A government-engineered shift in wealth has protected the public from the worst of the Fed’s rate hikes, hedge fund veteran Ray Dalio believes, but added the move may have pushed the government to shoot itself in the foot.

Writing on LinkedIn, Dalio, worth $19.1 billion, said there had been a “big government-engineered shift in wealth” from the public sector and government bondholders to the private sector.

This has made the private sector “relatively insensitive” to the Fed’s rate hikes, Dalio adds: “As a result of this coordinated government maneuver, the household sector’s balance sheets and income statements are in good shape, while the government’s are in bad shape.”

Dalio explained that during the pandemic years of 2020 and 2021, central governments spent a lot of money to support businesses and citizens and took on a lot more debt, and their balance sheets deteriorated as a result.

Meanwhile, central banks printed a lot more money—causing inflation to rise—and bought a lot of the debt itself to get money into the hands of the private sector.

As a result, Dalio estimates, the private sector is in “relatively good shape”—while the government is not.

Source: Yahoo!