Ray Dalio Calls Debt Limit A Prank: 'Works Like A Bunch Of Alcoholics Writing Laws To Enforce Drinking Limits'

Ray Dalio, founder and CIO of hedge fund Bridgewater Associates, believes that so-called debt limit never actually limits debt, but is in fact a farce.

What happened: "It's a prank that works like a bunch of alcoholics writing laws to enforce drinking limits, and when a limit is reached, they do a wacky trade that temporarily eliminates the limit that allows them to have the next binge until they reach the next limit, at which point they go through the next wacky trade and continue to binge” , Dalio wrote in a post titled “The Stuffing and Consequences of Debt and Debt Limit” on LinkedIn.

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"I guess this is the 79th preposterous negotiation that has taken place," he said.

Dalio also wondered if this ritual shows that the people who run the political system lack discipline. “I think this makes it clear that the long-term prognosis is that the debt frenzy will continue until a crisis puts an end to this dynamic. However, most people seem reassured by the fact that the limit indebtedness will not trigger a default and don't worry about continued overindebtedness,” he said.

Why it matters: Congressional Democrats are now reportedly pushing Republicans to bring forward a proposal to raise the debt ceiling and avoid a US default after meeting President Joe Biden on Tuesday.

Biden has said he has no intention of letting Republicans "destroy our economy".

Republicans, who control the House of Representatives, are reportedly split on how difficult it is to take a position on the debt ceiling. However, they remained united on Wednesday in their demand that Biden agree to negotiate the spending as part of any deal, Reuters reported.

Government finance: Dalio said that the finances of the governments of countries work the same way as the finances of individuals and organizations, with the only difference that governments can print money and take money from some people to give to others.

"Because money and debt are unlimited, those who decide how much to spend on what don't look at how much money to spend and then prioritize what to spend spend it,” he said.

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