Ray Dalio warns of a decrease in the value of the US dollar amid the escalating government debt: “The risks are larger than the rating agencies” – Investco QQQ TRST, Series 1 (NASDAQ: QQQ), SPDR S & P 500 (Arca: Spy)
Investor billionaire Ray Dalio Warning that the risks of the escalation of US government’s debts were much larger than the credit rating agencies they transfer.
What happened: Dalio, founder of Bridge, took over the X after the MOODY reduction and the most prominent concerns raised about the increasing government debts by saying that “credit assessments reduce the risk of credit”, as it only considers the possibility of the failure and loss that the government gave.
However, it shows that the risks are higher than transporting it because the government can try to print money to pay its debts to reduce it, which in turn causes inflation and affects the local currency of the country.
Dalio emphasizes that printing funds can cause bond owners from losses from a decrease in the value of the money, instead of a decrease in the amount of money. Which means that the low value of money is the cause of inflation.
“He said differently, for those who are interested in the value of their money, the risks of US government debt are greater than the classification agencies they transfer,” he said.
Cathy Jones, The chief fixed income strategy at the Shwab Center for Financial Research, this point by sharing the chart of the US dollar index, which decreased by 7.62 %.
Although she confessed that Moody’s comment has nothing new about the economy, which economists did not already know, the reduction was completely telling him about the “incomprehensible financial path.”
She said: “But the dollar continues to decline.
See also: The Federal Reserve must do “nothing of all” about the emerging returns, says Craig Shapiro: “Let him have sex with bonds eating.”
Why do it matter: According to the theory of the amount of money in the economy, printing money to pay debt increases the width of cash without a similar increase in the supply of goods and services.
This means that there is more money that chases the same amount of available elements, which leads to a decrease in the value of the local currency and the inflation.
MOODY reduced the long -term credit rating from AAA to AA1, and expected that the debt ratio to GDP would rise from nearly 100 % in 2025 to about 130 % by 2035. The agency also cited the extension of Trump’s tax cuts for the year 2017 specifically as a major reason for its decision to continue the American credit arrangement from AA1 in May 16, 2025.
A statement in late March from Moody’s highlighted that the United States is facing much greater challenges in providing its debts compared to the sovereign classification countries and its higher classification, even in a strong economic environment.
Price work: the SPDR S & P 500 ETF TRUST spy and Investco QQQ TRust ETF QQqThat follows the S&P 500 and NASDAQ 100 index, respectively, on Monday. The spy increased by 0.11 % to $ 594.85, while QQQ offers 0.096 % to $ 522.01, according to Benzinga Pro Data.
On Tuesday, the indicators of the S&P 500, Dow Jones and Nasdaq 100 were trading a little less.
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