How investors can protect themselves when things fall apart: tips from Ray Dalio

Ray Dalio, founder of hedge fund Bridgewater Associates, in an interview with Tucker Carlson, warned about the risks of the current monetary system and questioned the reliability of the dollar. What he advises investors seeking to protect capital in the context of global currency depreciation - in Oninvest's material.

Dalio is convinced that we are at a moment when the usual financial mechanisms are no longer working. In his opinion, this process does not always look like an instant collapse - more often it is a gradual "slide", the scale of which people realize only after a while. Dalio sees the core of the problem in a critical imbalance of supply and demand in the government debt market: when the government spends more than it earns and there are not enough buyers for its bonds, the central bank is forced to print money to keep rates low.

"Eventually the central bank buys that debt and becomes the owner of the government bonds. It starts losing money because it is holding these securities while market rates on them are rising. The authorities have to create even more money and debt to keep rates low, and as a result they lose more and more money," Dalio explains. Such dynamics, he says, inevitably change capital flows and force investors to seek refuge in assets that cannot be devalued by printing.

Here's what he advises investors:

Dalio is betting on gold: it is not someone else's obligation and does not depend on someone else's solvency. As long as investors actually hold government receipts, the holder of the metal is protected from the risk of someone else's default.

At the same time, he admits that many people ignore the metal because they have become accustomed to measuring wealth in dollars alone over decades of peace. They see currency as a reliable measure of value and simply do not believe that paper money can depreciate.

For Dalio, gold is first and foremost the second most important form of world money, a status confirmed by central bank reserves. It becomes the real measure of value when the usual paper systems stop working.

Dalio urges not to look for salvation in central bank digital currencies (CBDCs). He sees their introduction as inevitable, but does not believe they will solve the problem of money devaluation. According to the investor, central bank digital currencies will resemble money market funds without interest, making them ineffective for saving capital. But the main consequence of the transition to digital, Dalio says, will be the transformation of currency into an instrument of absolute power of the state over the transactions of the population.

In such a system, the investor said, the risk of a complete asset lockup becomes a reality for anyone who finds themselves in political disgrace or under sanctions. "For these reasons, and because the share of central bank digital currencies is negligible right now, I don't think they will grow to the scale to become something truly epochal. That's not to say that this trend won't grow, but I don't think it will become something huge," Dalio said confidently.

Dalio broadcasts the same skepticism about the yuan as an alternative to the dollar. Despite China's leadership in global trade, Dalio is skeptical about the yuan's chances of becoming a full-fledged reserve currency. He divides the currency's functions into a medium of exchange and a store of value. While the yuan will strengthen as a payment instrument, it loses out as a savings asset due to the lack of private capital protection.

In the face of increasing economic instability, Ray Dalio recommends that private investors shift their focus from global forecasts to concrete steps to protect capital and personal safety.

Central to his approach is the principle of "gold balance", where the metal serves not as a means of making money, but as insurance against the drawdown of all other assets.

But Dalio believes that financial diversification is only the first layer of defense. In times of global turmoil, long-term sustainability depends on adherence to what he considers basic principles.

This article was AI-translated and verified by a human editor