get to what we`re doing at the moment. And can we agree on how the machine works?

CHARLIE ROSE: Do you think they`ve done that or not?

RAY DALIO: I -- they don`t do that. They don`t -- this is the big thing. Everybody`s looking at what to do and there`s a debate --

(CROSSTALK)

CHARLIE ROSE: Well but no this is about can they do -- when I said do you think they have done that or not? Meaning have they set --

(CROSSTALK)

RAY DALIO: No, no, no.

CHARLIE ROSE: Let`s just test all of our assumptions about what`s necessary in the way the system works and the machine works?

(CROSSTALK)

RAY DALIO: No. No, so that`s the interesting thing. Everybody`s looking about what to do and each approaches it with a bias and we`ve not in a conversation that`s a quality conversation --

(CROSSTALK)

CHARLIE ROSE: And part of the argument comes -- has to do with how you read history too. Those people who were saying --

RAY DALIO: Well, we could do it together.

CHARLIE ROSE: Right, we read history together?

RAY DALIO: And you can at a very nuts and bolts level I can take any period of history and put it through my template. There`s a template I wrote that describes how I think machine works.

(CROSSTALK)

CHARLIE ROSE: Right, right. When you have signed "The Giving Pledge" with Warren Buffett and Bill Gates, have you not?

RAY DALIO: Yes.

CHARLIE ROSE: When you look at the Buffett rule about 00 as a man who has a huge income, how do you feel about the Buffett rule vis-a-vis the way you look at it in terms of whether there needs to be more sacrifice on the part of people who are at the highest level of the economic --

RAY DALIO: So I -- so -- I think the answer to that is probably true.

CHARLIE ROSE: Yes.

RAY DALIO: Ok. I think that -- but I want to be clear what -- I want to say more than this on the subject. I think that there`s not enough discussion on people being -- how do we get people to be self-sustaining?

So I want -- so the number one thing I want for my kids, the number one gift I can give my kids or the number one gift that I can give anybody is that you`re self-sufficient.

I don`t -- it`s not a matter of even living standards. It`s the notion of if you`re self-sufficient you have the freedom to make your own choices --

(CROSSTALK)

CHARLIE ROSE: It`s like a difficult parable about giving fish and teaching how to fish.

RAY DALIO: Yes and you can make whatever choices in life you want to make but you`re self-sufficient. And on an ethical standard it means that what I`m giving is equivalent to what I`m taking -- self-sufficiency, right?

So what I want to do, what I think that we need to do is say this large percentage of the population, how do we make them useful? How do we make them self-sufficient? Let`s all agree on a goal of how to achieve that. So like my kids I don`t want to just give money. Let`s -- I give -- I`m going to give away a lot more than half of my money.

CHARLIE ROSE: Right.

RAY DALIO: I`d be happy to give that to the government --

CHARLIE ROSE: If?

RAY DALIO: If the government put together programs that were like I`m giving away to charity to certain programs in which I believe the money is sufficiently used to help people.

Let`s say for example if the government created a series of programs that said there`s this education, teach for America. If I can read these things off, ok, of these types of things --

CHARLIE ROSE: All those you support.

RAY DALIO: Yes or it doesn`t have to be those.

CHARLIE ROSE: Yes.

RAY DALIO: It just has to be good.

CHARLIE ROSE: Right.

RAY DALIO: Ok? If the government --

(CROSSTALK)

CHARLIE ROSE: The result has to be self-sufficient?

RAY DALIO: Yes. So for example Arne Duncan --

CHARLIE ROSE: The Secretary of Education.

RAY DALIO: Secretary of Education is a fantastic person for dealing with improving the quality of education in the United States and he -- "Race for the Top" and such.

(CROSSTALK)

CHARLIE ROSE: So you say I`d be happy for my taxes to be raised if I knew that the money would go to be administered by someone like Arne Duncan.

RAY DALIO: Oh, man. Or even create a series of quality -- I will -- I will fund that opportunity. Give -- don`t waste it. Ok, don`t waste it. Put it to good use for education, for opportunity.

So I`m -- I think that what the country`s most important thing to give anybody is opportunity.

CHARLIE ROSE: Let me take this downtown to where there`s an economic protest on Wall Street.

RAY DALIO: Yes.

CHARLIE ROSE: In your sense -- you clearly have read about that and looked at it -- what do you think is at stake there and what do you think they`re saying to us?

RAY DALIO: I think the number one problem is that we`re not having a quality dialogue. So I wish that I could sit down --

(CROSSTALK)

CHARLIE ROSE: So somebody should be listening and --

RAY DALIO: No, no yes we get together, sit here in a room like you with those thoughts and understand how -- how -- what`s going on and what`s true. So for example on that particular case I don`t know that I adequately know the various points of views that are behind it.

CHARLIE ROSE: Right.

RAY DALIO: I certainly understand the frustration. I understand the dilemma. I understand that there`s discontent. Ok --

(CROSSTALK)

CHARLIE ROSE: Yes, discontent about there`s somehow a feeling that --

(CROSSTALK)

RAY DALIO: Right so it seems to me --

CHARLIE ROSE: -- that some people did better because of the way the rules were or some people did better because --

(CROSSTALK)

RAY DALIO: Right.

CHARLIE ROSE: -- they had power to influence Washington and they didn`t.

RAY DALIO: So I think we need to work ourselves through that. I -- I`m sorry --

CHARLIE ROSE: No, no go ahead.

RAY DALIO: Ok, so I think that not only do we have to work ourselves through that, I would say like the question really is also a question that should be dealt -- designated for our legislators, our government. Because if the government makes the rules, people will behind either -- did they break laws or did they not break laws? This is a -- this is a question of how should behavior be managed?

Like I think I -- I think I did everything right, you know I -- I did well for my customers. My customers are pension funds, teachers. I did well when others didn`t and I`m going to say that they are very grateful.

We have a wonderful relationship, 15-year wonderful relationship. That -- what happens is I happen to earn one-fifth of the profits.

CHARLIE ROSE: Right.

RAY DALIO: So then --

CHARLIE ROSE: You make 20 percent.

RAY DALIO: Ok, I earn 20 percent of the profits.

(CROSSTALK)

CHARLIE ROSE: And you take a two percent fee for doing it.

RAY DALIO: What -- yes that covers my overhead and a bit more.

CHARLIE ROSE: Right.

RAY DALIO: But anyway, I earn this money as a result. Very similar to I would say, any of those companies you mentioned, the eBay and so on and so forth.

CHARLIE ROSE: Right.

RAY DALIO: I pay about one-third in taxes. I pay about one -- I give away about one-third. And I`m -- and that`s what I do and I follow the law. And if I`m doing something that is incorrect, that they think is incorrect I`d like to know that and I would also like to say should those laws -- is that right or wrong.

CHARLIE ROSE: You want the people who work for you to tell you exactly what they believe and to be able to document the fact that it`s not just what they believe but it`s what they have discovered.

And you have to test those ideas in the marketplace of your own firm before you go off and act on those assumptions, correct?

RAY DALIO: Yes.

CHARLIE ROSE: So what is it telling you now if Greece defaults? And that has a contagion ability to leap across the Atlantic and have some influence on the U.S. economy. What is it telling you, you know, about whether China, for example can maintain the level of economic growth it`s had and avoid the kind of social conflicts that might exist in that society.

What does it tell you about emerging nations and what it is that -- what impact they will have on commodity prices and what does it tell you about the future of the dollar as a currency? All of those kinds of issues?

RAY DALIO: You`ve got a bunch of questions.

CHARLIE ROSE: No. I know I did.

(CROSSTALK)

RAY DALIO: And also I`ll do the best I can.

CHARLIE ROSE: In my remaining minute. Go ahead.

RAY DALIO: Ok, I would want to say that there is -- there are two worlds. There`s debtor-developed countries and there`s emerging creditor countries, classically the United States and China.

CHARLIE ROSE: Right.

RAY DALIO: One is a creditor, one a debtor. They are getting we`re still borrowing, we`re still in debt, we`re still -- they`re still earning. Then those two worlds can be broken into two -- those that can print money and those that can`t print money.

So now when I`m giving you the total answer in my remaining minutes, Europe is -- can`t, a lot of it, can`t print money. Therefore it will have to deal with whether there`s a transfer of wealth, there`s a limit to that transfer of wealth.

And so we are going to deal with the question of whether they would print money or get the haircuts. I think they`ll do both.

CHARLIE ROSE: Right.

RAY DALIO: When looking at China, China because they can`t raise interest rates because of their existing monetary policy, is that they can`t control credit growth in the normal ways that we control credit growth. So there`s a credit bubble emerging there and as -- in other words there`s a quality of lending and it`s bypassing the credit system.

And that`s something that the Chinese will need to get a control of because it`s a dangerous thing. And so that creates their risk. If I take then the United States we`re in a position in which there is this deleveraging. Deleveraging is risky so for example banks are leveraged about 12 to 15, 17 times.

CHARLIE ROSE: Right.

RAY DALIO: 15 times is a round number it depends on the bank. They`re leveraged 15-1 and if they go down by one-fifteenth, we have a capital problem and we`re in a deleveraging. Those problems -- bank crisis that have existed every ten years normally we are -- we can have a problem.

We don`t have the ability to have the same effect of monetary policy as we did before because a central bank -- it can buy a bond. It can -- therefore buy the bond. It gives that money to somebody who sold the bond and they were going to buy something like a bond. They`re -- the -- the getting it in the hands of somebody who spends it on cars and houses who really owes probably too much in debt is not an easy thing to do for monetary policy. So monetary policy is not as effective and then we have this social tension.

So we should be able to -- there`s this downward pressure of the deleveraging. We should be able to grow at a rate that`s comparable to our income growth if we are -- if we keep orderly and we -- and we work this through and everything is orderly. That means something between like 1.5 percent or 2 percent we should be growing at maybe about the 2 percent vicinity.

The problem with the 2 percent vicinity is that the employment rate remains the same or can trend higher. That produces social pressures, that produces tension which itself means that you can have a situation analogous to that which is existing in Greece and more social pressure you create the more tension that is existing and emerging in various ways, not just a Wall Street piece. But it`s existing in Spain.

CHARLIE ROSE: Right.

RAY DALIO: So if we can keep orderly and not argue with each other and not do disruptive things and we don`t go down ok and grow at that two percent you know maybe then it will be ok.

If we have disruption and we are not able to have a monetary policy and we can`t have fiscal stimulation and you have a problem of what do you do -- you can`t recapitalize the banks. I mean if you should happen to need to recapitalize the banks you can`t have a TARP program again.

CHARLIE ROSE: Politically not feasible.

RAY DALIO: Politically not feasible.

So you have to have a plan. You need to be thoughtful, I think, how do you create that plan and not only it`s a theoretical thing when I say how do you make a plan because you have to be able to have agreement to implement the plan. You can`t have people at odds.

As I say sometimes to policymakers my job is very -- is much easier than their job. My job is that I just have to pretty much anticipate what`s going to happen and be one step ahead. That`s not an easy job but it`s an easier job than policymakers who have to do that. They have to then find a solution for the bad stuff not happening. That`s not easy to find solutions and then even if they had solutions they have to get that solution through the political system. In which there`s -- there`s -- everybody`s saying that you can`t do that, whatever that is and everybody blaming each other.

CHARLIE ROSE: Are you optimistic or pessimistic?

RAY DALIO: I suppose I`m -- if I was -- I`m concerned. I think it`s a test of us. It`s a test of us in our society. It`s a test of us.

CHARLIE ROSE: On that note thank you for coming.

RAY DALIO: My pleasure, thank you for having me.

 

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Mon, 10/24/2011 - 00:05 | 1803403 CapitalistRock
CapitalistRock's picture

And that is exactly why you better save with gold instead of fiat paper.

Mon, 10/24/2011 - 00:08 | 1803408 paarsons
paarsons's picture

I'm not too sure about your reasoning.

These psychopaths can keep the ball in the air for a long long time.

In the end, however, I still expect deflation to win out.

But what the fuck do I know?

http://geraldcelente.proboards.com

Mon, 10/24/2011 - 00:30 | 1803434 CapitalistRock
CapitalistRock's picture

You are correct only if the expansion of the money supply is limited with something like gold. But it's. It. We have a fiat currency that is beng used to monetize the debt every day. That's what you are doing by keeping interest rates artificially low, paying banks interest on excess reserves with printed money, and buying bonds to expand the fed's balance sheet.

Measured in gold we are in a pretty wicked deflation. If you meant deflation of the economy and not the currency, then you are correct. Measured in dollars we will experience inflation in the years ahead.

Mon, 10/24/2011 - 01:32 | 1803514 Harlequin001
Harlequin001's picture

The problem with the system is that the system just doesn't work. We've reached this impasse now because of the currency pegging policies of Asia's central banks throughout late nineties and the earlier part of this decade.

When you have a currency peg you prevent a currency from falling thereby reducing the impact of inflation, which subsequently removes the need for increasing wages. If wages can't increase then you have a finite sum with which you can make repayments. Hit that and everyone stops borrowing regardless of stimulus.

Ain't no way now this 'dead horse' of an economy is getting up and walking. Bush, Snow and Greenspan saw to that...

Mon, 10/24/2011 - 02:18 | 1803564 narnia
narnia's picture

the balance of trade with countries with a currency peg are just a small part of a much bigger problem.  

the decades of promises built on terribly manipulated & flawed pricing of substantially less valueable assets are not capable of being deleveraged orderly.  it's hopeless.  eventually people will give up on ignoring reality, recognize the promises for what they are & the confidence game will be up.   

spontaneous order is part of our nature & biology.  we will survive this shock & be better because of it.

Mon, 10/24/2011 - 04:04 | 1803611 Harlequin001
Harlequin001's picture

many of us won't, but I fear you have missed the point. Credit only workd whilst it is expanding. When it stops its unwinding is total unless you can spur it with more credit through lower rates. The currency pegs put a lid on rising wages which is the only way you can make ever increasing payments on ever more credit.

Now that borrowers are tapped out the unwind will be total.

Mon, 10/24/2011 - 05:49 | 1803647 spiral_eyes
spiral_eyes's picture

No more tools in the toolkit?

Tell that to Benny. He's nothing if not daring — and he will try every permutation of Keynesian market manipulation in the universe, starting with QEing the S&P and Russell and killing interest on excess reserves, continuing with dumping painted tungsten bars onto the open market to reduce y-o-y gold yields ("QE Gold") and concluding with heading the Global Reserve and introducing a new global currency.

Bitchez need to study more Keynesian economics, to get a handle on the true extent of the print-money-create-wealth bullshit parade.

Mon, 10/24/2011 - 07:32 | 1803699 bernorange
bernorange's picture

Jim Rickards also warned over the weekend that he sees a very high risk of a dollar collapse.  Karl Denninger wrote recently a rant that included a little back of the envelope math giving the US roughly 6 years before full economic doom.

Mon, 10/24/2011 - 12:06 | 1804634 JW n FL
JW n FL's picture

 

 

Ray is scared shitless.. and with good reason.. We are Coming for him and you both, you bunch of fucking spineless, greedy cowards! Your day has come!!

Selling debt offshore so that you can pretend that really is owed somewhere else and that is why "We the People" must suffer?

FUCK THAT!! You scum have NO FUCKING PROBLEM Printing Money out of thin air for Yourselves!

SO! Start Printing out of thin air for "US"! "We the People" that provide the work product that secures your quality of life deserve.. We deserve to be treated well if for no other fact than we have treated YOU! well.

The Short Sighted Quarterly Bonus Craze!

America's Addiction to Sweet Light Crude! (when the majority left in the World is Heavy Sour and prohibitively expensive to drill for and refine! and damn sure isnt $50 a bbl)

The exodus of Manufacturing Jobs and thusly the Exodus of America's Tax Base (the tax base that really pays taxes, not the 30% tax base that has so many loop holes a blind man could easily only pay 5% instead of the 30% that is sung about by ALL!)

Change comes from within, change comes when the blanket of ignorance is lifted to reveal the factual nature of the Robbery that has been occurring over and over and FUCKING OVER AGAIN for the last 5 or 6 decades!

Dont forget to call your Lobby Group! because this change is coming.. and if not the Tea Party or Occupy Wall Street.. then some other new, better, non-co-opted group of regular people will educate enough of their fellow sheep! to ensure that the change does take root, that it does have the traction needed to run over the status quo!

ALL of You that would like nothing more than to enjoy the spoils of your participation in the Grande' Scheme of Corruption will be sadly disappointed in your inability to find a safe haven..

The Truth is Coming..

It only takes one small candle to break the darkness..

You had your time of Greed, You had your time of spreading Hunger and Hate.. You had your time to shine in the sun.... and you wasted it, on yourselves.

 

 

Mon, 10/24/2011 - 09:15 | 1803944 narnia
narnia's picture

it's just one of many factors.  other factors include the public sector growth putting a squeeze on the private sector, the regulatory/tax/compliance scheme, the $ reserve status, bubble subsidies, etc.

the credit underneath this currency bubble has expanded to match the direct & indirect taxation to finance this death star, which has no value.   

improvment in quality of life for people has just as much to do with the output they need & want costing less as a higher wage.  

Mon, 10/24/2011 - 06:41 | 1803664 WarriorClass
WarriorClass's picture

Herman Cain was head of the Kansas City Federal Reserve. He is a bankster that was all for TARP and theft of Americans for his Bankster friends. He also denied there was a housing bubble and economic collapse until 2008, so on top of being a theiving bankster, he is an idiot as well.
See for yourself:

http://www.youtube.com/watch?v=EhsBkxy4zQU

Cain is an idiot.

Mon, 10/24/2011 - 00:44 | 1803455 Yen Cross
Yen Cross's picture

 The Emhpasis  is appreciated.  That long ass post was an " EULOGY" , Quit wasting my time!!

Mon, 10/24/2011 - 02:47 | 1803577 Oracle of Kypseli
Oracle of Kypseli's picture

This long discussion about being able to bring all the planets in aligment, bring all politicians into a civil and honest debate, expect all the other parts of the equation to behave accordingly and avoid black swans for the next ten years, so that you can muddle through just like Japan, can be summarized with one word. "Impossible."

There will be pain.

Collapse is inevitable.

Yes! Government can keep the juggling balls in the air for long time, but the number of balls that must be juggled is increasing exponentially. The proverbial flight of that butterfly on the other side of the earth will eventually upset the balance.

Buy gold, silver, farms, food, water, seeds, guns and ammo. However, it's important to know that you do not wish for anything to happen just because you are prepared. Hope that you would never have to use them.

In the meanwhile, enjoy life as much as you can and teach your children to by self sufficient (his advice in the interview).

   

Mon, 10/24/2011 - 05:53 | 1803649 disabledvet
disabledvet's picture

I'm still trying to figure out if anything of any substance was said. Not that i don't want to be accused by someone in the hedge fund community...LET ALONE THE MEDIA...of "talking behind someone's back" (?)....anywho this says to me "we're retarded speculators too...but we happen to make tons of money at it." To me the "news" on this front was watching billionaires being forced into Chapter 7 liquidation as reported on in the Wall Street Journal. The key phrase that i took away is "financialization" and (what was left unsaid) how this relates to public finance. The fact of the matter is no government can make rational predictions of any future if the financial classes are one year worth a billion dollars and literally the next are flat broke and flipping burgers at McDonalds. Stay long energy, the war machine and patriotism. Everything else dies since "all debts are extinguished upon death." Unless of course you're a bank. Doesn't anyone else find this odd? The only debts that aren't extinguished upon death are the banks'? Happy trading!

Mon, 10/24/2011 - 08:36 | 1803825 Snidley Whipsnae
Snidley Whipsnae's picture

disabledvet, et al... "I'm still trying to figure out if anything of any substance was said."

One of the first points that Dalio touched on was the aspect of the modern economy that causes machines to replace humans in the workplace...and, that in the 'new economy' that many people simply will not find jobs because their jobs are being performed by new machines.

Too little time was spent on this subject... mostly because Charlie Rose is a ego maniac that loves the sound of his own voice and continously talks over whoever he is interviewing... I read the transcript rather than subject myself to Rose's painful audio interview.

Too little time was given to 'machines vs humans' in the workplace for another good reason, as Dalio pointed out in so many words: This is a paradox! Capitalism requires competition, competition means whoever gets the best finished product out the door for the least amount of expenditure wins the game! Voila... machines do it for less on the assembly line. Example: An auto assembly plant that once required 5,000 - 10,000 laborers now requires 400 -800 workers. Think about what that means when multiplied across all manufacturing processes and, eventually, across the world. Eventually, China, India, etc, will face the same problem only they will have billions of excess laborers instead of millions, as in the West.

I have read considerable material concerning Dalio. He runs his firm exactly as he described and requires all his top people to do complete research of all their propositions prior to putting forward thoughts in company meetings. He also requires each employee to describe the limitis of the 'knowable' in their presentation. His meeting are candid and he advises all to leave their egos at the door. The thin skinned need not enter.

Like it or not, we are entering a new age where much less manufacturing labor will be required. Of course, the service industries will still require labor but, one day, even Mac a Doo will have machines preparing and assembling burgers.

I'm not a Marxist (hell, even Marx claimed he wasn't a Marxist) but Marx did point out that the machine vs human labor problem would arise. It's here and it's going to get worse for laborers.

So, what to do with billions of excess laborers? The worlds politicians/bankers can't even decide if some bank bonds need haircuts... How will they ever approach the decision about excess labor? More food stamps, unemployment compensation, etc?

Mon, 10/24/2011 - 09:29 | 1803993 pvzh
pvzh's picture

How will they ever approach the decision about excess labor? More food stamps, unemployment compensation, etc?

That is easy. All that you described, plus couple it with sterilizations, legalization of drugs, wars, infections (persuade people that vaccines are bad for them "unnatural", poisonous, etc.), etc. The same old stuff "tried and true".

Mon, 10/24/2011 - 09:46 | 1804048 Alex Kintner
Alex Kintner's picture

I agree 100%. And Automation becomes a feedback system for ensured decline. People thrown out of work replaced by automation cannot buy goods. Thus, the need to produce fewer goods and a shrinking marketplace. Thus more job losses. Iterate the cycle until food riots begin. 

I know a guy who maintains Automation machinery that produces plastic bottles. He makes $10/hour and it's actually a fairly skilled job. Even those who maintain a job will have to live on a poverty wage.

Mon, 10/24/2011 - 11:34 | 1804487 pvzh
pvzh's picture

"People thrown out of work replaced by automation cannot buy goods.", but machines needs other "goods". It is very painful economic readjustment similar to industrial and agricultural revolution. Decrease in labour demand make it cheaper, so it can be employed for some other uses later.

Machines in themselves are not a problem. Peak easy energy is the problem because it will come down to what is "easier" and "cheaper" to use labourer or machine. If no new energy source comes online reasonably quickly, labourers will "win". There would be plenty of work tiling fields, towing stuff to a nearest town, making chains and whips. Well, at least everybody (the ones who make it) will be "fed" and "employed".

Mon, 10/24/2011 - 11:49 | 1804561 jonan
jonan's picture

god help us the day that 100% employment is a requirement for the survival of the human race...

Mon, 10/24/2011 - 11:48 | 1804558 jonan
jonan's picture

aren't jobs created by the companies who create the machines which automate? or am i missing something here?

Mon, 10/24/2011 - 11:21 | 1804413 MachoMan
MachoMan's picture

Are we certain that this automation vs. human labor is necessarily true across all manufacturing and all time?  It seems to me that we could very well get in a situation where labor was cheaper than machinery maintenance...  whether this be from energy constraints, supply chain disruptions, etc.  Obviously this would take a different regulatory environment, but I forsee this type of regulatory environment in our near future (governments have to deleverage as well).

It's certainly played a key role in the last 30+ years (probably since the dawn of civilization, but there seems to have been some type of event horizon more recently in our past)...  there is no doubt that our present unemployment is at least in part structural and at least in part due to the efficiency of mechanization.  But is this a trend where we just take the ruler out and draw a straight line down?  No whipback?  No normalization?  No protest against mechanization?  Seems like the theory may work in an all else equal sort of world, but I'm not sure we're there...

Mon, 10/24/2011 - 01:20 | 1803507 CrazyCooter
CrazyCooter's picture

The rationale, of deflation vs inflation, is which serves the .01% of the population the most?

Deflation means debt destruction and debt is the very core of the wealthy, thus it can not be destroyed. Debt is synonymous with wealth, at least for the .01%.

Please debate your counter point.

Regards,

Cooter

Mon, 10/24/2011 - 01:51 | 1803539 fonestar
fonestar's picture

That is until the .1% realize infinite debt-mass in singularity at the epicenter of their (red) hole, resulting in a quantum explosion giving rise to a new (logical) universe.

And then everyone just realizes that those crazy Austrians and goldbugs weren't so crazy after all.  Everyone lives happily ever after.

 

FIN

Mon, 10/24/2011 - 01:44 | 1803535 fonestar
fonestar's picture

Yeah monetary deflation for sure!  I mean, if they don't stop the purchasing power of my dollars from rising pretty soon I'm gonna buy up everything in sight!

 

/sarc

Mon, 10/24/2011 - 01:03 | 1803438 DormRoom
DormRoom's picture

there is no shelter.

 

He talks about deleveraging, and alluded to the Triffin Dilemma (China-US imbalances), but doesn't discuss flows. The US is in a Keynesian liquidity trap ("no more tools in the toolkit"). 

 

So the only safe places are assets/deposits in emerging-creditor nations.  But if everyone buys up those assets up all @ once (flow), and given their is only a finite number of assets, you'll have  massive currency inflows, which will stoke hyperinflation in those creditor nations. And those economies will blow up.

 

But if investors shift to commodities (primarily food/energy) as a safe haven, all at once, you'll get hyper-stagflation, as input cost inflation erode productivity, and producers are forced to reduce labour, when output drops, to maintain margins--if that.  Moreover structurally higher  food/energy cost will erode disposable income from labour, dragging demand.

If everyone moves away from the USD as the reserve currency (which they are/will), and looks for another store of value, the flows out of USD will break all economies.

 

The flows out USD will likely be faster than asset price discovery, as values are likely arbitrarily adjusted ,  so price will be very volatile, undermining confidence, until an anchor is agreed upon, by those socieites that haven't collapsed in the interim.

 

world governments are trying to manage panic-response, which will force agents to act all at once.  And it's this herd flight response, that they fear, especially out of USD, EURO, and YEN.

 

The new normal: hyperstagflation in developed-debtors nations. hyper-inflation in emergin-creditor nations.  The long run is here, for those who started the debt bubble in the 80s. 

 

Or a great depression will purge prices, and correct misallocation of capital that have been distorted by bubbles, and debt.

 

 

Mon, 10/24/2011 - 01:22 | 1803510 CrazyCooter
CrazyCooter's picture

Dalio is a douche bag. I am not sure debating anything he has to say will yield intellectual gains.

Just point and mock like the rest of us.

Regards,

Cooter

Mon, 10/24/2011 - 01:38 | 1803524 Harlequin001
Harlequin001's picture

He's talking his book. Clearly he wants a solution that doesn't impact him or his fund.

Pay 3% more tax; who's he kidding? Try telling that to someone on food stamps.

Perhaps he would be good enough to tell us what happens to the wider economy if people spend 3% less and why this is a better option to default, which makes the bonds in his hedge fund near worthless...

History will record that none of these so called fund managers ever 'made' any money, that they simply sat on other people's assets whilst Greenspan et al simply devalued currency...

Mon, 10/24/2011 - 07:33 | 1803701 wang (not verified)
wang's picture

 two self-indulgent mofos -

 

CHARLIE ROSE: Failure teaches you more than success?

RAY DALIO: Of course. One of my favorite books is "Einstein`s Mistakes."

CHARLIE ROSE: Right. And because it showed you that even Einstein, the most brilliant person of the century in common judgment made mistakes?

RAY DALIO: The great fallacy of all -- I think of all of mankind practically -- I mean that`s a big statement -- but the great fallacy is that people know more than what they do and there`s a discovery process and so when you look at -- that`s the process for learning.

The process for learning is to say "I don`t know." Like, I`m -- I`m totally comfortable being incompetent. If I -- if I -- I like being incompetent. I don`t mind being an incompetent. If I don`t -- how -- how much can you be competent about?

And so that whole notion of do you like learning? Do you like finding out what`s true and building on it without an ego? And that becomes the problem. How many statements do you listen to people that begin "I think this, I think that," where they should be asking "I wonder."

Mon, 10/24/2011 - 09:27 | 1803986 ElvisDog
ElvisDog's picture

Couldn't agree more. How is Dalio any different from Buffett? Another rich, liberal dickwad who has no connection with how the unwashed masses live. He's got his pile of money, and now he wants to sit on high and pontificate to the little people on how we should all just gather together in a room and work things out. His admiration for the U.S. Dept. of Education is a big tell on who he really is - another Soros-Buffett type wealthy statist that talks on one side of his mouth about giving more than half his money away while at the same time continuing to rake in billions of dollars from his financial engineering.

Mon, 10/24/2011 - 05:53 | 1803650 lewy14
lewy14's picture

Cooter, I agree Ray comes across as a db - I've heard smart things from him; this interview was not one of them.

That said, I don't think DormRoom was debating him, but adding substance. Which I for one found informative. (Suspiciously, because it confirmed my own thinking. Damn confirmation bias.)

Charlie Rose was aiming to extract his libdem talking points from Dalio and succeeded by playing to his vanity. 

Mon, 10/24/2011 - 08:46 | 1803846 Snidley Whipsnae
Snidley Whipsnae's picture

Charlie Rose is an azz hat and could make even Einstein look bad.

Read the transcript... Avoid all Rose audio/video interviews.

Dalio is an extremely intelligent fund manager and is doing the best he can IN THE ENVIRONMENT THAT HE WAS BORN INTO.

Dalio didn't create the Fed and central banks but he does realize how much they have distorted the world economy.

Mon, 10/24/2011 - 01:45 | 1803528 hack3434
hack3434's picture

Hugo Salina Price has a  clever solution for that "cash flow imblance" (read stupid money bidding up everything to the stratosphere).

http://www.plata.com.mx/mplata/articulos/articlesFilt.asp?fiidarticulo=163

Mon, 10/24/2011 - 02:55 | 1803582 Oracle of Kypseli
Oracle of Kypseli's picture

If the silver coin solution as described is adopted, is there enough silver there to satisfy both the industrial use and the money use? I doubt it. Especially if several nations adopt it.

Mon, 10/24/2011 - 09:46 | 1804051 pvzh
pvzh's picture

is there enough silver there to satisfy both the industrial use and the money use?

It is not a question of amount of silver, but the price of silver. At $30 an ounce there is not enough silver for anything, but at $3000 an ounce. There will be plenty for coins and justified industrial use (no more silver for clothes and solar panels for Canadian houses etc.).

Mon, 10/24/2011 - 11:54 | 1804586 akak
akak's picture

Excellent response.

When discussing a market commodity, it is never sufficient to talk about "enough" in isolation --- one must also consider "at what price?"

Mon, 10/24/2011 - 00:07 | 1803405 devo
devo's picture

The tool left is hyper-inflation. Can anyone address this? My feeling is the Fed will take this out on the middle class and working poor.

 

 

 

Mon, 10/24/2011 - 00:25 | 1803414 Big Slick
Big Slick's picture

There's absolutely no track record to suggest that the Fed would do such a thing! 

Mon, 10/24/2011 - 00:37 | 1803446 cranky-old-geezer
cranky-old-geezer's picture

 

 

Since you didn't indicate sarcasm I'll assume you really believe that.

What is 98% loss of purchasing power since 1913, and 1/3 loss of purchasing power since '08?  Inflation or hyperinflation?

No track record of the Fed doing hyperinflation?  Do you dirve a car down the road looking in the rear-view mirror? 

Not happened doesn't mean in can't happen.

 

 

Mon, 10/24/2011 - 00:48 | 1803464 Yen Cross
Yen Cross's picture

 Cranky old Geezer... Take it from me..  A lot of businees goes on down there!  

 

    She should be thankfull for you! 

Mon, 10/24/2011 - 03:22 | 1803593 cranky-old-geezer
cranky-old-geezer's picture

 

 

If I had a she like that avatar, I'd be doing a lot less commenting here, and a lot more "he'n & she'n" as they say :)

Mon, 10/24/2011 - 05:10 | 1803636 topcallingtroll
topcallingtroll's picture

You would eventually get bored with it.

Over the last six months or so I have collected a small harem with a little extra on the side. I thought for sure I had ended my posting days on zero hedge and said my good byes.

It wasnt a month before I was back.

I am so fucked out I have actually been dreading weekends. I am getting older and they all expect me to perform instantly like a young guy. Mid forties may look mid thirties with botox and chemical peel, but I aint a spring chicken. You wanna upset a lady? They think it to be an insult if you cant get hard, especially if she knows you performed adequately the night before and that afternoon. I have to carry around cialis now cuz i just cant go two or three times a day.

You will get tired of puusy if you are drowning in it. And if you are a true zerohead you will ultimately get your priorities back in order.

ZH first.
Sex later if you still have enough time.

Mon, 10/24/2011 - 09:26 | 1803982 Calmyourself
Calmyourself's picture

Life's a bitch, someones gotta do it..

Mon, 10/24/2011 - 13:36 | 1805020 MsCreant
MsCreant's picture

He was just thinking about 1 (one). Not a harem. Your advice may not apply.

Mon, 10/24/2011 - 09:02 | 1803905 Big Slick
Big Slick's picture

Apologies Geezer - I forgot to indicate the sarcasm.  (Where is that button again??)  Thanks for keeping me on my toes.  PS - I like the icon

Mon, 10/24/2011 - 00:32 | 1803440 CapitalistRock
CapitalistRock's picture

A dollar today buys what 2.5 cents did in 1913 when the fed was created. Prior to the creation of the fed annual inflation averaged just 0.5%.

So yes, the fed is very good at robbing your savings. That is exactly why the banks created a central bank.

Mon, 10/24/2011 - 01:22 | 1803509 cranky-old-geezer
cranky-old-geezer's picture

 

 

The tool left is hyper-inflation. Can anyone address this?

There's just not enough supply of credit at 1% interest in normal markets to keep funding $1.5 trillon deficit spending each year, so printing currency to buy some portion of that new debt is a foregone conclusion. 

Printing currency and buying government debt puts that currency right into the circulated money supply, expanding it relative to GDP.  That's Econ 101 textbook inflation.

At what point does inflation become hyperinflation?  10% annual?  15% annual?  20% annual? 30% annual?

We're running about 10% right now give or take.  That's the "on balance sheet" part.

The "off balance sheet" part (TALF, LSAP, currency swaps, foreign bank bailouts, IMF contributions, etc) is printed currency too, but usually not included in domestic money supply numbers because it's not considered to be in domestic circulation, but it's still out there floating around to one degree or another, boosting real world inflation by roughly 30%, yieling 13% net annual inflation in this case.

Again, at what point does it become hyperinflation? 

Everybody has their own view on that.  Some say 10%, some say 20%, some say 30%, some higher, some in between, like 15%.

Mon, 10/24/2011 - 01:34 | 1803522 CrazyCooter
CrazyCooter's picture

This guy (Dalio) is a douche bag. There are far more interesting people to think about with far more insightful opinions. He offers nothing useful, insightful, or just plain interesting.

Not saying points made are invalid, just don't frame them in terms of this corn hole.

Ralph Foster, at the tail end of his book, defined "national notes that became worthless in each decade" as 75% loss of purchasing power over ten years. As I get older, I respect this and accept losing 75% of my life savings as a "set back". It is a pretty long and sobering list.

Hyper-inflation, while serious, is kind of a side issue ... your paper holds value or it doesnt. If it doesn't then you better be able to protect yourself against loss, be it 3% a year (typical inflation) or 75% over ten years. If the US ran 10% a year inflation on a ZIRP policy, I would be completely fucking ruined despite my best efforts.

I am sure the Govt could afford a lot more debt in the process, but the cost is not worth it IMHO. But hey, I am just a citizen, right?

Regards,

Cooter

Mon, 10/24/2011 - 01:43 | 1803526 devo
devo's picture

Thanks for the response. I was wondering if I was missing something here. The world isn't going to end because the central banks will just (hyper) inflate...essentially a hidden tax/bailout placed onto the working class. For this reason, I don't see Greece as an issue. The worse their debt, the higher global inflation. Greek debt is a working poor/middle class problem. At least that's how I see it. Just wanted to know if my view is cycnical or distorted.

Based on my own calculations of daily finances, I have inflation at about 20% right now. That includes hidden inflation, which in my observation is the most pervasive and insideous type we're seeing right now. Insideous because the average American doesn't realize their box of Cheerios is filled with a third more air or the box is an eight smaller. I notice. It's bad. I'm paying for Greece with every box I purchase. My solution is to buy in bulk and use less of everything, even make some items from scratch. Eventually enough people will do that and corporate profits will fall off a cliff. That's the only way we see deleveraging--when the middle class speaks with their dollars and purchasing decisions.

 

Mon, 10/24/2011 - 03:09 | 1803586 cranky-old-geezer
cranky-old-geezer's picture

 

 

Ray's definition of deleveraging (which I don't quite agree with) is being forced on Main Street due to lower overall per capita salaries and wages across the economy from being in an economic depression (not recession).

Inflation (and resulting higher prices) is a separate issue technically.  For example you could have inflation and resulting higher prices in a growing economy, which incidentally is standard Fed monetary policy, slight inflation constantly, irrespective of growing or shrinking economy.  They call it "growth".  And it is in nominal terms but not in constant dollar terms or relative to gold for example.  It's false growth.  Fake growth.

All the so-called "growth" since 1980 has been this fake inflationary "growth".  The economy has actually been shrinking since 1980 in constant dollar terms as manufacturing slowly moves offshore and those high-wage union jobs disappear. Granted, I.T. sector and financial sector growth have offset some of that shrinkage, but not all of it.

Lower avg per capita salaries & wages in an economic depression combined with inflation and resulting higher prices puts a double squeeze on consumers, the ole 1 - 2 punch you might say.

That's what we're seeing now, as you mentioned.

And I agree, Greece really isn't an issue.  ECB could print till the cows come home, flooding Greece with a hundred trillion Euros. But it would collapse the Euro.  There's no free lunch.

Seems to me Greece is more about not triggering derivative payouts, which would blow the entire EZ ponzi scheme apart.

Mon, 10/24/2011 - 09:58 | 1804003 devo
devo's picture

What is ironic is that you'd think inflation would drop (i.e. deflation) if manufacturing was moving offshore. Maybe that's why the Fed purposely inflates. At least that is intuitive to me, since capacticy utilization plays a large roll in inflation and U.S. manufacturing capacity is lower. Capacity meaning, if factory x is at 100% and factory y is at 100% capacity and there is still demand, they can then raise prices to z degree and demand will not drop. This would cause inflation. But, a much more healthy inflation (than printing money) since it's likely coupled with (a) jobs and (b) wage inflation (at least theoretically). The poor would lose out in that scenario (though social programs could be better funded), but right now the poor and middle class both lose, and that is overall worse for society.

I agree that Greece is about not triggering derivatives. It's also about winning political votes and avoiding anarchy. The sheeple are mobilizing.

 

Mon, 10/24/2011 - 13:13 | 1804700 cranky-old-geezer
cranky-old-geezer's picture

Capacity meaning, if factory x is at 100% and factory y is at 100% capacity and there is still demand, they can then raise prices to z degree and demand will not drop. This would cause inflation.

It would cause higher prices, not inflation.

Inflation has to do with money supply growth relative to GDP.

Higher prices are a result of inflation (all other things being equal).

Using "inflation" and "deflation" to describe rising and falling prices is one of the biggest terminology mistakes in economics. Even PhD economists do it.

Prices are influenced by two things: Rising / falling demand, and inflation / deflation.

This is why it's improper to use "inflation" and "deflation" to describe price changes. They might be the result of simple supply / demand changes, not involving money supply changes.

You could have a stable gold-redeemable currency with a fixed exchange rate, no inflation nor deflation, and still have rising prices from demand increase alone, the scenario you describe above.

This is why terms like "stagflation" and "biflation" are improper. They attempt to describe two separate issues, supply / demand changes and money supply changes.

We didn't have "stagflation" in the late 70's. We had demand collapse combined with rapid money supply growth. A recession with continually expanding money supply.

We don't have "biflation" in housing now. We have severe demand collapse combined with rapidly expanding money supply, offsetting each other more or less, resulting in housing prices falling mildly rather than viciously.

This is a good example of demand collapse being attenuated by monetary policy, exactly what Bernanke's trying to do.

He couldn't care less about the housing market. He cares only about housing prices, trying to keep housing prices up so bank balance sheets won't turn red and bankrupt half the banking system.

Mon, 10/24/2011 - 16:07 | 1805698 devo
devo's picture

Great post.

What would you consider smaller portions of products that cost the same (or higher) price? I've been calling this "hidden inflation". I see it everywhere, but especially in groceries.

Using your gold standard example: say one swiss franc 20 buys 1600 cans of tuna. A year later the same franc can buy 16000 cans of tuna, but the cans are smaller. Let's assume the demand for tuna hasn't increased. This would be inflation, correct? Despite not having higher money supply.

Or are you saying somewhere along the line money supply had to have increased for that to happen? To me, it seems like the company producing tuna could increase the price (despite low demand and no increase in money supply) just to maintain margins. In essence, a dollar buys less. Isn't this inflation? 

It's a bit abstract to wrap my head around.

Mon, 10/24/2011 - 20:27 | 1806542 cranky-old-geezer
cranky-old-geezer's picture

 

 

Price increses in groceries we're seeing, or smaller sizes at the same price, essentially the same thing, is due to rapidly expanding money supply while GDP is actually dropping, which is pure textboook inflation, more dollars chasing fewer goods & services.

Those rising prices aren't inflation.  They're just rising prices, a result of inflation.   Inflation is the cause, rising grocery prices is the effect.

When a stock price rises on the exchange, we don't call it inflation.  We call it rising price.  We don't say the stock inflated 3 points today.  We say the price rose 3 points.

Why that stock price rose could be inflation or supply / demand or a combination of both.

How has Bernanke been keeping stock prices up in this economic depresson?  Simple, expanding the money supply ...and giving that newly printed money to Wall Street incidentally for the express purpose of juicing stocks.  More dollars chasing a limited supply of a particular stock, causing the price to rise.

You might say there's a supply / demand aspect in that too, and you would be right.  Bernanke is creating artificual demand for stocks.  It's called manipulating the stock market ...which is supposed to be a crime.

But the inflation aspect explains why your paycheck has lost 1/3 purchasing power since '08.  The US dollar has lost 1/3 of its value since '08, and it's due to rapidly expanding money supply combined with falling GDP, textbook inflation, fairly severe textbook inflation too. 

Is is hyperinflation? 

That's up to you. It's your call. Becasue everyone has their own view of what constitutes hyperinflation.

Mon, 10/24/2011 - 03:17 | 1803590 Oracle of Kypseli
Oracle of Kypseli's picture

Anyone with a steady job, has fewer things to worry about. When your earnings exceed your needs and you start having some savings, how to protect and maintain the purchasing power of your savings becomes the problem.

Throughout the ages, gold, silver, farm land (with low or no taxation) have been the way for those who have up to a few million.

For the rich, who do not need to sell for long time, it can expand to art, collectibles, land with planted hard wood trees (30 year wait) tea and vanilla bean plantations in SE Asia and farms in S America managed by locals on a % basis, inactive mines that do not have operating costs until demand increases and becomes profitable and so on.

 

Mon, 10/24/2011 - 02:17 | 1803562 devo
devo's picture

The Fed has handcuffed themself into perpetual low interest rates. Banks holding 30 year paper at 2% and/or mortgages at 3.5% will go bankrupt if short term rates ever rise. How does that cycle ever end?

It's amazing these are the decisions being made. It's so short-sighted, and it's as if officials hope and pray the economy miraculously picks up between today's destructive decisions and the day when there's one too many toxic assets (for the middle class to absorb), and it the first domino falls.

It's an insult to research institutions that Bernake is labled an "academic"...as a Magna Cum Laude graduate (note: not in economics) from a top university, I take offense to his unsound and irresponsible logic being labeled academic. Media propaganda I suppose.

It's a sad state of affairs when SKF and SQQQ are better investments than GS and AAPL.

Mon, 10/24/2011 - 02:28 | 1803571 Dr Zaius
Dr Zaius's picture

Devo, I don't see how ZIRP cycle ends either. If interest rates return to historic norms, the federal deficit will balloon far past our current $1.5 trillion deficits just on interest payments alone. Not to mention keeping the banks solvent with their sovereign, soon to be, toxic assets.

Mon, 10/24/2011 - 03:52 | 1803602 cranky-old-geezer
cranky-old-geezer's picture

 

 

How does that cycle ever end?

It's not really a cycle therefore it won't recycle.

It's the end-game kick-the-can-till-the-whole-fucking-thing-collapses strategy, ZIRP, QE, Op Twist, whatever, just buying a little more time.

Massive growing and increasingly unservicable debt isn't a cycle, it's an end game, approaching the edge of a cliff with no way to stop, guaranteed you're going right over.

There's no way back from this.  It's the end of the road.

Mon, 10/24/2011 - 09:42 | 1804025 devo
devo's picture

But what is the point of destroying the system when, via an organic deleveraging, it can be continued for many many years. I just don't understand how those making these decisions benefit. Are they all sociopathic nihilists who simply don't care about anything but themselves, today, and view the future as meaningless? Have we unknowingly elected home-grown terrorists? Are they simply incompetent? I just fail to see the purpose of avoiding the obvious solution, which is so clearly a painful deleveraging period. I think people would accept that rather than feel dread and ennui for the next decade.

 

Mon, 10/24/2011 - 12:03 | 1804619 MachoMan
MachoMan's picture

A couple of reasons:

First, if TPTB ultimately fear irate peons (as they should, hence the social safety net), then a massive deleveraging cycle whereby the spoils of the run-up and wealth gap are put to obnoxious use (buying everything at firesale prices, e.g. familial farm land and estates, small businesses, etc.) would not be the most palatable solution...  poking caged animals with a sharp stick is often times a sign of mental problems (of which many of our leaders and industrial titans are rightfully accused), but TPTB are not so stupid.  Ultimately, the overt mechanisms of control are too costly to implement, hence control of media, influence of credit addiction, etc. (more covert forms of control).  Once the covert forms of control lose their effect, plan B is MORE bread and circuses (printing).

Second, even in a highly inflationary environment, those who have closest/quickest access to the newly issued money may benefit.  See generally, FOFOA.

Third, the longer the status quo goes on, the longer those who may have culpability live to see sunlight and are better able to prepare for whatever may ensue.  It is precisely the view of the future as important that guides their actions...  In a deleveraging cycle, there are many questions to be answered...  and many important people asking questions.

Fourth, and in keeping with the Third point, the deleveraging cycle causes those on the margin of being in "the club" or lower tier members to lose faith...  to question...  and to exert political muscle to bring the rest down with them.  In the inflationary scenario, at least for quite a while (biflation kills the lower bosses too), the middle class enforcers keep the serfs at bay.  While the serfs may overtake the middle class enforcers, the TPTB are for damn certain that if their middle class enforcers are taken out, that they will be overrun as well.

Fifth, if you presently have a geopolitical strategy of sucking resource rich nations (oil) dry via a MIC/inflationary policy, then why not continue?  Aren't we pot committed at this point?  We literally may be playing for all the marbles at this stage in the world's development and prospects for alternative energy returns.

Last, if you're addicted to power and control, why not sow the seeds for a political figure to emerge from the economic chaos with a message of give me control and power and I'll fix it?  It just doesn't seem like in a deleveraging cycle there is as much "need" for intervention to cure the matter.  There is certainly a call for intervention in the form of "stimulus," but not for additional concentration of power to take control of the economy...  spending is a different animal than centrally planning, rationing, and dictating the parameters of the economy...  although, it may be the difference between an alligator and a crocodile.

If you are in a situation where you are damned if you do, damned if you don't, then why not put off the event as long as possible?  Especially if it otherwise falls into your political goals?

 

Mon, 10/24/2011 - 12:58 | 1804860 cranky-old-geezer
cranky-old-geezer's picture

 

 

But what is the point of destroying the system when, via an organic deleveraging, it can be continued for many many years.

Because (a) TPTB know the end of America's superpwoer status is approaching, because (b) the end of USD WRC status is approaching, therefore (c) it's loot everything they can while they can.

That's about as simple as I can say it.

Are they all sociopathic nihilists who simply don't care about anything but themselves ...

Yes.

Are they simply incompetent?

No.  They know exactly what they're doing.

The only incompetence is sheeple believing / hoping / praying the looting will stop.

Mon, 10/24/2011 - 15:56 | 1805596 devo
devo's picture

I pretty much agree. I have about $100,000 in cash (I am mid-30s and an excellent life-long saver) and have no idea what to do with it...of course, I am being punished right now for my responsibility and savings. Anyway, I was thinking buying property or gold. But, then I think, "What if we get a new president?"...that could change everything. Someone like Ron Paul could be bad for gold (i.e. via stopping printing) and possibly recognize the need to deflate home prices, even though I love Ron Paul as a candidate.

I know I don't want to be in the dollar. I don't know how to invest in Australia, Asia, etc very easily other than going through U.S. equities in companies that deal overseas. I am not savvy enough to trade forex. Any ideas?

Mon, 10/24/2011 - 18:01 | 1806139 MachoMan
MachoMan's picture

You have no choice but to hedge for both deflationary and inflationary pressures...  which, I think in the end, means taking a haircut.  My suggestion is to take half of your disposable income and pay down debt that will benefit you from paying it (e.g. student loans, credit cards...)...  otherwise, set up a sinking fund (mortgages, etc.).  Take the other half and purchase, without leverage, inflationary hedges...  take your pick, but I'd suggest something physical and in YOUR possession.

There are some asset classes that will do fine in both regards...  debt is really the killer in a deleveraging environment...  that is moreso your enemy than a shitty return on a fully paid for asset.

Start looking at decent small businesses around you...  real property...  think tangible.

Mon, 10/24/2011 - 18:10 | 1806157 devo
devo's picture

Thanks.

I actually have no debt, have never held a credit card balance (I actually "make money" via reward programs from my credit card), and paid my student loans (20k) 1 year after graduation. So, basically I am very responsible with money and have no debt. I grew up poor, and my family who came over from Italy were poor before working hard/saving, so that's what I do.

However, I feel my savings is being chipped away at. Well, I don't feel it is, I know it is. I'm not sure how to protect it. My gut says physical assets like a small home and metals, with maybe 10% in stocks (though they are overbought now), but I'm not quite sure, and I don't trust anyone on TV and/or anyone selling their advice. Peter Shiff is probably the broker I trust most, which is why I lean toward physical assets. He does a lot of investing in foreign currency and stock, which I don't know how to go about other than ETFs (which I don't trust, I'd rather be able to trade the actual stocks--is there any way for the average U.S. citizen to trade stocks in Hong Kong other than Funds and ETFs?)

 

 

Tue, 10/25/2011 - 10:05 | 1807946 MachoMan
MachoMan's picture

Some questions simply don't have answers.  Anyone who tells you otherwise is trying to sell you something.  I would also hedge by learning something productive...  (NOT FIRE INDUSTRY).  Plan on losing everything...  but, if you are able bodied and have quite a few assets paid for, then learning a useful trade may (probably will) allow you to come out relatively unscathed.  Diversify your assets and spend the focus of your efforts improving yourself and your capabilities...  sounds to me like you've already reached where you're gonna in terms of monetary preparations...

PS, I would also suggest provisioning for natural disaster, supply chain disruption, etc.  10 years of food is great if you have the money to blow, but even a week's worth of food and water will go a long way.  Might look at some lead delivery devices as well (AND LEARN HOW TO SHOOT WORTH A SHIT).

Mon, 10/24/2011 - 21:35 | 1806730 cranky-old-geezer
cranky-old-geezer's picture

 

 

You're right, staying in dollars is guaranteed loss of value, i.e. loss of purchasing power. You've already lost 1/3 value since '08. You've already taken a 33% loss since '08.

Had that 100k been in gold or silver you would not have taken a 33% loss of purchasing power. You would have retained that purchasing power, even gained purchasing power since gold and silver have risen in price (not "inflated") more than 50%, the amount of price rise needed to offset a 33% loss of dollar purchasing power.

Going forward from here, dollar holdings are guaranteed to lose more value because more inflation is guaranteed. Bernanke MUST continue printing to fund $1.5 trillion annual government budget deficits, continue bailing out failing banks, continue buying MBS to keep that market from collapsing, continue doing currency swaps to keep the freikin Euro from collapsing, continue funding the IMF to keep whole nations from collapsing, and god knows what else he's throwing dollars at behind the scenes.

People think because QE "officially" stopped, Bernanke stopped the printing presses.

No fucking way. He's running 'em faster than ever. But it's all behind the scenes. We don't see it.

But we see the result of it. US dollar steadily losing value, prices steadily rising (except housing which is just fucking imploding).

Ron Paul stopping all that madness?

No fucking way. It's way above his head. A hundred Ron Pauls couldn't stop it.

The president is a freikin puppet on strings held by bankers.

Mon, 10/24/2011 - 23:31 | 1807037 Fake Jim Quinn
Fake Jim Quinn's picture

The WSJ carried this piece on how the rich are buying catastrophic scenario portfolios:

http://blogs.wsj.com/wealth/2011/10/18/the-rich-invest-in-catastrophe-po...

Tue, 10/25/2011 - 00:11 | 1807097 akak
akak's picture

LOL, buying disaster insurance against the collapse of the entire financial and monetary system!  Oh my God, if I laugh any harder I am going to cry!

Tue, 10/25/2011 - 10:07 | 1807958 MachoMan
MachoMan's picture

Isn't that what most of the derivatives net out to anyway?  When all sovereigns/large financial institutions are interconnected, it would seem foolish to think you might have a solvent counterparty... 

Mon, 10/24/2011 - 00:08 | 1803406 chump666
chump666's picture

Excellent.

Mon, 10/24/2011 - 00:08 | 1803407 Yen Cross
Yen Cross's picture

 I used to suck down bud lights , where a ( rail), road runs.   ( Buzz) You know.

Mon, 10/24/2011 - 00:11 | 1803415 Yen Cross
Yen Cross's picture

 Trade the crosses! Look at the  gbp/usd trade. It's ready for 10 handles!

Mon, 10/24/2011 - 00:12 | 1803416 No One
No One's picture

shouldn't this new FHFA program be rolled out in 2012?

 

http://online.wsj.com/article/SB1000142405297020434610457663893111455013...

Haven't read the whole thing, but I doubt that a lack of refi activity is the cause of a stagnant housing market... it is the fucking PRICES assholes.. Maybe homes are too expensive at 7 TIMES the media income.. no that can't be it.. Has to be re-fi activity... fuck.. I need another drinkl.

Mon, 10/24/2011 - 01:51 | 1803537 Hansel
Hansel's picture

The outline of the proposal is a piece of shit.  It doesn't really help anyone.  The taxpayer is still paying too much on an underwater house.  The bondholders get an early prepayment of the existing debt; maybe the gov't pays out old debt in full and takes the loss when underwriting the new debt.  Fannie and Freddie get to finance someone who is significantly underwater on a house and stick the rest of the citizens with the loss.

Obama is trying to buy an election by handing out free shit to would-be voters.

Mon, 10/24/2011 - 07:03 | 1803670 firerx
firerx's picture

You probably haven't purchased a home in the 2006 era. home prices are currently lower than the cost was to construct them in the first place.  No bank is willing to refi a home in which the value has halved or worst.  

Mon, 10/24/2011 - 10:47 | 1804257 No One
No One's picture

You're right, I didn't. I saw houses that were for sales for nearly $700K, which was WAY more than 2.5 - 3x my income. Yes, I could "afford" the payments, but decided being house poor wasn't a wise way to go. Why don't I get help from the Feds for realizing that home prices were too rich in 2006?

Mon, 10/24/2011 - 00:23 | 1803422 HungrySeagull
HungrySeagull's picture

so solly. no monee, no bang bang long time.

Mon, 10/24/2011 - 00:24 | 1803424 GottaBKiddn
GottaBKiddn's picture

I think Ray forgot about the big monkey wrench of devaluation that has been used throughout history. Everybody hates it so much that they don't want to think about it, but it does work.

Mon, 10/24/2011 - 00:25 | 1803427 JLee2027
JLee2027's picture

He lost me at "orderly deleveraging over 10 years".  Is he kidding?  We are sitting on a powder keg. There will be nothing orderly about this, nor will it take 10 years.

Mon, 10/24/2011 - 00:32 | 1803437 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

He is a billionaire.  He hasn't shopped for groceries let alone wiped his behind for decades.  He is just a little out of touch.

Mon, 10/24/2011 - 01:37 | 1803527 chump666
chump666's picture

dude don't sound jealous.  thats the markets you make money or you lose money.  some people just nail it well and make money.

stick to attacking your dumb ass goverments who are f*cking the people from all angles.

 

Mon, 10/24/2011 - 01:55 | 1803544 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Were you insulted I called him a billionaire?  He wasn't.  That is what he is.  He is a filthy rich billionaire who makes his money front running pension funds.  He admits it in this interview.  Maybe you should watch it again.  And he doesn't wipe his own ass, enough said.

Jealousy?  You think I am jealous he is not in touch?  Funny he talked about reality, but then said he would give all of his money to government programs.  So why hasn't he?  Because he is a greedy SOB, that's why.

Mon, 10/24/2011 - 02:08 | 1803558 chump666
chump666's picture

Insulted? I couldn't give f*ck, but forget about guys like him, worry when governments are papering over a complete meltdown due anytime.

Watching AUD and risk crosses looking to push equities into a super meltup next session, so the con job is on.  You wanna also worry that f*cking China is playing around with their stats again.  The market looks like rallying into Aug/Sept resistance.  What does that mean?  Markets are sucking up BS from EZ, US and CHina.  That's a bad sign.  This whole thing looks like it's going to collapse in a major heap.

As for fund guys like Ray, look, banks f*ck em, they should go bust that trade like hedge funds then get us to bail them ount.  That is disgusting.  These guys, they go.  NO ONE should bail them out.  He looks worried to me, most hedge funds are, volatility is eating into margins and thats why everyone is panic buying/selling daily/weekly etc.

I think the whole thing is going to hit the fan very soon. 

Mon, 10/24/2011 - 04:22 | 1803620 DollarMenu
DollarMenu's picture

What I heard him say was that he would consider giving money to government programs that were as effective as the programs to which he currently donates about 1/3 of his income.

I don't know the man, so I can not say he is 'greedy'.

Greed is somewhat relative.

He does however give away a greater percentage of his income  than I do of mine.

 

Mon, 10/24/2011 - 09:39 | 1804028 ElvisDog
ElvisDog's picture

Don't be fooled by the "I'm donating 1/3 of my income" scam. It's a little P/R ploy the uber-rich play to convince everyone they're not evil. If he wants to be noble, why doesn't he take less than 2/20 from the teachers' pension fund? If he thinks the rich should pay more of their fair share, why doesn't he simply write a check to the Treasury.

Mon, 10/24/2011 - 12:10 | 1804653 MachoMan
MachoMan's picture

Of course, in what academic vacuum is the government more effective at virtually anything?  I mean, I guess if he wanted to put his money where his mouth is, he could donate to the military...  that's pretty effective.  My guess is that in any area he cares to donate, the government will never be as effective...  I think we can chalk this one up as an illusory promise.

Mon, 10/24/2011 - 00:36 | 1803444 chump666
chump666's picture

Yeah but he is sitting on mega millions, hence the "Orderly" comment. So he has to be kinda cool with his response

 we will all be done and dusted into next yr, not 10yrs.  The economic iceage has already started.

 

Mon, 10/24/2011 - 01:12 | 1803497 Dasa Slooofoot
Dasa Slooofoot's picture

He lost me at "orderly deleveraging over 10 years".  

I believe he was talking historically, not in the now. 

Mon, 10/24/2011 - 00:26 | 1803428 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Why is Charlie's hair always so messy when he has his show?  What is he busy doing before he goes on?

Mon, 10/24/2011 - 03:24 | 1803595 Oracle of Kypseli
Oracle of Kypseli's picture

He takes naps so that his eye bags don't show.

Mon, 10/24/2011 - 00:29 | 1803433 Carlyle Groupie
Carlyle Groupie's picture

China loves Ray! Come join forces.

Mon, 10/24/2011 - 00:33 | 1803442 CrazyCooter
CrazyCooter's picture

This was on Infectious Greed it seems two days ago (one of the other blogs I used to follow - but I have been lazy) ... clearly the video has been pulled ... it would not work for me at all.

Paul Kedrosky is a must read, especially for sci-geeks like me. He has great stuff, especially on the science angle, just unique. Not sure how he comes up with it all. He has to be a hell of a conversation over a beer!

Lesson learned ...

Regards,

Cooter

Mon, 10/24/2011 - 01:03 | 1803476 CrazyCooter
CrazyCooter's picture

After a bit of reading ... oh, Christ ... another moron (Dalio) that can't figure out how to trim 1T+ annually out of the budget.

How about let us cut all the foreign wars (for starters) and ... aw, fuck, why bother ... carry on ... BAU ...

http://www.youtube.com/watch?v=VJNsZgHCVKU

Regards,

Cooter

Mon, 10/24/2011 - 01:57 | 1803547 Vlad Tepid
Vlad Tepid's picture

http://c3244172.r72.cf0.rackcdn.com/wp-content/uploads/2011/10/RestoreAmericaPlan.pdf

 

This should do the trick. Doesn't roll off the tongue like 9-9-9, but if it weren't for an ignorant electorate, this is how budgets would look in an Age of Austerity.

Mon, 10/24/2011 - 00:38 | 1803443 Yen Cross
Yen Cross's picture

 I thought Tylers kept it , Exponential?   Not that it matters!

 

   Tool( credit default swaps) , Kits and all!    

 

                                  Barf Barf!

Mon, 10/24/2011 - 01:10 | 1803494 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

It's Sunday night and the dollar is pushing Asian equities up.  What do you expect?

Mon, 10/24/2011 - 00:39 | 1803445 dwdollar
dwdollar's picture

Sorry... Ray... but I'm not paying 3 percent more in taxes. I'm not paying any taxes. You can kiss my young ass you Baby Boomer fucking prick. Your generation made this mess. Clean it up yourselves. I'm too busy trying to find a fucking way to have a family.

Mon, 10/24/2011 - 01:06 | 1803489 CrazyCooter
CrazyCooter's picture

Yup. I said this up thread with a fun link to boot. Ray can go fuck himself.

I am tired of these sons of bitches thinking that the US has to be the world policeman and its our damn duty to suck it up and pay out the fscking nose.

All the US has to do is cut foreign wars and stupid waste from government payrolls and things balance out pretty OK. Well, assuming we don't have to bail out all the deposits of BofA, but that is another thread ...

Regards,

Cooter

Mon, 10/24/2011 - 09:02 | 1803906 machineh
machineh's picture

'Ok, a central bank can make a purchase and get money in the hands of somebody else or blah, blah, blah, blah, blah.' -- Ray Dalio

The man is amazingly inarticulate.

How does someone who can't even speak in complete sentences get hisself on TV?

The transcript is just painful to read -- I gave up. Two tongue-tied Boomer farts, slinging trite bromides at each other. Change the channel, please!

Mon, 10/24/2011 - 09:44 | 1804041 ElvisDog
ElvisDog's picture

Exactly. Two extremely successful boomers, who made their big pile of money during the debt-fueled boom of 1980-2007, now want to tell those who did not how to fix things. Here's a suggestion to Charlie and Ray - since your generation fucked everything up and is going to dump the cost of cleaning things up to the Gen-X and later crowd how about letting them decide how they want to handle things.

Mon, 10/24/2011 - 12:04 | 1804624 akak
akak's picture

Two tongue-tied Boomer farts, slinging trite bromides at each other.

An excellent summation of one of the most vapid, inane, contentless interviews that I have ever seen.  I kept waiting for Ray to utter the phrase "it is what it is".

Mon, 10/24/2011 - 01:38 | 1803530 cranky-old-geezer
cranky-old-geezer's picture

 

 

I'm too busy trying to find a fucking way to have a family.

I suppose fucking would be the way to have a family unless you adopt.

And Ray has pension funds to look after, so yes, I suppose he'd be all for maintaining the status quo, keep those bond markets pumped up, keep those equity markets pumped up, etc, and please no downgrades or defaults.

Mon, 10/24/2011 - 00:37 | 1803447 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

How's everyone's dollar puts going?  Yeah?  Yeah?  LOL

Mon, 10/24/2011 - 00:38 | 1803448 LaLiLuLeLo
LaLiLuLeLo's picture

He's absolutely right about private debt: 300% of GDP in 2009 vs. 230% 1930.

 

Hold on to your butts

http://www.youtube.com/watch?v=l1aN8oe_sCY

Mon, 10/24/2011 - 00:40 | 1803451 LaLiLuLeLo
Mon, 10/24/2011 - 00:38 | 1803449 Johnk
Johnk's picture

What's with all the digs at #OWS?  It's like bashing jaywalkers while murderers roam free.

Mon, 10/24/2011 - 01:11 | 1803495 CrazyCooter
CrazyCooter's picture

Hard to hide in the day of the internet. Hell, at some point in the future, paid political trolls may end up at the tight end of a rope ... small price to pay after billions starve and there is a digital trail to track down the "nuremberg" defendants ... you know, the "just doin' my job" defendants ...

Strange days are these ... all depends on who runs the show in five years ... hate to be on the wrong side of that bet ...

Regards,

Cooter

Mon, 10/24/2011 - 01:22 | 1803503 knukles
knukles's picture

Well stated.
We must as individuals be very careful with our analyses of OWS, what with gut biases, predilections and the lot of news from numerous sources each with its own hidden agendas.  It seems to me to be terribly easy for me (and by extension the "us" or "we" but then again I am never certain of anything where others might be) to be subsumed by the alternative points of view and find myself (if damned lucky to realize such) exactly where I do not wish to be... fully engaged in the Hegelian Dialectic. 
If certainty is a limiting status, I'd guess that a recognition of OWS as well as just about every movement throughout the world rests upon one fundamental premise...

.......Significant Disenfranchisement

....each with it's own particular biases, agendas, plans and dreams... but nonetheless a portrayal of Disenfranchisement... that "Dreams" or "Opportunities" for the lack of better terms have been in some way precluded by events beyond one's control (and not from the assumption of the status of victimization) but of promises unkeepable, of gross unfairness and injustice, of amends to be made and improvements furthered.

And to bring this point home further, that is the same ethos which permeates ZH and its denzins.  In some way, the identification of an injustice perpetrated with an accompanying desire for healing.

As a rising tide lifts all boats, by extension a falling tide leaves many disabled.   By necessity, the deleveraging period within which we rest shall spawn more Tea Parties, Arab Springs, OWS's, wars and insurrections, cultural revolutions and the like all fueled by the Internet Reformation.  Most captured by outside interests, managed by powers from afar, but a few genuine... for each of us to decide as we see fit.
And it will not be pretty, clean, wholesome, gentle or serene.  But may we endure the transition well, demonstrating grace and civility, bringing a spark of light to offend the darkness of an increasingly uncivilized world.

“If there must be trouble, let it be in my day, that my child may have peace”
            - Thomas Payne
Mon, 10/24/2011 - 00:45 | 1803458 mfoste1
mfoste1's picture

fuk mi......

Mon, 10/24/2011 - 00:48 | 1803465 pasttense
pasttense's picture

So why was this article posted? I didn't read anything interesting here, just very elementary stuff.

Anyone?

Mon, 10/24/2011 - 01:52 | 1803541 wretch
wretch's picture

One of the Tylers has a hard-on for billionaires on mainstream news.

Mon, 10/24/2011 - 02:20 | 1803566 Dr Zaius
Dr Zaius's picture

Agree 100%. I was eager to read the interview based on the build-up, but felt cheated of my time upon reaching the end. Nothing that someone wouldn't pick up after a few days of reading ZH. So much for any deep insight. Sheesh...

Mon, 10/24/2011 - 12:08 | 1804643 akak
akak's picture

I was eager to read the interview based on the build-up, but felt cheated of my time upon reaching the end. Nothing that someone wouldn't pick up after a few days of reading ZH. So much for any deep insight. Sheesh...

Hell, I missed even the shallow insights!

Oh, and some advice Mr. Dalio --- it's called "sentences".  Look it up.  They come in handy when trying to speak intelligently, something that you consistently failed to do in this mockery of an interview.

 

Mon, 10/24/2011 - 00:50 | 1803469 reader2010
reader2010's picture

Bullshit. The ultimate TOOL is to create a new world reserve currency to perpetuate the theft. 

Mon, 10/24/2011 - 00:51 | 1803471 jomama
jomama's picture

dear god i hope i never have to resort to a comb-over like that

Mon, 10/24/2011 - 00:52 | 1803472 Yen Cross
Yen Cross's picture

 Pas tense has Dry Mouth.

Mon, 10/24/2011 - 00:57 | 1803473 tickhound
tickhound's picture

"So we`re in an interesting era... if you think of a person as an economic machine as being a tool, a part of that economic machine the demand for labor has changed in a very profound way. It`s an interesting question. We might enter into a period in which we don`t need people as tools. So what does that mean?"

THIS is what we need to be talking about.  Labor vs technology IS 'different this time' and suppressing technology in support of labor is reaching end.  The man/tool cog has met his match.  And our politicians will be an enemy towards any profound progression... At least any that includes us.

Mon, 10/24/2011 - 05:23 | 1803643 topcallingtroll
topcallingtroll's picture

Luddite.

Ignorant. Ignorant Luddite.

Mon, 10/24/2011 - 11:15 | 1804385 tickhound
tickhound's picture

c'mon troll... even a caveman can do it.  Bring your horse and buggy.

Mon, 10/24/2011 - 07:28 | 1803675 i-dog
i-dog's picture

"We might enter into a period in which we don`t need people as tools.
...
THIS is what we need to be talking about."

I agree, 100%. I first heard this raised by a forward-thinking leader over 30 years ago, yet haven't heard it discussed even once since.

We moved people from the farms to the factories ... then from the factories to office desks ... then from office desks to mobile communicators ... where next? There is a long queue of developing countries backing up behind us at the "farms-to-factories" phase, waiting for us to make room for them in the "factories to paper-pushing" phase.

We really do need to look at how the developed world can plan to function in a civilised manner yet with only a small percentage of the population actually working. How a developed nation can generate wealth and then distribute it without class (or other) warfare ... or government.....

Mon, 10/24/2011 - 12:13 | 1804666 i-dog
i-dog's picture

I'm not into Zeitgeist ... it's a top-down, authoritarian solution that is little different than the NWO approach. There are ways of achieving the objectives without a grand-poohbah deciding on allocations.

Mon, 10/24/2011 - 12:17 | 1804685 MachoMan
MachoMan's picture

aside from the whole "central allocation" thing NEVER working...  despite countless trials.

Mon, 10/24/2011 - 15:05 | 1805427 tickhound
tickhound's picture

The question then remains... what is the solution?  Or the foundation of the solution?  Certainly a debt based profit system will only collide with a 'built to last' non-cyclical non-consumer driven economy.  I get stuck here.

Mon, 10/24/2011 - 18:12 | 1806176 MachoMan
MachoMan's picture

The solution is to pick our poison because humans haven't found the solution (and probably won't, presuming there is one).  We made a choice a long, long time ago to progress with the debt boom/bust cycles...  I honestly think that we get a stair-stepped technology leap from doing so (r & d into everything, cheap credit finds a home)...  the bust whipes away a significant amount of items, but ultimately there is a residual...  I postulate this residual is greater than what we would have achieved under a more stable approach...  but, I realize this isn't a falsifiable hypothesis and therefore worthless...

Of course, the down side is that with abundant world killing technologies, it's only a matter of time before pandora's box gets opened so to speak...  and during the bust, we fall asleep at the wheel...  whether it's an oil platform in the gulf...  a nuclear plant...  a couple nukes...  a designer virus...  who knows.  All have significant maintenance costs.

Mon, 10/24/2011 - 15:00 | 1805405 tickhound
tickhound's picture

trust me I hear you... But it provides suggestions worthy of discussion regarding the inevitability of an automated labor force.  We can ignore the solutions presented, but it does not take from the 'problems' we face.

Mon, 10/24/2011 - 12:14 | 1804670 akak
akak's picture

"We might enter into a period in which we don`t need people as tools.

Wake me up when we arrive at the period in which we don't need governments as tools.

 

 

Shit, that was a short nap.

Mon, 10/24/2011 - 12:16 | 1804682 MachoMan
MachoMan's picture

from office to home via telecommuting and then from home to the farm...  back in the fields picking...  turning over dirt...  putting in spillways...  clearing ditches...  at fractions of the present wage rate.

Tue, 10/25/2011 - 01:36 | 1806712 i-dog
i-dog's picture

I agree ... as a voluntary choice for an individual.

But we can't have 7 billion farmers for very long, before one of them starts producing iStuff ... then selling it to other farmers ... thereby getting 'rich' ... thereby invoking the envy of the broke iStuff purchasers (who traded their money for iStuff, then want their money back while keeping the iStuff!) ... thereby arriving back at precisely where we are now.

Tue, 10/25/2011 - 10:10 | 1807970 MachoMan
MachoMan's picture

Which is the way it was before our present predicament and the way it will be afterward...

Mon, 10/24/2011 - 07:25 | 1803692 DCFusor
DCFusor's picture

Yeah.  Under the current system, unless you produce you don't get paid.  If you're not needed for production, you're fucked.  But then, so are "they".  Then there's no one to buy the products of the machines, so here we are bumping up against that as a structural issue no one is really addressing.  In a way, that's what Ray was saying - no one is sitting down to discover how the machine really operates, there's no definitive overview.  Everyone wants to "do something" without knowing how the machine works, and therefore what would even work.

Sure, the guy might be talking his book - it's hard to avoid.  So, read through that, get past it, and his points are valid.  If you don't know how it works when it does, you don't know how to fix it when it doesn't.  Pat ideas from pre-existing agendas and blindered-beliefs ain't going to get it this time.

I suppose that's why so many here take offense (I note none keyed on the "find out how it works so we can fix it) -- y'all seem to think you all know how it works (even though you disagree, a big sign that at least some don't) and are offended at the idea you don't fucking know it all. 

I know I don't know it all, though I do know quite a lot - but gheesh, a little less vanity about it would get us all to a better way of thinking, that would enrich us all.

That is what we want, right?  Or do we want just us to be enriched, us to be the .01% while the rest starve and freeze?  If so, I have no interest in participating.

In my worldview, no one has to lose for me to win.  I could stand to see more of that idea around.

 

Mon, 10/24/2011 - 00:53 | 1803474 bankonzhongguo
bankonzhongguo's picture

The talking point over the weekend has been; 'Greece defaults and then there is "contagion" and the S&P goes down.'

WTF?

I can't wait to see the 2 trillion in IMF bonds that get bought by the Fed to "rescue" Europe.  Does this mean Joe Six-pack in Ohio just financed into the south of France?

Criminally Hilarious.

Its funny.  You place at bet at the track and lose, you walk away with nothing.  You buy a house and lose your job you default and your kids are on the street.  You start a business, spend too much for adverting, no foot traffic, go bust and declare bankruptcy and get liquidated out.

If you are a bank and make any bad decision; like how you allocate your cash, who you write mortgage for, what venture you gamble on or crazy-ass product you road-show - if you are too big to fail - you get a bailout supported by all the people that are wholly victimized by the macro econ events.

Somehow Charlie Rose and his krew have no problem watching goyim march off to Iran or being shackled to a lifetime to endless debt bondage.  Can't "fix" the economy with endless wars and continual bailouts to a banking sector that is holding the world hostage.

'10 years to de-leverage.' 

We just started year number 4.

Write all debt down by a third and restart. Yes.  It's that easy.

Mon, 10/24/2011 - 01:01 | 1803483 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Does this mean Joe Six-pack in Ohio just financed into the south of France?

When has Joe not financed the Global Cartel?  The dollar has backed everything so far.  Joe is needed as a debt slave.  When that changes let me know.

Mon, 10/24/2011 - 05:28 | 1803644 topcallingtroll
topcallingtroll's picture

A debt slave in the usa versus a factory slave in China.

Uhh. I prefer to be the debt slave in the usa.
So would all the chinese.

Some burden. We live better than we should because someone is subsidizing us.

Mon, 10/24/2011 - 00:56 | 1803477 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Dalio is willing to give half of his money to Teach for America! 

So do it already, Ray!

Billionaires are such duchebags.  What?  Thy don't think we know the difference between what they say and what they do?

Mon, 10/24/2011 - 01:15 | 1803501 CrazyCooter
CrazyCooter's picture

I was five minutes into Dalio's interview when I reached the conclusion ... douchebag.

I also think not very much of Charlie Rose these days ... right up there with Rachel Maddow as far as value/content goes ...

I just couldn't keep reading after a bit. I got better shit to do with my free time ... like this Newcastle over here ...

Regards,

Cooter

Mon, 10/24/2011 - 01:57 | 1803549 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Rose attends Bilderberg meetings.  Need more?

Mon, 10/24/2011 - 02:01 | 1803551 Vlad Tepid
Vlad Tepid's picture

Oh, Newcastle!  Now I really want to share a brewskie with you, sir! I've been following your posts the last few weeks since you gave us that great bio and details on your Northern Exposure.  I've been thinking of relocating up that way for sometime (Skagway,Douglas, or Juneau).  Mind if I periodically bug you for tips and hints in the future?

Tue, 10/25/2011 - 00:58 | 1807158 CrazyCooter
CrazyCooter's picture

Not at all. I have a time zone lag, so I am usually late to threads, but often go back every few days and troll for any missed action. :-)

Regards,

Cooter

Mon, 10/24/2011 - 00:59 | 1803479 Fishhawk
Fishhawk's picture

If Ray is really as smart as the intro suggests, he will not give any more interviews.  The man says almost nothing; he dribbles out banalities without even finding suitable conjunctions.  His inability to declare in a complete sentence is truly worrisome.  His one contribution, that we need real dialog, based on common understanding of our history, is laudable, but unworkable beyond a small team.  Clearly there is no concensus in this country about even basic values.  Is it ok to steal?  Should you take advantage of others because you have better knowledge, data, or economic power?  Should you look to the state to take care of you, or should you be useful and productive and intent on being responsible for your own existence?  The dialog he accepts as fundamental is not going to happen in our political system, so the possibility of finding a common solution is nil.  Since he has money, he is by definition a pillar of society, and as such he is not allowed to say that there is no hopium in our future; he is at least that smart, but that is all I got out of his wool-gathering.   

Fishhawk

Mon, 10/24/2011 - 07:58 | 1803720 Arius
Arius's picture

@fishhawk

it seems to me you are making the case for him: why he is concerned and why he thinks in final conclusion this will be a test of us and our system...

if you think the chances are nil well i guess you should put your money when your mouth is and quit bubling around....

in old world wisdom - dont look the teeth of the horse given to you .... look at the substance....

below is a link of another CNBC interview back in May, 2011...

 http://macromon.wordpress.com/2011/03/03/cnbc-interviews-bridgewaters-ray-dalio/

Mon, 10/24/2011 - 00:59 | 1803480 azusgm
azusgm's picture

What a frustrating interview. I wanted to hear what Dalio had to say, not what questions or comments Charlie Rose had on his list.

Mon, 10/24/2011 - 01:05 | 1803484 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Ray helped save the world by investing Obama's free dollars in pension funds.  What more do you need to know?

Mon, 10/24/2011 - 01:07 | 1803490 Mr. White
Mr. White's picture

But are there any fools in the fool kit? I thought I saw some...

Mon, 10/24/2011 - 01:19 | 1803498 Yen Cross
Yen Cross's picture

 Europe just did a reset!  This is just a bounce for the 1/3 rd of spx reportiting next week .

Mon, 10/24/2011 - 01:20 | 1803505 ddtuttle
ddtuttle's picture

I think Mr Dailio spends too much time getting smoke blown up his ass.  Have you ever had a boss say: "tell me where I'm wrong, tell me that I don't understand, Tell if I say something stupid"?  And did you actually try it?  I sympathize with his ideals, but I feel sorry for the people who work for this guy, talk about walking on egg shells!  "No, no, really.  Tell me I'm an asshole I won't fire you".

However, he's right when he says we have a debt problem, and that its much bigger than just the government debt.  If you include real debts from the government, municipalities and states, indivudal and coommercial debt, you get something like $50 trillion dollars.  This does NOT include medicare, social security or medicaid's "unfunded liabilities".

Economists have calculated that a society should not have more than 180% of GDP of total debt; however the US has twice that.  So we need to deleverage at least $25 Trillion dollars worth of our debt before we might begin a healthy use of credit again.  Given that such massive deleveraging causes recession, it will be even closer to 30 or 35.  You wonder why Bernanke and Eurocrats are panicing?

Mr Dalio is a smart guy and has access to all the numbers, but his people won't tell him that 3% is a joke, it's nowhere near enough.  We need to rearchitect the global economy and financial system, and create a model for a national economies that is self-correcting and stable.

The public dialog is worthless nonsense, but none of our politicians understands the first thing about economics, so they believe economists who work for banks or the Fed.  That's not economics, its propaganda that serves the banks, period.  Mr Dallio, you know how to make money, but I don't think you understand how the "machine" works either.

Ray, you can fire me now.

Mon, 10/24/2011 - 07:50 | 1803724 Arius
Arius's picture

well, there are many machines - it seems to me you are mixing political and economic machines ... which of course they are well connected and part of the same .... in all due respect though i think to be where he is and to stay there one got to know how the machine works ...

Mon, 10/24/2011 - 10:30 | 1804187 Optimusprime
Optimusprime's picture

"The public dialog is worthless nonsense, but none of our politicians understands the first thing about economics, so they believe economists who work for banks or the Fed.  That's not economics, its propaganda that serves the banks, period.  Mr Dallio, you know how to make money, but I don't think you understand how the "machine" works either.

Ray, you can fire me now."

 

Bravo!  This level of comment is why so many of us read ZH.

Mon, 10/24/2011 - 01:18 | 1803506 redpill
redpill's picture

There's more than one way for an economy to work, and I don't like Ray's economic machine.

Mon, 10/24/2011 - 01:21 | 1803508 Yen Cross
Yen Cross's picture

 Thank God I can fly! It's all about SPX  next week!

Mon, 10/24/2011 - 01:27 | 1803513 r00t61
r00t61's picture

I didn't read a single word about fractional reserve lending, or the Federal Reserve setting rates, or even its quasi-illegal secret slush fund loans to crooked banks all over the globe. Nothing about peak oil, or the mathematical end-game of a monetary system that depends upon infinite growth to service debt.

Instead, I get this joker defending the stimulus, claiming that it created jobs - but how MUCH did it cost to create each job, I ask.  His solution to fix the problem is the 3-3: three percent spending cuts, three percent more taxes.  It's "Cain lite."

I didn't read a single thing about the willful fraud committed by banks, or the absolute apathy of Obama's Justice Department to prosecute any of this stuff.  Nothing about the complete and total regulatory capture of the SEC.  I read that the Secretary of Education should be given some sort of new "blank check" to create more "education infrastructure."

This must be a pre-Halloween joke, right?

Otherwise, give me a break.  This guy's worried about what will happen to his FRNs if this hand grenade we call the modern eCONomy goes off.

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