Exclusive Exclusive: Bridgewater Chief Warns of Currency Wars, Calls for Higher Taxation of Wall Street

The head of Bridgewater, the world’s largest hedge fund, has called for higher taxes for fund managers, warned of a currency war between central banks and increasing nationalism in politics in Europe and the United States, in a wide-ranging interview with Handelsblatt. Ray Dalio said he agreed in principle with U.S. Democratic presidential candidate Hillary Clinton, who has called for hedge funds to pay higher taxes. Mr. Dalio argued that fees earned by hedge funds should be treated like regular income instead of as capital gains taxes. “If you consider the big picture, yes, [Clinton] is right … fund managers can get their fees in the form of carried interest rather than income, and pay a lower tax rate. While that is technically possible, it is not appropriate,” he told Handelsblatt. “The truth is that the work is nothing else but earned income, because a fund manager does not necessarily have to put in his own money.” Mr. Dalio stressed that Bridgewater itself has not taken advantage of the situation. “We don’t do that. We have no so-called ‘carried interest,” he said, adding: “We have always paid income taxes on our fees.” Mr. Dalio compared current market volatility to earlier financial crises. “We find ourselves in a new world which is more like the 1930s [than 2008], when currency devaluations have to be greater because interest rates can’t be cut,” he said. Asked if this amounts to a currency war, he responded: “We will see a great deal of devaluation, with the goal of increasing the competitiveness of the respective country.” Politically, he warned that populist rhetoric is gathering steam on both sides of the Atlantic. “It’s certainly the case that during hard times, tensions and conflicts increase and greater populism emerges,” said Mr. Dalio. “People are tired of politicians who don’t improve their lives, and there is an increasing desire for a strong nationalistic leader who can take control and make sure ‘the trains run on time,” he added. Mr. Dalio said he also sees “a rejection of the governing elite and hostility between people who are different economically, ethnically and socially,” both in Europe and the United States.   Read the full interview in Thursday’s Handelsblatt Global Edition at 12:00 CET. Picture Source: Bloomberg