Ray Dalio, the billionaire founder of the world’s largest hedge fund, said there’s about a 25% chance of a U.S. recession this year and in 2020 and that central bankers will be limited in addressing it.

The Federal Reserve, European Central Bank and Bank of Japan “have to face the fact that when the next downturn comes there will not be the power to reverse it in the same way that existed before,” Dalio, 70, said Thursday in an interview on “The David Rubenstein Show: Peer-to-Peer Conversations.” He recommends that the Fed cut interest rates slowly, maybe by 25 basis points, without giving a time period.

Dalio, the co-chief investment officer of Bridgewater Associates, said a confluence of factors today -- the effectiveness of central banks, the gap between the rich and poor, the U.S. election and the growing influence of China -- need to be considered when weighing the possibility of a recession.

The Fed cut rates on July 31 for the first time in more than a decade and is expected to ease by another quarter percentage point at its Sept. 17-18 policy meeting. Chairman Jerome Powell called the July cut as “mid-cycle adjustment” rather than the start of a long series of rate reductions.

Flaws In Capitalism

Dalio has lamented the interest rate environment for months, and recently said in an LinkedIn post that the global economy is in the late stages of the long-term debt cycle. He has been bullish on gold, which he says will be in demand as investors seek alternative forms of money as central bank stimulus nears the limit of its effectiveness.

Earlier this year Dalio sounded the alarm on flaws with capitalism, saying it has created gaps in education, social mobility and income that threatens the health of the economy. He argued that the wealth and income gap should be treated as a national emergency, and requires better leadership from the “top of the country” and higher taxes on the rich.

Bridgewater’s main hedge fund, Pure Alpha, has failed to impress this year even while his macro peers have enjoyed a rebound. The fund has lost 6% this year through Aug. 23, hurt by bearish wagers on global interest rates, Bloomberg previously reported.

Other highlights from the interview:

Dalio isn’t worried about Brexit’s impact on the U.S. economy

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