Former hedge fund director Ray Dalio warned that the Federal Reserve of America (Fed) easing monetary policy could be inflating an economic bubble, while marking the end stage of a 75-year economic cycle. Typically, the Fed lowers interest rates during an economic downturn, but currently, the easing is occurring in the context of low unemployment and strong growth — characteristics of the end stage when public debt is excessively high.
Dalio believes this is a “dangerous” combination and tends to cause inflation, especially when the government's fiscal policy remains expansive with large deficits and short-term bonds. He noted that this effectively causes the Fed to “print money” to finance public debt. This environment is favorable for store-of-value assets like Bitcoin and gold.
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