‘Managed Depression’ May Lead to Social Unrest

Countries in southern Europe are going to face a “10 to 15 year managed depression” that may lead to some serious bouts of social unrest of the kind that led to the rise of the Nazi party, said the manager of the world’s largest hedge fund.

“I think there will be a combination of monetary policy and printing a certain amount of money to relieve it,” said Ray Dalio, founder and chief investment officer of the world’s largest hedge fund, Bridgewater Associates, in an exclusive interview on CNBC’s “Squawk Box.”“And at the same time, there’ll be a deleveraging and restructuring of debt … I think we’re going to see both, because you have to lower the debt-to-income ratio so you have a higher level of growth than you do of interest rates.”

That process bothers him, he said.

“I worry about another leg down in the economies causing social disruption, because deleveragings can be very painful — it depends on how they’re managed,” Dalio said.

He added: “When people get at each other’s throat, the rich and the poor and the left and the right and so on, and you have a basic breakdown, that becomes very threatening. For example, Hitler came to power in 1933, which was the depth of the Great Depression, because of the social tension between the factions. So I think it very much is dependent on how the people work this through together and worry about the social elements.”

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