Billionaire investor Ray Dalio believes a historically massive transfer of wealth has been quietly boosted by central banks around the world.
An estimated $73 trillion transfer of wealth is now underway as baby boomers bequeath assets to the next generation, reports Fortune.
And according to a new economic update from Dalio, that wealth transfer has been buoyed by central banks, which funneled capital into the hands of households and businesses during the “free money” era of low interest rates.
“As a result of this coordinated government maneuver, the household sector’s balance sheets and income statements are in good shape, while the government’s are in bad shape.
In the US and globally, the central governments’ balance sheets and income statements are bad and getting worse because the governments ran and are still running large deficits. They also have big losses on the government bonds they bought to fund the government debts and, with their balance sheets where they are, are losing money where interest rates are.”
Millennials are set to receive the majority of the $73 trillion windfall, which is expected to be completely handed down by 2045.
At the same time, Dalio says the stage is now set for governments to suffer the consequences of loose monetary policies, battling bad balance sheets with “tolerably” slow growth and inflation.
“Over the long term, from looking at history and penciling out what is likely, it is virtually certain that central governments’ deficits will be large, and it is highly probable that they will grow at an increasing rate as the increasing debt service costs plus increasing other budget costs compound upward…
As they increase, governments will need to sell more debt, so there will be a self-reinforcing debt spiral that will lead to market-imposed debt limits while central banks will be forced to print more money and buy more debt as they experience losses and deteriorating balance sheets.”