Ray Dalio says gold, non-fiat currencies will be stronger stores of value as U.S. debt mounts
News Summary
Bridgewater founder Ray Dalio warned at the 2025 FutureChina Global Forum that gold and non-fiat currencies will become stronger stores of value as major currencies face devaluation risks amid mounting global debt pressures. He stated that the U.S. government's excessive spending and spiraling debt have become "unsustainable," posing a major fiscal crisis that threatens its monetary order. Dalio urged investors to diversify about 10% of their portfolio into gold. Ng Kok Song, founding partner and chairman of Avanda Investment Management, concurred, stating U.S. debt unsustainability has reached a "tipping point." Dalio noted that while the dollar index has tumbled over 10% this year, other major currencies have also weakened against gold, making gold the world's second-largest reserve currency. Dalio estimated the U.S. government needs to sell an additional $12 trillion in debt to cover deficits, interest payments, and maturing borrowings, but market demand is insufficient, creating a supply-demand imbalance. He proposed to Washington lawmakers to reduce the fiscal deficit to 3% of GDP, but politicians on both sides have been reluctant to balance the debt level. President Donald Trump's massive tax-and-spending bill is expected to add $3.4 trillion to the national debt over the next decade. Dalio anticipates the U.S. dollar will retain its dominant role as a "medium of exchange," though the rising role of the Chinese currency in global trade will diminish some of the dollar's luster.
Background
Ray Dalio, founder of Bridgewater Associates, the world's largest hedge fund, is renowned for his deep analysis of global economic cycles and debt supercycles. He has long warned about the fragility of fiat currency systems and the risks of spiraling sovereign debt. His views carry significant weight among global investors and policymakers. Currently, the U.S. national debt has reached unprecedented levels, with substantial fiscal spending and tax cuts under President Donald Trump's second term further exacerbating fiscal pressures. Globally, many major economies, including France, Japan, and China, also face their own debt challenges, contributing to growing concerns about the stability of the global monetary system.
In-Depth AI Insights
Why are Dalio's concerns about U.S. debt particularly salient now, and what are the strategic implications for the dollar's global role beyond its medium of exchange function? Dalio's warning comes as the Trump administration's second term continues to drive substantial fiscal expansion (e.g., tax cuts, infrastructure spending), accelerating the national debt's climb. This not only validates Dalio's long-standing assertions about "unsustainable debt" but also may hasten fundamental market questioning of U.S. fiscal discipline. - Strategically, even if the dollar's role as the primary global "medium of exchange" remains unchallenged in the short term, its appeal as a "store of value" and "reserve currency" will continue to erode. - This will prompt central banks and sovereign wealth funds to accelerate their diversification strategies, reducing over-reliance on dollar assets, thereby diminishing U.S. geopolitical influence on a financial level. - In the long run, if the U.S. fails to control its debt effectively, the dollar's "exorbitant privilege" will gradually wane, creating more room for other potential reserve assets (like gold) or currencies (like the RMB, if its convertibility and liquidity further improve). If gold and "non-fiat currencies" are suggested as alternatives, what are the practical challenges and limitations for institutional and sovereign investors in shifting away from the dollar? While Dalio's advice is strategically forward-looking, significant practical hurdles exist: - Liquidity and Market Depth: While the gold market is substantial, it remains insufficient compared to the multi-trillion-dollar sovereign bond markets. Rapid shifts by large sovereign funds could cause extreme market volatility. - Regulatory and Legal Frameworks: Regulatory frameworks for holding and trading non-traditional assets are not fully developed across jurisdictions, posing potential legal and compliance risks. - Lack of Viable "Non-Fiat" Alternatives: The concept of "non-fiat currencies" is vague; beyond gold, there are currently no other non-state-backed digital currencies with sufficient scale, stability, and global acceptance to meet institutional and sovereign store-of-value needs. - Infrastructure and Interoperability: The existing global financial infrastructure is built around fiat currency systems. The conversion costs are immense, and there's a lack of interoperability to replace the dollar in complex international transactions. What might be the less obvious, second-order effects of a prolonged U.S. fiscal crisis on global investment flows and asset pricing beyond the immediate impact on the dollar and gold? Beyond the direct impact on the dollar and gold, a prolonged fiscal crisis could trigger deeper structural changes: - Regionalization of Capital Allocation: Global capital may shift away from the U.S. towards regions with stronger fiscal discipline or higher growth potential, leading to divergence in regional capital markets. - Emerging Market Risk Re-evaluation: If the dollar's reserve currency status falters, emerging market economies will face greater exchange rate volatility and financing costs, as they have benefited from the stability of the dollar system. - Sovereign Credit Risk Contagion: Investors may begin to scrutinize the debt sustainability of other developed economies more rigorously, leading to a repricing of global sovereign bond markets and wider credit spreads. - Central Bank Balance Sheet Strategy Adjustments: Central banks worldwide may be forced to re-evaluate their foreign exchange reserve composition and monetary policy tools to navigate a more fragmented and multipolar global monetary system.