Ray Dalio: I’m ‘significantly concerned’ about inflation

The billionaire founder of Bridgewater Associates joins 'Influencers with Andy Serwer' to share his take on the highest inflation in the U.S. in almost 40 years.

Video Transcript

ANDY SERWER: Quickly, on inflation rate, how concerned are you about it?

RAY DALIO: I'm significantly concerned about it because the amount of money and credit that has to be produced and is budgeted is a large increase. And yet if it's not spent, it produces its own problems. The markets have a sensitivity to that.

So what it means-- and then there's a supply/demand picture for bonds. And the way it looks is if you should get the selling of bonds, it worsens that supply/demand picture because the way it works is the Treasury borrows and runs a deficit, but it can't produce money. So it has to sell bonds. And when it sells bonds, if there are not enough buyers of those bonds, then the Federal Reserve's got to come in and print money and buy those bonds.

And the world right now is overinvested in US dollar-denominated bonds, pension funds on the 60-40 mix, or-- and they have negative real returns. And cash has a lot of negative real returns. So if there was a selling of that and a moving to other assets-- stocks, other assets, commodities, other assets, or other places, other currencies, other real estate and the like-- that selling worsens the supply/demand picture. And then if there's not enough demand, that means that the central bank is going to come in and print more money. So yes, it's not only the inflation that's in the pipeline or projected in that supply/demand balance, but it's also what it could be if there's a selling of debt instruments.