Get Out Of The US Dollar - Ray Dalio

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01. others are trying to get out of the dollar system there's a dollar system that now is being changed india is dealing directly with russia and holders of dollars and nominated assets don't want to hold those dollar attitudes if they feel that they're going to be grabbed and so on there are things that are happening in our lifetimes that never happened before the amount of spending financed by debt the amount of internal conflict the rise of great power in the form of challenge uh china to challenge the existing world order and so on the alliances with um russia and all of that and so um i needed to study the horizon decline of reserve currency so i went back 500 years to see the dutch gilder and the patterns of the past it helps me and then when i did the study i did a book because i thought it was important to pass along and then i wanted to make it very clear and digestible so the animation that you're talking about is very clear and digestible so people can put what's now happening in the perspective of these historical patterns which helps people uh think about what's coming next right now the u.s is imposing sanctions sanctions are it's a form of economic warfare and it has a big implication for the dollar right um okay now others are trying to get out of the dollar system there's a dollar system that now is being uh changed um uh india is dealing directly with russia and um holders of dollars and nominated assets um don't want to hold those dollar attitudes if they feel that they're going to be um grabbed and so on so what's happening now um has happened many times before and i learned this in my past because uh in 1971 i was clerking on the floor of the new york stock exchange and president nixon gets on and he says um we're not going to give you the gold that the dollar is backed by and we had a devaluation um it took me by surprise um i worked on walked on the floor of the stock exchange i thought it was going to go down a lot it went up a lot and that's because i never experienced the currency devaluation i found the same exact thing when i studied history same exact announcement took place on march 5th 1933 by roosevelt and had the same effect so i understood um then how history before me uh was important studying the great depression allowed me and bridgewater to anticipate the 2008 financial crisis if i didn't study that what's happening now is very relevant is a guide to the past as a guide to what's happening now as we are approaching um a challenging of the world order in other words a great power challenging another there is an increased um likelihood of some kind of war there are five kinds of wars there's a trade war a technology war a geopolitical influence war a capital war which we're in the midst of and then there's a military war and those things drive countries to be self-sufficient and independent and as a result globalization diminishes and nationalization nationalism increases how does it affect the markets it affects the value of money most fundamentally like what we're seeing now uh is that the value of money when you run very large deficits and you have you have to spend a lot you have to spend a lot on uh social programs you have to spend a lot on uh defense you have to spend a lot on environmental programs and so on and so when you spend a lot more money than you earn then you have to print money to make up that difference to make the purchases and then that devalues money and so it's like the examples i gave you of the two currencies evaluations that you had before 1971 led to the inflationary period of the 1970s and so you have the stock market yes the stock market goes up and other things but cash is trash and people get them begin to learn that the bonds that they're holding have negative returns and it starts to change the value of money the value of money the value of dollars and so on so money goes into other assets it produces a more of an inflation and you start to enter a certain type of environment and the environment that we're in is beginning to be very much like that of the 1970s and so um i think that what you have to think about is the value of money how much money does one have in debt instruments and um do you want to own that as an asset i i think i think they're bad assets and so uh and then how do you diversify and the system also has to deal with um what is money what is money is uh is the dollar going to remain um the same sort of reserve currency um and then you see the development of alternative monies we're seeing a variety i think different types of money will compete with each other in the environment we're in um some maybe it's um crypto maybe it's uh maybe it's gold maybe it's um other things maybe the digital or mmb competes with um the us dollar we're going to come into an environment because everybody thinks that there's think about how much money is being stored in debt instruments those debt assets think about how poor those returns are so that kind of a shift i think is very important can the the dollar stay the world's reserve currency when we are running when inflation is at this high current level and likely to remain this way for for some time uh uh so all currencies have a lot of debt and so when you look at one relative to the other there will be a lot of printing i mean currency equals debt and when you hold a currency you're holding a debt instrument and so all of those will um decline in value relative to other things now will the dollar decline more than other currencies it's almost certain that we're going to come into this environment we're in this environment and whereas there's a shifting of the those currencies um so you're going to see more of china's ram and b being used you're seeing india have a direct link uh with russia on the uh currency so we're an important change in the currency but how that is the store of wealth is a different question so uh a currency is a medium of exchange and a storehold of wealth and its storehold of wealth is now a problem particularly for the dollar but it's also a problem for other countries so that's why you have inflation as money goes into other things and and the cost of borrowing is so low relative to the inflation rate then it courage encourages the borrowing of money and and the sale of money in other words not holding financial assets like that so that's yes i think you're changing the nature of what money is and what the dollar is as a storehold of wealth