U.S. Economy Needs Over $1 Trillion in Fresh Coronavirus Stimulus, Says World’s Biggest Hedge Fund

KEY POINTS

  • Bridgewater Associates co-CIO Greg Jensen said the U.S. economy needs between $1.3 trillion and $1.7 trillion to sustain its recovery from the coronavirus-induced devastation. 
  • “And it depends what it’s used for…. The policy that gets directly spent in the economy is much more effective per dollar than the dollar that’s preventing more bad things from happening,” Jensen said on “Squawk on the Street.” 
  • Republicans and Democrats in Washington continue to disagree over the size and scale of another piece of coronavirus legislation.

The co-CIO of the world’s largest hedge fund stated on Tuesday that the U.S. economy continues to require substantial financial support in order to sustain its healing from the coronavirus-induced devastation.

Greg Jensen of Bridgewater Associates stated the firm estimates that the price for another coronavirus relief costs is between $1.3 trillion and $1.7 trillion in order for the U.S. economy to continue “in the method that it’s been going.”

“And it depends what it’s utilized for. … The policy that gets directly spent in the economy is much more effective per dollar than the dollar that’s avoiding more bad things from happening,” Jensen stated in a ” Squawk on the Street” interview. “The cash for states is going to prevent negatives. The stimulus checks will be direct positives.”

Jensen’s remarks come as Republican politicians and Democrats in Washington continue to squabble over the size and scope of another piece of Covid-19 stimulus legislation while millions of Americans remain out of work and companies to face ongoing disturbance.

Earlier Tuesday, White House chief of staff Mark Meadows suggested Democrats and Republicans were making ” real progress” on settlements however said aid to state and local federal governments continues to be the greatest sticking point.

With cities and states facing serious decreases in tax profits as an outcome of the pandemic, Democrats have proposed nearly $1 trillion in help. Meadows said that figure was not “based upon truth.” Republicans would just want to support an extra $150 billion to local federal governments on top of the $150 billion designated previously this year, he stated, also on “Squawk on the Street.”

Democrats began settlements this summertime with an overall proposal north of $3 trillion, while Republicans had a beginning point around $1 trillion. Last week, the Trump administration indicated it would be going to support a $1.3 trillion proposal. Nevertheless, Home Speaker Nancy Pelosi, D-Calif., said that roughly $300 billion increase remained insufficient and she continues to urge Republican politicians to meet Democrats in the middle and craft approximately $2.2 trillion costs.

Republicans may also introduce a smaller bill, with a price of around $500 billion, that focuses on locations of bipartisan agreement.

Jensen, whose Ray Dalio-founded hedge fund had about $138 billion in assets under management as of April 30, said the U.S. economy has enhanced since the nadir of the pandemic. However, he pushed back on the suggestion the recovery would persist without additional fiscal help, despite the fact that there are encouraging signs such as rising bank deposits.

“Too much is being drawn of where the economy is on those things relative to how it got there. If you eliminate the factor it arrived, if you remove the supports to earnings, you’re going to begin to see a downturn at the worst possible time,” Jensen said. ” Yes, there are some winners in the economy, and the average looks OK, however, there are still substantial losers versus those winners, which’s a big societal difficulty,” he added.

Jensen stated the U.S. economy has fared much better in its recovery compared to international equivalents that did not inject a significant quantity of financial stimulus. Those nations, he stated, have had “many different outcomes.”

“You withdraw those supports, it’s a huge tightening to the economy and an unsustainable one,” Jensen said. “One method or the other, possibly we fall into a trap over the next month or 2 out of politics but with time, that require for a major round of support is going to come.”

For investors, Jensen stated the crisis reaction from global policymakers on both the financial and financial sides will be useful to enjoy in the year ahead. He competed that they have embarked on a path of spending and printing money “up until they can’t.”

“The longer term they’re going to keep printing and spending up until they hit the wall. The wall will be marked by inflation and currency, therefore for us, the wider positioning must follow governments printing and investing money until you see problematic inflation,” he said.

“You’ll have the seesaw of politics make it harder, but largely you’re ultimately going to get spending and printing up until you strike that nonreligious turning point where that ends up being too inflationary.”

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