mr. dalioi think there is a lot the west does not understand about chinese markets. i think the essence of what's going on in china is an adjustment. they have four major challenges. they have a debt restructuring challenge. they have an economic restructuring challenge, so they have to come up with a new model for the economy. they have a capital markets challenge. to build in an efficient way that circulates capital through the system better. they have a balance of payments challenge. having to do with the pressure on the currency. capital outflow, those types of things. these are things that have happened repeatedly throughout the rest of the world. the united states has had three major debt crises. we couldn't pay our debts in 1971. in 1982, we had a debt crisis. we had the s&l crisis. we've reshaped our economy many times. i remember when the steel industry ended, heavy manufacturing, and we have gone into other areas. we have had another of balance of payments and and currency issues. i t

mr. dalio: it'll be a challenge. mr. xinghai: it is.know, just one sentence, in terms of u.s./china cooperation and other issues. we are working very well with our u.s. counterparts. francine: a challenge, but doable. you are confident this will be done? mr. dalio: i think monetary policies will not be as effective. that is a big change in the world, because we require monetary policies to be effective. and then, i think on cooperation on monetary policies, because you can't move interest rates as much you move currencies. i think, we are entering an environment, in which there will be more currency volatility, as a means of easing policies, where they need to be eased. that smacks of currency wars, not as much currency cooperation. when i think of fiscal policy, i think fiscal policy is very politically sensitive. you get into a bad economic situation, and and somebody will say, "you need to be fiscally more responsible." and someone will say, "you need fiscal stimulus." when there are political shifts, particularly, let's say the poli

mr. dalio: i think the federal reserve thinks of the business cycle -- classic business cycle is that when demand is increasing, you are at a fairly high level of capacity, unemployment rates are low. you should tighten monetary policy. that is the policy that i figured overriding the feds issue. they are paying too much attention to the business cycle, and not enough to the long-term debt cycle. them is a long-term debt cycle that you can squeeze much more out of this because of lower interest rates. we are seeing that the world map is getting feedback is a deflating world with asset prices coming down. i hope they will remain flexible in their thinking of monetary policy. be hesitant, there is asymmetric risk. them is no doubt that the federal reserve can be effective in tightening monetary policy. if they are a little bit late, i don't think that is a problem. they are not as effective in easing monetary policy like in the 1935 period. what they have to do is move away from the whites of the

mr. daliowell, the volatility result inrimarily a the world as a whole that we have an easing of monetary policy all around the world. we are not going to have the same effect. with interest rates at zero, you can't cut interest rates. with asset prices having risen, because of the quantitative haveg, the risk premiums gone down, and there is a big vulnerability. so when china is dealing with , the rest of the world, china is a negative on the margin of for the rest of the world. and the world is vulnerable because of a lack of monetary policy while asset prices are , high. francine: how do you explain of volatility? is it something we need to learn to live with? >> maybe there are two factors going wrong. one is china is in the midst of an economy that relies heavily on investment and exports and they are shifting to consumption. in this transition, a lot of assets get devalued in the process. this is the primary reason behind volatility. another factor is the fed raised interest rates not lon

einhorn has pointed out, mr. dalio has pointed out, they've kept rates low too long. money that into energy cap and bonds that shouldn't be there. >> guys, thank you. real questions, real advice, real answers. we do appreciate it. the dow is down 379. don't worry, "street talk," finding you some opportunities in equities coming up. and that is still ahead. stick around. ♪jake reese, "day to feel alive"♪ ♪jake reese, "day to feel alive"♪ hundreds of crash simulations. thousands of hours of painstaking craftsmanship. and an infinite reserve of patience... ...to create a vehicle that looks, drives and thinks like nothing else on the road. the all-new glc. the suv the world has been waiting for. starting at $38,950. where self-proclaimed ofinancial superstars , pitch you investment opportunities. i've got a fantastic deal for you- gold! with the right pool of investors, there's a lot of money to be made. but first, investors must ask the right questions and use the smartcheck challenge to make the right decisions. you're not even registered; i'm done with you! i can...i c