Ray Dalio: flood of money threatens its value

We are seeing a flood of money and credit that, while lifting asset prices, will undermine the value of that money, says Ray Dalio, founder of Bridgewater Associates.

“We are in a flood of money and credit that is lifting most asset prices,” says Ray Dalio, founder and co-chief investment officer of Bridgewater Associates, the world’s biggest hedge fund. Indeed, with interest rates at rock bottom as they are today, “there’s no good reason that stocks couldn’t trade at 50 times earnings”. 

But there’s a downside. Speaking to viewers of an “Ask Me Anything” session on social-media website Reddit last week, Dalio warns that the scale of the flood is also “threatening to the value of our money and credit”. As a result, it’s more crucial than ever to diversify. “Put your savings into a well-diversified mix of currencies, countries and asset classes so that your savings will not depreciate in value.“ 

Dalio, who has been writing about “the changing world order” in a series of essays posted on LinkedIn, is concerned about growing class conflict in the US and sees the next few years as crucial. “Between now and the... presidential election in 2024, we will face critical choices both domestically and internationally that will define the likelihood of having an internal and/or external existential conflict.” 

His view on bitcoin has softened – digital currencies are “interesting... with similarities and differences to gold and other limited-supply, mobile... store holds of wealth”, he says. All the same, he still favours gold: “I have a strong preference for holding those things which central banks are going to want to hold and exchange value in when they are trying to transact”.

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