Bridgewater CIO Warns of Deeper, Longer, and ‘Much More Painful’ Recession Than What We’re Accustomed To – Economics Bitcoin News

Bridgewater Associates’ co-chief investment officer has warned about a recession that is “much more difficult” and “much more painful” than what we’ve been accustomed to. “The dam has been broken where fiscal policymakers are now part of the story,” said the executive of the world’s largest hedge fund.

Bridgewater Executive’s Recession Warning

Karen Karniol-Tambour, Bridgewater Associates’ co-chief investment officer, warned about recessions that are very different from previous times in an interview with Bloomberg last week. Founded by billionaire Ray Dalio, Bridgewater Associates is the world’s largest hedge fund, with about $130 billion in assets under management.

When asked about the next big risk she sees coming over five to 10 years, Karniol-Tambour replied:

The next big risk is recessions that are deeper and longer than what we’ve been accustomed to.

In previous economic downturns, “central banks could just hop right in and reverse it,” she noted, adding that when central banks just eased everything, recessions were “quick and shallow,” not “deep and long.”

She explained that the Covid pandemic was a turning point because for the first time fiscal policymakers got “deeply involved in solving the problem.” In addition to central banks printing money, “policymakers basically come in and direct the money to people,” she said, elaborating:

So to me, the dam has been broken where fiscal policymakers are now part of the story … They’re much more likely to step in with big fiscal expansions.

“Monetary policy on the one hand will be less important because fiscal will be doing what it’s doing,” she described. “On the other hand, they’re going to be in an even tougher spot because they’ll have much more entrenched inflation because of secular inflationary pressures and fiscal policymakers stimulating at the same time.” The Bridgewater executive continued:

So they’ll be forced to tighten a lot more than they would’ve otherwise wanted — or ease a lot less. Those become recessions that are much more difficult, much more painful.

“We’re in a place where to solve a lot of our most important problems, you can’t only rely on market forces, you need political forces to work as well,” she stressed, noting that the risks are “exacerbated by how fast the pace of de-globalization is going to be.”

Karniol-Tambour opined:

The biggest wild card here, of course, is how difficult the…