Bridgewater Founder Advocates “Hard Money” Like Gold and Bitcoin Over Debt

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As a seasoned researcher with over two decades of experience navigating the dynamic world of finance and economics, I find Ray Dalio’s investment strategy intriguing. Having closely followed the evolution of the global reserve currencies since the 2008 financial crisis, his analysis resonates with my observations.

This week, numerous global financiers converged on Abu Dhabi for a succession of finance and cryptocurrency seminars. In this intensely competitive environment, Ray Dalio, the affluent investor and founder of Bridgewater Associates, offered a captivating investment approach: it’s wiser to focus on tangible assets like gold and bitcoin instead of debt-based investments.

Dalio expressed deep concerns about rising indebtedness in major economies, including the United States and China. Speaking at the Abu Dhabi conference on Tuesday, he stated: 

As a researcher, I am convinced that financial difficulties involving debt may loom on the horizon. To mitigate potential risks associated with debt-based assets such as bonds and loans, I am inclined towards investing in tangible forms of currency, like gold and cryptocurrencies such as Bitcoin, which are often referred to as ‘hard money.’

Significantly, Bridgewater Associates founder Ray Dalio personally holds a modest amount of Bitcoin. In a 2021 interview with MarketWatch, he likened Bitcoin to “almost a younger generation’s equivalent to gold.” Although Dalio is cautiously optimistic about Bitcoin, he emphasized that gold remains the well-respected and established alternative to traditional fiat money.

Gold and Bitcoin Hit Record Highs

Gold and bitcoin are receiving a lot of focus recently, as they approach all-time highs in trading. More and more investors view these assets as reliable safeguards against market turbulence, international disputes, and changing financial regulations. Last week, bitcoin broke through the $100,000 barrier for the first time, fueled by positive remarks from influential voices such as Donald Trump.

In times when global debt is escalating significantly, investments tied to tangible commodities or limited supply systems, commonly referred to as ‘hard money’, seem more appealing. Ray Dalio highlighted that the mounting debt in economies such as the U.S., China, and others (excluding Germany) has become unsustainable. He cautioned about an imminent debt crisis which could potentially destabilize the strength of various currencies.

Dalio identified five major forces shaping the future: debt, monetary systems, and economic stability stand out as key factors. Additionally, rising wealth inequality fuels domestic political divisions, while international conflicts, such as US-China tensions, intensify geopolitical instability.

Dalio Warns of Currency Threats

During an interview on CNBC’s Squawk Box in 2023, he issued a caution about potential dangers to conventional monetary structures. The widespread practice of excessive money printing, extending beyond the U.S., poses a risk to financial security, according to Dalio. His words were:

In our current reality, the traditional concept of money is under threat due to excessive printing, and it’s not only the U.S. that’s contributing to this issue.

In the aftermath of the 2008 financial crisis and during Bitcoin’s early development, Dalio started studying the growth and fall of the last three global reserve currencies – the Dutch guilder, British pound, and US dollar. Dalio pinpoints three interconnected trends that influence a currency’s dominance: the accumulation of debt and financial resources, internal disputes sparked by wealth disparities, and the rise of a new dominant force aiming to displace the existing currency.

A currency’s resilience during these cycles depends on the robustness of the economy backing its status as a reserve. At present, the US dollar is going through the first cycle, where debt and credit expansion drive buying power. Dalio’s recognition of Bitcoin as a “possible replacement for gold” underlines its increasing importance within investment communities.

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2024-12-10 21:36