Complete Charlie Rose Transcript With Ray Dalio, CEO of World's Biggest Hedge FundRare and really, really good interview with Ray Dalio of Bridgewater Associates.

Link to video here-

Full transcript of interview below:

CHARLIE ROSE: Ray Dalio is here. He is the founder of Bridgewater Associates. He created the investment firm in 1975 out of a two-bedroom apartment in New York City. Today the company managed roughly $125 billion in global investments. Its clients include foreign governments, sovereign banks, central banks and institutional pension funds.

Over the last two years, Bridgewater ranked as the largest and best- performing hedge fund in the world. In 2010, his returns were greater than the profits of Google, Amazon and eBay combined.

I`m very pleased to have Ray Dalio at this table for the first time to talk about a perspective on the global economic scene and a whole range of issues having to do with where we see ourselves and also a look at his own philosophy and what has informed his own opinions and the way he looks at the world. Having said that — welcome.


RAY DALIO: Thank you.

CHARLIE ROSE: It`s great to have you here.

RAY DALIO: It`s great to be here.

CHARLIE ROSE: What is Bridgewater Associates?

RAY DALIO: It`s a global macro firm. We assess what the world economy is like and what — how asset classes will change and we are managing money for pension funds and endowments like you described; the Pennsylvania teachers, those types of pension funds. We`re trying to keep them safe.

CHARLIE ROSE: When you look at the world today, the global economic picture, I read today Goldman Sachs had a disappointing performance. JP Morgan did not do as well as some had hoped it might be. What`s happening with financial firms?

RAY DALIO: I think it`s important to understand that we`re going through a deleveraging. So we have to understand the big picture is — there`s a deleveraging. Three big themes: first there`s a deleveraging; secondly we have a problem with monetary and fiscal policies are running out of ammunition; and thirdly we have an issue in terms of people most importantly who are at each other`s throats politically and globally in terms of having a problem resolving those.

Imagine you earned $100,000 a year and you didn`t have any debt. You can go to a bank and borrow $10,000 a year. You can spend, therefore, $110 a year. When you spend $110,000 a year, somebody else earns $110,000 and they can go to a bank and there`s a self-reinforcing process in which your debt rises in relationship to your income.

And that goes on for a long time and that goes on for 50 or 75 years through history. We`ve had 50, 75-year cycles and then you reach a point where you can`t anymore get more debt and the process starts to change. And you can`t leverage up. Traditionally the private sector leverages up, we leveraged up then we got to a point in 2007 where we had a bubble and that same sort of bubble that happened in Japan, same sort of bubble that happened in the Great Depression, meaning we reached our debt limits. Europe`s reached its debt limits.

So then we begin the process in reverse as you can`t spend as much you — somebody else`s income falls. And that process works in reverse. So we`re in a deleveraging. So I think that this is important globally. That`s what Europe`s in.

So when we deal with Goldman Sachs or when we deal with banks and when we deal with Europe I think you can break the world into two parts, there`s the debtor-developed world which has reached its debt limits and is going through a deleveraging. Then there`s the creditor-emerging world, the countries like China which are competitive and are beginning to have those big surpluses and they`re lending us money. So we have this big imbalance in the world.

You can break the world into two parts. Debtor-developed countries and emerging-creditor countries and they have a big imbalance which is a debt problem. That`s the nature of the beast of what`s going on.

CHARLIE ROSE: And how long would the deleveraging take place? Ten years?

RAY DALIO: These take place over ten years. The key is to spread it out as much as you can. Make sure that it`s not disorderly.

CHARLIE ROSE: let me talk about the dysfunction issue. We can`t solve our problems domestically in the United States, our economic problems, unless there`s some sense of respect for other people`s views and some sense of it being able to come together and find solutions that are in the interest of the country, not necessarily always in the interest of the ideology or the party.

RAY DALIO: Yes. And I think that`s the problem so pervasively when we`re talking about culture. It is — when people disagree and you can take thoughtful people disagree, you have then the potential of learning a lot. If people who were disagreeing can say why do we disagree and work through that conversation in an intelligent way to try to find out what`s true, you can learn, you can make progress, it can be a fabulous thing.

When you instead have people who were talking behind each other`s backs and all criticizing and all looking for blame, this is a problem. I think the real question is how we approach those — can we approach that in a thoughtful way in which we work that through?

Let`s say for example the government budget balance.


RAY DALIO: The government budget balance if you raise taxes — if everybody just sucked it in a little bit, you raise taxes by three percent, you cut spending by three percent — I`m using three percent as an example to say not much. Everybody should be able to pay three percent more or you should be able to cut your expenditures by three percent.

CHARLIE ROSE: If the government did that —

RAY DALIO: If the government did that, they would eliminate half the budget deficit — it`s estimated about $8.5 trillion over the next ten years is what we`re going to have as a deficit, they will eliminate half of that. Now —

CHARLIE ROSE: Over how long a period?

RAY DALIO: The next ten years.

CHARLIE ROSE: The next ten years, all right.

RAY DALIO: Now, I`m asking you if we could have every American — can everybody pay three percent more? Can everybody just spend three percent less? You can make a heck of a contribution to that.

Instead we have a division that`s going on in which we — the basic division is Republicans will say that we shouldn`t raise taxes.

CHARLIE ROSE: Or even reduce deductions.

RAY DALIO: Yes — in that way of raising taxes. So we — and Democrats say that we must raise taxes because we can`t cut the spending. So the delineation that as we came into that was the debt limit issue, that remains the debt limit issue.

And there`s vested interests involved; 70 percent of the taxes are paid by the top 10 percent of income earners, income taxes. And so — so what we have is

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