Investor Ray Dalio, founder of the world’s largest hedge fund, Bridgewater Associates, told CNBC on Thursday (March 19) he estimates the coronavirus pandemic will cost American businesses as much as $4 trillion.
He also maintains that the financial toll for international companies will hit $12 trillion and “a lot of people are going to be broke.”
“What’s happening has not happened in our lifetime before ... What we have is a crisis,” Dalio told CNBC. “There will also be individuals who have very big losses. ... There’s a need for the government to spend more money, a lot more money.”
A stimulus package of up to $1 trillion is being considered by the federal government but Dalio said that is not nearly enough. He suggests a minimum of $1.5 trillion to $2 trillion contingent on the type of relief offered, for example, loan guarantees and credits.
The Federal Reserve said it is planning to inject $1 trillion to boost the economic climate. Central banks in other countries are also making moves to soften the financial blow from the coronavirus.
Dalio said there’s an “inability of central banks to stimulate in a way that’s normal.” When interest rates “have already hit the floor” there is not a lot of wiggle room when it comes to monetary policies.
“We are now at a point where there will have to be a debt restructuring and a monetization of that,” Dalio said. “We’re living in a different world, like the 1930s in which 1930s, 1932, you have a devaluation of the dollar. You have the printing of money.”
Dalio’s $160 billion hedge fund experienced losses of an estimated 20 percent due to a sell-off prompted by fears over the pandemic.
“We’re down ... somewhere in the vicinity of 10 percent to 20 percent kind of decline,” Dalio said. “We missed that, you know, we’re kicking ourselves for missing that move. ... What happened was it didn’t come from the usual places, it came from not the usual ways that downturns come.”
Markets have been almost unhinged as the coronavirus — first identified in Wuhan, China in December — has infected 218,700 people and claimed 9,186 lives, more than 50 percent outside mainland China. The COVID-19 contagion is in at least 147 countries.
American workers who are experiencing smaller paychecks or none at all will see some relief by way of government assistance. Details are still being worked out in terms of who will get the checks and how much they will be.