Ray Dalio warns Fed is stimulating the economy into a bubble

Current fiscal and monetary policies will cause hard asset prices to rise, but both are signs of late-stage economic decay, Dalio said.

The US Federal Reserve’s decision to ease monetary policy is inflating an economic bubble that could drive up the prices of hard assets, but also marks the final phase of a 75-year economic cycle, according to former hedge fund manager Ray Dalio.

Typically, the Federal Reserve eases interest rates when economic activity is stagnating or declining, asset prices are falling, unemployment is high and credit dries up, as seen during the Great Depression of the 1930s or the 2008 financial crisis, Dalio wrote in an article posted to X on Wednesday.

However, the Fed is now easing monetary policy at a time of low unemployment, economic growth and rising asset markets, Dalio wrote, which is typical of late-stage economies saddled with too much debt. 

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