For almost two years now, Bridgewater Associates Founder Ray Dalio has been telling anyone who will listen that the rise of anti-establishment populist parties presents a greater threat to markets than the ebbing of monetary stimulus and burgeoning national debt. And in an interview with CNN”s Fareed Zakaria that’s set to air on Sunday, Dalio is finally bringing his “1937 thesis” out of the realm of the financial press and to the attention of the broader public.
And in an excerpt from the interview published by Bloomberg on Saturday, Dalio cited one of his favorite charts, the “populism index”, once again demonstrating his elitist disdain for the “common man” while conflating their political ascendancy in the modern era with the violence and xenophobia of regimes like Hitler’s Third Reich.
“We created a conflict gauge – various ways of measuring different conflicts – and the conflict gauge now is the highest, really, since the war years,” Dalio said in an interview with CNN’s Fareed Zakaria that will air on Sunday. “There is more polarity, more conflict internally, of a sort.”
As a reminder, Dalio defines populism as…
Power to the common man…
…Through the tactic of attacking the establishment, the elites, and the powerful…
…Brought about by wealth and opportunity gaps, xenophobia, and people being fed up with government not working effectively, which leads to:
…The emergence of the strong leader to serve the common man and make the system run more efficiently…
…Protectionism…
..Nationalism…
…Militarism…
…Greater conflict, and…
…Greater attempts to influence or control the media.
Here’s a snapshot of his developed populism index (which doesn’t include the populists’ advance in Austria, Hungary, Germany and elsewhere that have occurred over the past 18 months). Since then, Bridgewater’s analysis puts the gauge at its highest level in 70 years.
It also doesn’t reflect the stunning victory of Jair Bolsonaro in Brazil and Mexico’s leftist/populist Manuel Andres Lopez Obrador.
“If you look at Brazil, if you look at Mexico and if you look in many countries right now, worldwide, you see that there is more political extremism,” Dalio said, according to a transcript provided by the network. “It’s a negative for the economy.”
So what’s the solution? According to Dalio, it’s “making sure capitalism works for everyone.” Here’s more on that from an interview Dalio gave back in September.
Dalio: Because I think the parallels are really important to understand. Okay. 1929 to ’32 and 2008 to 2009, we have a debt crisis. And interest rates hit zero. Both of those cases, interest rates hit zero. Only two times this century. There’s only one thing to do next. And that is to print money and buy financial assets. So in both of those cases, that’s what the central bank did, and they pushed asset prices up. As a result we had an expansion, we had the markets rising. And we particularly had an increase in the wealth gap. Because if you owned financial assets, you got richer. And if you didn’t, you didn’t. And so what today we have is a wealth gap that’s the largest since that period. The top 0.1 of the 1% of the population’s net worth is equal to the bottom 90% combined. You have to go back to 1935-40. As a result we have populism, okay. Populism is the disenchanted – capitalism not working for the majority of people. So we have that particular gap. So we have a political gap, a social gap in terms of the economics, and we’re coming into the phase where we’re beginning the tightening cycle. 1937, we begin a tightening cycle. We begin a tightening cycle at this point. No tightening cycle ever works out perfectly. That’s why we have recessions. We can’t get it perfectly. So as we’re going into this particular cycle, we have to start to think, “well, what will the next downturn be like?” we’re nine years into this. As you have a downturn, I believe that there’s a political and social implication to that related to populism. And less effective monetary policy. There’s less effective monetary policy because so far there are two types of monetary policy used: lowering interest rates, we can’t lower interest rates, and the second is quantitative easing. And it’s maximized its effect. So I think the next downturn is going to be a different type of downturn. I think pension problems, health care problems in terms of obligations that are not funded that are not debt —
Put another way: All of these ignorant proles who voted for Trump need to wise up and get an education! (this despite the fact that a majority of white men in the US with college degrees voted for Trump).
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