A Billionaire Explains It All

Is this the beginning of the end of the world monetary system? Read on!

“Wealth cannot be created by creating debt and money.”

-Ray Dalio

Ray Dalio has been on a tear lately, trying to explain economics and the monetary crisis to the American people.

Dalio is the founder of Bridgewater Associates, the world’s largest hedge fund, with over $124 billion in assets under management.  We’ve been following Dalio for a long time and he’s no newcomer to gold.  Dalio’s observed in 2000 that gold would be their top investment “for years to come.”   

Now he says this is the beginning of the end of the world monetary system as we know it.  It is not just a problem of the U.S. dollar, says Dalio, it’s the entire fiat monetary system.   

“The U.K., the euro, Japan, China, all have similar debt problems… which is the reason you’re seeing gold get chosen by the central banks.  Gold has always been the main currency.  It’s the only non-fiat currency.  In other words, it’s the only currency that can’t be printed that they want.  That’s why you’re seeing central banks and sovereign wealth funds move to gold.”

“That’s the nature of the shift in the monetary system.”

That sound’s like what we have been saying.  Almost verbatim.  But last year Dalio also described Washington’s economic peril in a way that we didn’t.  He invoked the metaphor of Washington having a financial heart attack:

It’s spending 40 percent more than it takes in, and it can’t really cut spending because so much of it is fixed. It’s accumulated a debt that’s six times its income…  The credit system is like a circulatory system that brings nutrients—buying power—to different parts of the economy. If that buying power is used to generate income, then the income services the debt, and it’s a healthy system. But when debts, debt service payments, and interest rates rise, they begin to crowd out other spending—like plaque in the circulatory system—creating a problem akin to an economic heart attack.

Ray Dalio says we are at point of no return.  There’s not much Washington can do at this point but institute capital controls and print money.  Warning signs are flashing, he says.  Now gold is reclaiming its place in the global monetary order, having surpassed the euro to become the world’s second-largest reserve currency.  

Dalio is not alone among leaders of the investment world making these self-evident observations.  Jaime Dimon of JPMorgan Chase said last year that gold could go to $10,000.  David Einhorn, the founder of Greenlight Capital says quite simply that “our fiscal policies and our monetary policies don’t make any sense,” calling the calling the U.S. deficit trajectory unsustainable.

We agree with Dalio’s baseline observation, that “if you don’t own gold, you know neither history nor economics.”