Ray Dalio, the eminent investor and ex-CEO of Bridgewater Associates, continues to advocate for gold as a safeguard against the dual threats of rising inflation and a looming debt crisis.
With global debt escalating sharply, the U.S. national debt has surged to a record $34 trillion this year. Similar debt crises are unfolding in China, Japan, and Europe, jeopardizing the stability of their currencies, Dalio highlights in a recent LinkedIn post.
He explains that historical trends and logical analysis reveal significant risks associated with these debts, which may not be repaid or might be settled with devalued currency. Consequently, the appeal of both debt and currency diminishes. Dalio points out that central banks may respond to excessive national debt by increasing the money supply, a measure that although prevents a severe debt crunch, leads to currency devaluation and inflation.
Dalio underscores the virtues of gold, describing it as a non-debt-backed currency that, unlike traditional cash and bonds—which are susceptible to devaluation through default or inflation—maintains its value in the face of these risks. This is why he includes gold in his investment portfolio, considering it a robust diversifier in an environment burdened by high debt levels.
Recently, gold has experienced a remarkable surge, driven by investors flocking to the metal amid persistent inflation, the threat of a recession, and geopolitical tensions in the Middle East. Dalio has previously raised concerns about the U.S. debt situation, cautioning that an impending debt crisis could trigger a balance sheet recession, a scenario where economic activity is stifled as individuals and corporations prioritize debt repayment over consumption and investment.
