In an interview with Bloomberg Markets: The Close on Tuesday, billionaire investor Ray Dalio shared his belief that the U.S. dollar’s status as the world’s major reserve currency is under threat. This is not the first time Dalio, who is the founder of Bridgewater Associates, has shared his negative sentiments towards the U.S. dollar and other major fiat currencies. In an interview with CNBC at the World Economic Forum in Davos earlier this year, Dalio explained that governments around the world were approaching a limit in terms of how much new currency they can continue to create to stimulate the global economy. During that same interview, Dalio made it clear he prefers gold over Bitcoin as a potential hedge against the devaluation of major fiat currencies.
During his appearance on Bloomberg Markets: The Close, Bloomberg’s Erik Schatzker asked Dalio if there is a real threat right now to the U.S. dollar’s status as the world’s reserve currency.
“Yes, there is a threat,” responded Dalio. “It is a evolutionary process. There’s not yet a good alternative in the form of a currency per say, but . . . big large investors [and] institutional investors don’t run out, necessarily, to alternative currencies because the three major reserve currencies all have the same basic problem.”
Dalio went on to explain that large investors are moving their money into other stores of wealth, such as equities, gold, and other asset classes. According to Dalio, investors in search of yield simply cannot rely on government-issued bonds for the returns they seek.
“If those who are holding bonds, which are a lot, choose to sell the bonds because they’re not providing a good return (and they’re not) and because there’s so much debt production and debt monetization, that puts the Federal Reserve or other central banks in the very difficult position of operating like a currency defense,” added Dalio. “Mechanistically, as money leaves that debt, that means either interest rates would rise, which would be terrible for the economy and markets, or they’re forced to buy more and more. And that is how a spiral could occur.”
While many Bitcoin holders would agree with Dalio’s assessment of the U.S. dollar, Dalio does not see Bitcoin as a hedge against the fiat currency system. In the aforementioned interview with CNBC from earlier this year, Dalio made it clear that he doesn’t view Bitcoin as an effective store of value or medium of exchange. Dalio also noted that central banks would likely be the ones doing much of the buying of other assets during a devaluation of fiat currencies, and in his view, they’re much more likely to by gold rather than Bitcoin, as the precious metal has been a reserve currency for a thousand years.