- Legendary hedge fund manager Ray Dalio said the stability of the US dollar is threatened as tensions between Beijing and Washington could lead to a “capital war.”
- In an interview with Fox Business, Dalio said that if the US government prohibits investments in China or withholds payments on Chinese debt bonds, that could lead to major declines in the US economy.
- “There is a trade war, there is a technological war, there is a geopolitical war and there could be a capital war,” he said.
- On Monday, the dollar index fell to a multi-year low, falling 0.5% to its lowest level since 2018.
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Billionaire investor Ray Dalio warned that mounting tensions between the United States and China could lead to a “capital war” with major repercussions on the value of the dollar.
Dalio, the founder of investment management firm Bridgewater Associates, said in Fox’s “Sunday Morning Futures” that the two countries are currently in an “ideological civil war” and that if they did not work together, the United States economy would decline.
“We are in conflict with China. You can call it a war,” said Dalio. “There is a trade war, there is a technological war, there is a geopolitical war and there could be a capital war.”
He went on to say that if the United States government prohibits investments in China or withholds payments on Chinese debt bonds, it would become more problematic for the United States economy.
“If you say, by law, don’t invest in China or even withhold payment on the bonds that the United States must pay in China, these things are possibilities and have big implications, such as the value of the dollar because investors, previous investors to commercialization, they are not used to those things being dictated by the government, “he said.
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He said he is more concerned with the “solidity” of America’s money because it is currently its worst enemy.
“We are our worst enemy, so how we relate to each other solidly and productively in a way that most people in the country believe is fair will determine our future.”
Dalio recently warned of the armed conflict between the two world powers, drawing comparisons between current economic tensions and the years before World War II.
In the most recent geopolitical offensive, China ordered the closure of a US consulate in the city of Chengdu, just days after the United States ordered the closure of a Chinese consulate in Houston.
On Monday, the dollar fell to a multi-year low and analysts expect it to weaken further against major currencies.
The dollar index, a measure relative to other foreign currencies, fell as much as 0.5% to its lowest level since 2018.
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