Ray Dalio.
Brian Snyder/Reuters
Ray Dalio slammed UK leaders for tanking the British pound and government bonds this week.
Investors panicked about an excessive amount of UK government debt being sold, he said.
The elite investor said officials’ failure to foresee the market reaction suggested “incompetence.”
Ray Dalio has lambasted UK leaders for inadvertently sending the British pound to a record low against the dollar on Monday, and driving two-year government bond yields to a 14-year high of 4.3% on Tuesday.
The UK government sparked the selloff by announcing a slew of tax cuts aimed at boosting economic growth, which fanned fears of worse inflation and ballooning public debt.
Dalio, a billionaire investor and the founder of Bridgewater Associates, outlined some lessons for investors and policymakers from the nation’s “fiscal blunder” in a Tuesday tweet.
“The panic selling you are now seeing that is leading to the plunge of UK bonds, currency, and financial assets is due to the recognition that the big supply of debt that will have to be sold by the government is much too much for the demand,” Dalio said.
Investors are dumping pounds and bonds because they’re worried about the government trying to sell too much debt, he continued, adding that it was bewildering the UK authorities didn’t foresee that market reaction.
“I can’t understand how those who were behind this move didn’t understand that,” Dalio tweeted. “It suggests incompetence.”
The hedge fund manager accused the UK government of acting like a developing nation by producing too much debt relative to global demand.
He also warned that other governments running fiscal deficits, and trying to finance them by selling loads of debt there isn’t demand for when real interest rates are low or negative, could face the same problems as the UK.
Dalio’s comments in recent weeks have been similarly gloomy. For example, he predicted long-term US inflation of roughly 4.5% to 5%, interest rates above 4.5% in the years ahead, and an estimated 20% plunge in stock prices as a result.
Greg Jensen, one of Dalio’s two co-chief investors at Bridgewater, has also warned that US investors should expect stubbornly high inflation, a long and painful recession, and further declines in asset prices.