Dear Ray
Income and Wealth Inequality
Is Capitalism the Problem?
Boston, New York, and ???

“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist.”
John Maynard Keynes

“Nothing is more dangerous than a dogmatic worldview—nothing more constraining, more blinding to innovation, more destructive of openness to novelty.”
Stephen Jay Gould

“Inequality has emerged as a major issue in the US and beyond. A generation ago it could reasonably have been asserted that the overall growth rate of the economy was the main influence on the growth in middle-class incomes and progress in reducing poverty. This is no longer a plausible claim.

The share of income going to the top 1 percent of earners has increased sharply. A rising share of output is going to profits. Real wages are stagnant. Family incomes have not risen as fast as productivity. The cumulative effect of all these developments is that the US may well be on the way to becoming a Downton Abbey economy. It is very likely that these issues will be with us long after the cyclical conditions have normalized and budget deficits have at last been addressed.”
Lawrence Summers (in the Financial Times, February 2014)

Ray Dalio is the thoughtful, somewhat controversial founder of the world’s largest hedge fund, Bridgewater Associates, which he started in 1975. While much of his writing is private, I (and many others) peruse every word we can of his and the Bridgewater team’s thinking. I find it to be some of the most interesting market commentary I read.

Lately Ray (read his bio here) has been far more open with his thinking, posting books and essays. This letter is the beginning of a response to his articles, Why and How Capitalism Needs To Be Reformed, Parts 1 and 2 and a follow-up piece titled It’s Time to Look More Carefully at ‘Monetary Policy 3 (MP3)’ and ‘Modern Monetary Theory’. He posted both publicly on LinkedIn.

On first reading those, I will admit to thinking, “Ray Dalio is kinda, sorta wrong.” I agreed with much of Part 1, with a few quibbles. Ditto for Part 2. But when I read the third piece I found myself thinking, “Ray Dalio is really, really wrong.” In that essay he basically endorses Modern Monetary Theory (MMT).