Ray Dalio, the
billionaire hedge fund manager and founder and chief investment officer
of Bridgewater Associates, believes capital markets are no longer free.


Speaking to Bloomberg,
Dalio said markets have changed a lot so central banks like the Federal
Reserve no longer act within the confines of the traditional economic
system.


“There are markets that are driven by central
banks not only their actions but their desire to be an owner of those
assets. Their priorities about that ownership when they buy and when
they sell are not the same as the classic free-market allocations. And
as a result, the capital markets are not free.”


He said
central banks, in normal times, will put money on deposit for banks to
borrow and lend it to people who can pay. This creates the credit system
and other financial assets compete with each other. Now, Dalio said,
the economy and the markets are more driven by the ownership of assets
by central banks.


He said central banks found themselves
in a situation “where they’re the market makers” after the 2008
Financial Crisis and created the environment where markets are no longer
free. But, he pointed out, if the central banks did not allow lending
to blue-chip companies and fallen angels, then large parts of the
economy could fall.


Dalio said the U.S. dollar may also
lose attractiveness because as a reserve currency, the flood of cash in
the market means the traditional valuation of money no longer exists. He
has previously expressed concerns over the U.S. dollar’s role as a reserve currency.

Dalio is famously bearish on cash
but still has not thrown his weight towards other alternatives, like
say cryptocurrencies. Dalio said in April “cash is almost always the
worst investment.” The billionaire has talked about bitcoin before but
felt cryptocurrencies are much too volatile to function as a store of
value.