World’s Largest Hedge Fund Manager Issues New Warning

Warren Buffet is a great example.

Others are hard-core quantitative analysts who build complex trading algorithms.

Ray Dalio, the billionaire founder of Bridgewater Associates, is neither.

He’s a macro investor whose fortune was built on an uncanny ability to spot big macro trends.

He predicted in 2007, for example, that the US housing bubble would burst, and warned the Bush administration that major banks were on the verge of collapse.

The government ignored him.

After the 2008 collapse of Lehman Brothers, Dalio immediately recognized that the Federal Reserve would have to print trillions of dollars to bail out the system… so he positioned his firm for big profits, buying assets like gold and foreign currencies.

Dalio was right again.

Now Dalio has a new warning for anyone who’s willing to listen.

In October he admonished a room full of central bankers in New York that there was simply too much debt in the world.

At the time, total global debt was an astounding $152 trillion.

Total debt has now risen to $217 trillion, according to a report published last month by the Institute for International Finance.

And as Dalio points out, this has consequences.

He told central bankers back in October that “there is only so much one can squeeze out of a debt cycle, and most countries are approaching those limits.”

Governments often go into debt in order to finance big spending projects which stimulate economic growth.

But eventually the amount of growth you can generate from debt reaches a point of diminishing returns.

We can already see plenty of data to support this assertion.

China has taken on hundreds of billions of debt over the last several years in order to maintain its economic growth.

But measures of China’s “debt efficiency” now show, according to the Wall Street Journal, that it takes “increasingly more debt to generate the same GDP growth.”