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QE Infinity: Ray Dalio Warns US Will See Another Round Of QE After Taper

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by Tyler Durden
Tuesday, Sep 21, 2021 - 02:37 PM

A few days ago, Bridgewater's Ray Dalio sat for an interview with CNBC and declared that "cash is still trash", and that governments will conspire to "kill" bitcoin if it ever does become a legitimate threat to the greenback. Just one day later, US stocks suffered their worst single-day drop since May.

On Tuesday, with every investor and Wall Street research department focused on the situation at Evergrande, Dalio sat for an interview with Bloomberg where he once again tried to reassure investors that there's "nothing to see here" in China, where Dalio has made large investments, not just with the money belonging to Bridgewater's clients, but with his own personal fortune.

Dalio's message was pretty clear: "Evergrande's debt crisis "is all manageable...Investors will be stung - that’s how it works," Dalio said in an apparent reference to the thousands of Chinese mom-and-pop investors who have gone full 'torches and pitchforks'.

Ultimately, even if Evergrande defaults (which, as we learned Tuesday morning, it already has) Dalio says "the system" will be protected "because it’s denominated in its own currency."

"China’s a strategic play - you’re not going to jump in and out. And the amount that you’re in should be that which you’re comfortable with," Dalio said. "It’s not smart to sell on the break, or buy." While most investors are overweight the US, diversification is important given the "war of sorts going on in technology," he said.

As for Chinese stocks, which have had a rough year (particularly those traded in Hong Kong and the US), Dalio has dismissed the losses as little more than "wiggles".

"China’s a strategic play - you’re not going to jump in and out. And the amount that you’re in should be that which you’re comfortable with," Dalio said. "It’s not smart to sell on the break, or buy." While most investors are overweight the U.S., diversification is important given the "war of sorts going on in technology," he said.

We can't help but wonder...might Bridgewater be heading for its worst year in recent memory?

Turning to the subject of bitcoin, Dalio insisted the cryptocurrency has an "imputed value, not an intrinsic value." If Bitcoin is successful, it will be worth "a lot more" than it is now (that is, assuming the government doesn't "kill" it).

Dalio took a break from talking his book when the subject of discussion turned to QE. At this, Dalio actually had something insightful to offer: once the Fed tapers, more QE will inevitably follow. That's because - as Dalio explained - more likely than not, once the Fed finally dials back the size of its balance sheet, it will simply function as a preamble for the next round of QE. Regular Zero Hedge readers know that we have frequently compared QE to heroin and the economy to a junkie that's become hooked on the Fed's free money.

The end result of all this means real rates will remain negative for a long time, leaving savers at a distinct disadvantage to owners of assets.

Readers can watch a clip from Dalio's interview with Bloomberg's Tom Keene below:

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