Conflict between US and China Could develop into a “Capital War”

Billionaire investor Ray Dalio warned the conflict between the U.S. and China could develop into a “capital war,” which would hurt the U.S. dollar.

“There’s a trade war, there’s a technology war, there’s a geopolitical war and there could be a capital war — that’s the reality,” Dalio said on Fox’s “Sunday Morning Futures.” “If you say by law, don’t invest in China or even possibly withholding the payment of bonds that the United States owes payment on in China, these things are possibilities and they have big implications, such as for the value of the dollar because premarket investors are not used to having those things dictated by the government,” he said. The Bridgewater Associates founder added that these difficult questions had to be “well-addressed” and it was a challenge for the government to get the policy right.

When asked whether he was worried about the dollar, Dalio warned the U.S. was its “own worst enemy” and that he was concerned about the “soundness of our money.”

“You can’t continue to run deficits, sell debt or print money rather than be productive and sustain that over a period of time.

“If we don’t work together to do the sound things, to be productive, to earn more than we spend, to build the stability of our currency and build a good balance sheet, we are going to decline,” he added.

From the Dollar Index chart, we observed that dollar index peaked on 2020-03-20 at 102.82.

Source: Marketwatch, 2020-07-27, “Billionaire Investor Ray Dalio Fears For the Dollar and the ‘Soundness of our money’, and here’s Why”