Thursday Nov 6 2025 18:10
2 min
The US Federal Reserve’s decision to ease monetary policy is fueling an economic bubble that could drive up the prices of hard assets, but also marks the final phase of a 75-year economic cycle, according to former hedge fund manager Ray Dalio.
Typically, the Federal Reserve eases interest rates when economic activity is stagnating or declining, asset prices are falling, unemployment is high, and credit dries up, as seen during the Great Depression of the 1930s or the 2008 financial crisis, Dalio explained.
However, Dalio points out that the Fed is currently easing monetary policy at a time of low unemployment, economic growth, and rising asset markets. This, he argues, is characteristic of late-stage economies burdened with excessive debt.
Dalio describes this “dangerous” combination as being more inflationary, cautioning investors to closely monitor upcoming fiscal and monetary decisions. “Because the fiscal side of government policy is now highly stimulative, due to huge existing debt outstanding and huge deficits financed with huge Treasury issuance — especially in relatively short maturities — quantitative easing would effectively monetize government debt rather than simply re-liquify the private system,” he stated.
He posits that the continued inflationary pressure and currency debasement are positive catalysts for Bitcoin (BTC), gold, and other store-of-value assets, which are viewed as hedges against macroeconomic and geopolitical risks, including a potential reset of the global monetary order.
Investors appear uncertain regarding the Fed’s next move. “There were strongly differing views about how to proceed in December,” Federal Reserve Chair Jerome Powell said in October. “A further reduction in the policy rate at the December meeting is not a foregone conclusion — far from it.”
According to data from the Chicago Mercantile Exchange, over 69% of investors predict a 25 basis-point interest rate cut at the next Federal Open Market Committee meeting in December. The Fed previously slashed interest rates by 25 basis points in October, but the cut, which typically acts as a positive catalyst for crypto asset prices, failed to significantly boost the markets.
Matt Mena, a market analyst at investment company 21Shares, suggested that the rate cut was “fully priced in” by investors, who widely anticipated the decision prior to the meeting.
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