Dalio & Tudor Jones Warn: "We Will Kill Each Other" If Our Broken Economic System Isn't Fixed

Bridgewater Associates Founder Ray Dalio and Tudor Investments' Paul Tudor Jones joined Yahoo Finance for the 2nd annual Greenwich Investment Forum earlier this month.

Speaking directly after Connecticut Gov. New Lamont, with whom Dalio is working to bolster Connecticut's schools via a $100 million gift- the largest charitable gift the state has ever received, PTJ and Dalio largely focused their "Fireside Chat" on the flaws of Fed policy, the dangers of America's ballooning budget deficit, and the steps that must be take to "stop us from killing each other" in a violent revolution, as Dalio warned. 

PTJ spoke first, starting with a few words about President Trump, praising him as "the greatest salesman" to ever enter the American political arena. After all, didn't Trump convince the Republican Party - once the party of fiscal piety - that 5% budget deficits 10 years into an economic rebound are necessary to protect the economy. Similarly, didn't he also convince the Fed - "through great moral suasion" - that returning to real negative rates with unemployment at 50-year lows was a necessity?

Both Dalio and PTJ agree that, while clearly stimulative in the short-term (obviously just take a look at the S&P 500), these decisions will set up the US economy for one of the most punishing downturns in history, which is why PTJ always laughs when Jerome Powell is quizzed about financial conditions and whether he sees bubbles anywhere. Because at this point, the whole market is a bubble.

"Clearly, the low interest rate policy we're pursuing is creating an excess and that excess is in our public deficits. Which, at the current pace, in less than ten years we will have exceeded the threshold where Greece had its issues," PTJ said.

And when we look abroad, the full scope of this heady "fiscal-monetary mix" becomes even more obvious.

"I look at our fiscal-monetary mix, it's the most stimulative that I've ever seen - again, economically adjusted - no wonder the stock market is at new highs. It's literally the most conducive environment - certainly in the short run - for economic growth and strength that I've ever seen. You add on that an 11% budget deficit in China, the second largest economy, and 3%."

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