NEW YORK (Reuters) - Hedge fund titan Ray Dalio said the U.S. economy had come out of the “intensive care unit,” but he warned against any quick move to “austerity” budget measures.
“We were in the intensive care unit,” Dalio, who runs the $120 billion hedge fund Bridgewater Associates, told more than 200 guests at the Council of Foreign Relations in Manhattan on Wednesday. “We are largely healed and largely operating in a manner that is sustainable if we don’t hit an air pocket.”
Dalio said a major challenge for U.S. politicians will be dealing with the so-called fiscal cliff, which many in Washington call the year-end expiration of the Bush-era tax cuts and previously agreed-upon cuts in defense spending and social programs.
He sided with economists who worry that a sharp reduction in government spending could lead the United States back into recession.
“We can’t just worry about too much debt,” Dalio said. “We have to worry about too much austerity.”
Dalio, who founded his firm in 1975, is one of the most successful money managers in the $2 trillion hedge fund industry. His speech drew other Wall Street luminaries, including famed hedge fund manager John Paulson.
Dalio said he was monitoring the long-simmering financial crisis in the euro zone, as well as the economic slowdown in China. He said losses on European debt could reach at least $2 trillion.
Asked by an audience member about how much he worries about China, Dalio said volatility there would affect the United States, but he did not “think they are going to go into a tailspin.”
Reporting by Katya Wachtel; Editing by Lisa Von Ahn