Ray Dalio: UK operates “like an emerging country” | Ben Spain

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The fall in the financial market resulting from the UK government’s spending plan “suggests incompetence”, according to the billionaire investor and founder of Bridgewater Associates, Ray Dalio, in a series of tweets.

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“The panic selling you are seeing now that is causing UK bonds, currency and financial assets to plunge is due to the recognition that the large supply of debt that the government will have to sell is too much for demand” Dalio tweeted.

“That makes people want to get out of debt and currency. I can’t understand how those behind this move didn’t understand that. It suggests incompetence. Mechanically, the UK government is operating like the government of an emerging country… it is producing too much debt in a currency for which there is not much global demand,” Dalio tweeted.

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The impact of the “mini-budget”

The comments from the author of the best-selling book ‘Principles’ come after the turmoil in financial markets caused by Britain’s new Chancellor of the Exchequer, Kwasi Kwarteng, that has announced the largest package of tax cuts in 50 years in what has been called the “mini-budget.”

Kwarteng had said a major change in direction is needed to boost economic growth, after which the pound fell to a record low against the dollar, hitting $1.0327. The escrow of the pound British sterling from Invesco Currency Shares (NYSE:FXB), which is designed to track the British pound, is down more than 7% in the past month.

BoE movement

In its latest move, the Bank of England has said it will start buying government bonds at an “urgent pace” to help restore “orderly market conditions”. The central bank has agreed to buy £65bn of government bonds at a time when pension funds, which invest in gilts or UK government bonds, were forced to start selling, sparking fears of a further market decline, according to a bbc news.

“I hope, but doubt, that other policymakers who are doing similar things (i.e. spending more money than they are taking in, so they need to sell a lot of debt for which they won’t find adequate demand at real interest under or negative current rates) will recognize that they are risking a similar outcome, and that investors will see this too,” Dalio said on Twitter.

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Ray Dalio: UK operates “like an emerging country” | Ben Spain