The world is going through threats not of a chilly conflict or only a commerce conflict, however a capital conflict the place cash is being weaponized, in line with billionaire hedge fund supervisor Ray Dalio. He advised one asset could be the most secure to put money into throughout risky occasions.
The Bridgewater Associates founder mentioned in an interview on the World Governments Summit in Dubai on Tuesday the world is on the cusp of widespread battle the place—as a substitute of ammunition—nations assault one another by the technique of controlling the move of cash, corresponding to leveraging debt possession.
“We are on the brink,” Dalio mentioned. “That means not in, but it means we are quite close to [a capital war], and it would be very easy to go over the brink into a capital war, because there are mutual fears.”
Dalio attributes this escalating discord to President Donald Trump’s latest threats to take over or buy Greenland from Denmark, which analysts imagine weakened the alliance shaped by the North Atlantic Treaty Group (NATO). He mentioned this friction might create worry in European holders of U.S. securities, bonds, and inventory, that they may very well be sanctioned. That nervousness might, in flip, create “reciprocal fear” the U.S. wouldn’t be capable of get essential international funding, Dalio mentioned.
Dalio’s broader warnings about risky world markets echoes an analogous message he made through the World Financial Discussion board in Davos, Switzerland, final month. In a dialog with Kamal Ahmed, Fortune’s government editorial director for the U.Ok. and Europe, Dalio warned of a breakdown on this planet’s financial order. Particularly, he mentioned, the world is at some extent in a bigger cycle wherein the U.S.’s energy is eroding, largely because of the immense $38 trillion nationwide debt. This breakdown has been exacerbated by geopolitical tensions and technological adjustments, Dalio warned.
“Let’s not be naive and say, ‘Oh, we’re breaking the rule-based system,’” he mentioned. “It’s gone.”
International tensions and ‘Sell America’ mode
Certainly, markets entered “Sell America” mode following Trump’s push for Greenland, throttling the U.S. greenback and sharply growing the yield on five-year Treasury bonds, signaling considerations about elevated authorities debt provide. Danish pension fund AkademikerPension confirmed it could exit U.S. Treasuries by the top of January as a result of U.S. authorities funds have been now not sustainable. Swedish pension fund Alecta equally lower its holdings. The selloff additionally coincided with a probe into Federal Reserve chair Jerome Powell, which perturbed world traders over the potential of a lack of Fed independence. The belongings have since recovered.
European traders make up the overwhelming majority of the U.S.-denominated asset holders, accounting for 80% of international patrons of U.S. Treasures between April and November 2025, in line with Citi knowledge.
Dalio famous capital wars emerge throughout broader conflicts, citing the U.S.’s entrance into World Warfare II, when the U.S. froze Japan’s belongings in an try to realize management over the nation and its eastward enlargement with out army power. He noticed an “analogous situation” immediately between the U.S. and China and Europe.
A Nixon-era throwback to gold
“In reserve currencies, gold is the second largest reserve currency,” Dalio mentioned. He added financial policy-makers would nonetheless name gold “the safest money in this kind of environment.”
“Gold is up about 65% from a year ago, and down about 16% from its high,” Dalio mentioned. “I think people make the mistake of thinking, is it going to go up and down, and should I buy it?”
Dalio in contrast immediately to 1971, when former President Richard Nixon did away with the gold commonplace. Within the early Seventies, inflation and large debt masses and authorities spending rocked investor confidence within the greenback, leaving gold as an efficient hedge. Dalio beforehand advocated for traders to have gold as 15% of their portfolio.
“Because gold is a diversifier, when the bad times come along it does uniquely well, and when the good times are prosperous, less so, [but] it’s an effective diversifier,” Dalio mentioned on Tuesday. “I’d say the most important thing is [to] have a well-diversified portfolio.”
