I’m Ray Dalio – founder of Bridgewater Associates and author of Principles: Life ＆ Work. Ask me anything.

Hey Ray,

I was wondering what you think about the future of the dollar with the unprecedented amount of money injection into the economy from 2008 to the COVID epidemic. How will these stimulus' affect the future generations in terms of wealth accumulation and value of money for years to come?

I believe that because the dollar is now the world's currency and most people borrow, save, and transact in it, that the world desperately needs dollars and, as a result, there is a global shortage of them, which supports the dollar. Having the world's printing press to produce the world's currency is the equivalent of having the world's most important asset, especially in times when so many people need the world's money. So, we are now having a short squeeze on the dollar. Eventually, that will end because either that shortage of dollars will be satisfied by enough creation of dollars or it won't be satisfied in which case there will be debt defaults and restructurings that will reduce the need for dollars. When that happens, the dollar will weaken. It will also weaken when those who are holding dollar-denominated debt no longer want to hold that debt because interest rates are inadequate and so much dollar-denominated debt and money is being created that its value is undermined.

Dear Ray,

Michael Burry has come out saying that the pandemic could “unwind the passive investment boom”. Does he mean popular index trackers and ETFs like Vanguard and if these just track indicies like the S&P 500 how can it unwind without the underlying indicies unwinding?

Also which currencies would you be buying currently for a medium term outlook?

Many thanks, Charley

You'll have to speak to Michael Burry about what he means as I wouldn't presume to know. However, concerning passive vs. active investing and ETFs, I think smart active investors will now have a great opportunity to outperform them because of how different the conditions of the companies and items in them are from one another. I think we have entered a period in which the usual generalizations that index trackers and ETFs are created around will be much less important than the individual conditions within them. I think that the ETFs and index funds contribute to the inefficiencies because the selling and buying of them effects all of the items in them without regard for those item's differences.

Hi Ray! You've talked a lot about cycles of leveraging and deleveraging throughout the 20th century within Principles/Big Debt Crises in terms of the economic machine. I was wondering what your thoughts were about the current market environment relative to these concepts with respect to the domestic US and global economy? Thanks!

I will answer your question in brief but hope that you will read my comprehensive explanation of how money and credit cycles have worked throughout history, which I expect to put on Linkedin and principles.com in the next couple of days - or if you want a quicker, more entertaining take on this, watch "How the Economic Machine Works" on YouTube.

In brief, now, like in the 1930-1945 period, interest rates have hit 0% and printing money and buying financial assets doesn't get the money and credit to go where policymakers want it to go, so the central government borrows a lot and the central bank prints a lot of money and creates a lot of credit to buy this debt, which the central government spends to target what they want to save. The US government (including the central government and the central bank) is in the unique position of being able provide the money and credit that the world needs because the US dollar is the world's dominant reserve currency. While the US accounts for about 20% of the world economy, the US dollar accounts for about 70% of the world's buying, selling, borrowing, and lending. Those who will get dollars, and to a lesser extent Euros (and to a much lesser extent Yen), who need this money and credit to make up for their lost income and inability to pay debts will benefit more than those who will not get this money and credit, such as those in emerging countries. I believe that increasingly there will be questions by bondholders who are receiving negative real and nominal interest rates while there is a lot of printing of money about whether the debt assets they are holding are good storeholds of wealth. I believe that cash, which is non-interest-bearing money, will not be the safest asset to hold.

I really appreciate your research, summarisation and writing. Could you share more about your process?

For instance:

• How do you schedule time for writing and research
• How do you decide what to read
• How do you take notes
• Do you need to force yourself to write or does it come naturally

Could you share some tips for the people who feel they have something to say but find it hard to have the motivation or can’t find the right process?

The way I research and write is an iterative process in which I delve into the subject in various ways, write down what I think, triangulate it with the world's greatest experts who I ask to tear it apart or offer new ideas that I missed to stress test it, do more research, writing, and triangulating until I reach the point of diminishing returns. However, I never stop this process because I never adequately learn to satisfy my important curiosities.

What I read is typically those books and other sources of information which are written by brilliant experts in the areas that I'm drawn to learn more about.

As far as how I schedule my time, I have a number of strategic objectives that I am unwaveringly on a path to accomplish and pursue in a highly variable way that is optimized for the tradeoffs that I spend at the moment.

More generally, I have a deep sense of responsibility to others who are partners in my pursuing my passions such as those I work with and our investors and their beneficiaries as I attempt to understand the world, the economy, and the markets, and then successfully bet on what they will do. Of course my family, my closest friends, and my other treasured relationships lead me to spend time in ways that are appropriate to them.

I do a lot and I love it and I benefit a lot from the help of others who provide leverage to me.

Hi Ray, big fan of yours. A few months ago you said cash is trash. But now cash is king. What gives?

I'm glad you asked so that I can clarify. Back then, and still now, I believe that central banks will print a lot of money and keep cash interest rates at such low levels that they will have negative real returns and negative returns relative to assets that behave well in times of reflation. When the virus hit and it had its negative impact on earnings and balance sheets, asset values plummeted which made cash look comparatively attractive. However, what did the central banks do? They created a ton more cash to buy debt and push interest rates lower which is having the effect of pushing those assets that will be better suited for the new environment up. When you think about what assets are safe to own, and you think of cash, please remember that while it doesn't move around in value as much as other assets, there is a costly negative return to it in relation to goods and services and other financial assets that amounts to about a couple of percent a year, which adds up. So I still think that cash is trash relative to other alternatives, particularly those that will retain their value or increase their value during reflationary periods (e.g., some gold and some stocks).

Government Spending Limits - Is there a limit on what the govt can spend to save economy from covid19 impact? What determines that limit? When will this govt spending have to be repaid? How will it be repaid?

A government's creation of money and credit and its spending of this money and credit cannot produce goods and services or employ people (though it can give them money and credit to not go broke). The level of economic activity that we will see will depend on how we are changed by this experience with the virus (if it goes away and doesn't come back; if it comes back, that's another story). I believe that we will be profoundly changed by this experience for many reasons including how the discussions about who will pay the bills (e.g., will we pass this debt on or will we raise taxes) and about who should have what (e.g., should there be fewer differences in our access to basic needs) occur. Many other profound changes will also occur, such as attempts to have self-sufficiency in an interdependent world and the changes in the global world order.

If you are interested in these things, I suggest you read my LinkedIn series "The Changing World Order" (https://www.linkedin.com/pulse/changing-world-order-ray-dalio-1f/). There is a lot that we don't know, and at the same time, there are many historical parallels that show the mechanics of how these sorts of things work. I hope this is of some use to you.

What is the meaning of life?

I believe that it is to evolve and contribute to evolution. I think that is true for everything in the universe which does these things in an interactive, perpetual-motion sort of way through time. I believe that nature naturally rewards us with the gratification of doing it well.

In Chapter 1 of The Changing World Order, you wrote:

...those (countries) who believe that having peace and savoring life are more important than having a lot of wealth and power wouldn’t think of fighting hard enough to gain enough of the wealth and power to make it into the group included in this study.

In your own life how have you thought about pursing peace and savoring life versus pursuing wealth and power?

(Please keep thinking and writing! I love your work.)

I think that pursuing peace and savoring life, rather than fighting over wealth and power, is much wiser. I don't believe that most people in most places where the culture habituates fighting over wealth and power truly appreciate the alternative. I think a lot about what money is worth and believe that it has no intrinsic value, so to answer this, one must look beyond it to ask oneself what is most important to have that money can buy. I believe that for most people, it starts with taking care of oneself and one's family--i.e., their basic health, education, and maintenance needs - then the needs of those who are closest around them, and increasingly those beyond them, which includes the greater community. The more that happens and the more important these others become relative to oneself, the more peaceful and harmonious the society is. For these reasons, I believe that how we will behave with each other will determine our society's fate. There is more than enough wealth to go around to take care of most people's basic health and education needs which, if done well, will raise the society's productivity and increase the size of the pie.

Hyperinflation - What causes hyperinflation (like Germany in the 30s)? What economic indicator is a good predictor for coming hyperinflation? What asset types are best to own if hyperinflation is ahead? Do you think hyperinflation could be an unintended consequence of our recent US monetary and fiscal policies in response to covid19?

Hyperinflation comes from investors who are holding money and credit assets (e.g. bonds) wanting to sell those and move their money to other assets either in the same country or in other countries. As they do this selling, the central bank is put into the position of having to choose between having interest rates go up (which is undesirable because it weakens the economy) or printing money and buying those financial assets (which can devalue money and debt). When they need to do this a lot, it causes a monetary inflation which becomes a hyperinflation.

Hi Ray, I have two questions:

1) In your LinkedIn article titled 'It’s Time to Look More Carefully at “Monetary Policy 3 (MP3)” and “Modern Monetary Theory (MMT)” ', you discuss the various interpretations of what Modern Monetary is and why it is a likely path during the next economic downturn. Given recent events, it appears that some of the things you discuss in this article have either been implemented or seem like a next step in a continued effort to stimulate the American economy. How would you rate the fiscal & monetary response to the current, COVID-19 driven slowdown? What are some potential unforeseen consequences of policies being implemented?

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2) You attended burning man last year. How did you end up choosing your outfit?

1. Yes. We are now in an era of the most massive MP3/helicopter money monetary stimulation since WWII. Please read about it in my "Big Debt Crises" book, which you can get for free at economicprinciples.org.

2. I'm a grown up hippie who went to a clothing store on the corner of Haight and Ashbury in SF to buy clothes that I would feel really comfortable in. I love that coat!

Who have you spoken to recently that SURPRISED or INSPIRED you with their perspective and approach to the current crises? What did they say? How did it impact you?

Those who surprised and inspired me the most pertaining to the crisis were those who ran into the fire to help. We each have contact with different people who do this so I will only touch on the ones that I've had direct contact with. They include healthcare workers (because I'm on a hospital board which allows me to have an inside picture), teachers of the poorest students who are finding ways to educate them despite the obstacles presented by poverty (because of the work that my wife, teachers, and others are doing for disengaged and disconnected high schoolers in CT), small merchants (through my window in microfinance through Grameen America), and people, companies, and even other countries, who are significantly contributing but remaining anonymous (partially because of their preference for anonymity and partially because of their fears of being attacked).

However, I am most impressed by folks who are on the front lines and in often cases suffering financially but are unwaveringly doing the right things to help others.

I assume that with changing world orders, there can also be a transformation in values - which is probably settlement of the escalating/tension arising factors. What potential shifts in values do you see likely to occur?

During the bad times people value the basics (rather than luxuries) and strength of character more than ever.