Ray Dalio Warns “Capital War” Between The US And China Would Hit Dollar
Mon, 07/27/2020 – 09:45
Bridgewater Associates Founder Ray Dalio spoke with “Sunday Morning Futures” host Maria Bartiromo, warning about rising geopolitical risks between the US and China and what that means for foreign currency markets.
“There’s a trade war, there’s a technology war, there is a geopolitical war and there could be a capital war,” Dalio told Bartiromo, adding that a potential capital war could erupt if Washington bans investments in China.
He suggested the politicians in Washington have already threatened the dollar’s stability by being “our own worst enemy.”
Dalio, who famously said “cash is trash” in Davos in 2020, saw his bearish dollar narrative implode in March when the dollar was the ultimate haven currency. However, now, the dollar is headed for its worst month since early 2018. The currency continues to plunge on Monday morning, down 62bps to 93.780.
Negative real rates in the U.S., the relentless bid for precious metals, the reemergence of the virus pandemic, recovery stalling, President Trump’s reelection odds slumping, and the massive deficit spending has been bad news for the greenback.
Dalio said the unprecedented rounds of fiscal and monetary injections have pressured the dollar lower as investors question the “soundness of our money.”
He warned, “you can’t continue to run deficits, sell debt, or print money rather than be productive and sustain that over a period of time.”
“If we don’t work together to do the sound things, to be productive, to earn more than we spend, to build the stability of our currency and build the balance sheet, we are going to decline,” Dalio added. “We are declining because of those things.”
The dollar has crashed to 19-month lows…
Gold is surging to a record high.
Faith in fiat is quickly dwindling as aggressive moves by the government and Federal Reserve are jeopardizing king dollar.
Are the predictions of the dollar’s demise premature and overblown?
Where the dollar ends up in the weeks ahead depends on the 9-year support line. A break in support would suggest further selling pressure.
Dalio’s latest interview on Fox was very much a reiteration of his LinkedIn post a couple of weeks ago when he said economic tensions between the US and China could escalate into an armed conflict. He drew parallels between the current situation and the years before World War I and World War II:
“…the United States and China are now in an economic war that could conceivably evolve into a shooting war, and I’ve never experienced an economic war, I studied a number of past ones to learn what they are like,” he wrote.
“Comparisons between the 1930s leading to World War II and today, especially with regard to economic sanctions, are especially interesting and helpful in considering what might be ahead,” he added.
Dalio simplifies America’s decline into a large cycle. What could come next is a hot conflict with China.
He shows there’s a battle between empires, one where the US is in decline while China is rising.
Dalio is certainly laying out the path to the demise of the dollar and war with China.