Ray Dalio says the global economy is heading for a ‘great sag’

Ray Dalio doesn’t want to use the word “recession” when talking about the global economy. But he does believe it is headed for what he dubbed the “Great Sag.”

The billionaire hedge fund founder told CNN Business on Thursday that the world is dealing with financial challenges on a scale not seen since the 1930s, when economies were deep in the throes of the Great Depression.

Pension and health care debts are piling up faster than they can be funded, he said. And with interest rates as low as they are around the world, Dalio said he doubts that further action from central banks will do much to help.

“The impetuses for growth that began in 2008 and 2009 are largely behind us,” Dalio said on the sidelines of the Bloomberg New Economy Forum in Beijing.

That lack of policy effectiveness creates other problems, Dalio added. By buying up government debt and encouraging more lending, central banks are just putting more money in the hands of investors — exacerbating the divide between the rich and poor.

“The world is awash in liquidity,” Dalio said. “But it doesn’t resolve the wealth gap.”

That kind of inequality has fueled unrest in places like Hong Kong and Chile, Dalio said, adding that tension in those areas “is a reflection of that increased populism.”

Dalio is famous for predicting the 2008 financial crisis. And he worries now that capitalism is broken for most people. In a recent LinkedIn post, he wrote that the world is “approaching a big paradigm shift.”

On Thursday, he suggested that he’s bracing himself for turbulent times by diversifying the assets of his fund, Bridgewater Associates. But when it comes to solving the “sag,” he’s not optimistic.

The only way to respond is to rise above it, he added, “and say what is good for the whole.”