In an exclusive interview conducted by Bridgewater Associates and seen by Business Insider, Ray Dalio chatted with legendary economist and former Federal Reserve chair Paul Volcker.
Volcker laid out three main principles that have shaped his worldview and helped him make world-altering decisions throughout his career.
“He sees things from the top.”
That’s how billionaire investor Ray Dalio describes his idol, Paul Volcker — the former Federal Reserve chair who’s commonly viewed as one of the most important and influential figures in US economic history.
It was that zoomed-out perspective that helped Volcker rescue America from the skyrocketing inflation that afflicted it in the late 1970s and early 1980s. His tight monetary policy was unpopular in the short term, but he was proven correct by 1983. Inflation came down, growth surged, and the US enjoyed a decade of economic prosperity.
And while that’s arguably Volcker’s crowning achievement, he stayed active for decades after leaving the Fed in 1987.
One prime example was his stint as chairman of the Economic Recovery Advisory Board under former president Barack Obama, a position he held for roughly two years from 2009 to 2011. As part of that role, he unveiled the so-called Volcker Rule, which was intended to scale back risky behavior by banks.
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Volcker recently sat down to chat with Dalio, who’s become a legend himself by founding Bridgewater Associates, the world’s largest hedge fund. The two titans of modern finance discussed everything from broad economic principles to the current US political situation.
Dalio was particularly interested to hear about Volcker’s guiding principles — the ones that he’s used to make important decisions and assess the environment around him. After all, Dalio led the discussion by saying he views Volcker as the “most principled person” he knows.
The conversation came several months after the release of Volcker’s new book, “Keeping At It: The Quest for Sound Money and Good Government,” which hit shelves on Oct. 30, 2018.
Here’s a summary of three principles Volcker laid out, which — in the spirit of his book — are specifically geared towards what makes a strong government.
(1) Effective governance
“Alexander Hamilton put it all in a nutshell. He’s an old Treasury guy, a financial guy. He restored the credit of the United States, so he’s a hero of mine.”
“He said the true test of good government is its ability to administer, not to create policy. Can they carry out the policies effectively and economically? Good government is not just high policy, it’s making a machine work, day after day, efficiently.”
“The faith of the American people in our government today is really distressing. We have a real challenge.”
(2) The economization of family spending
“When you talk about principles, they go down …read more
Source:: Business Insider