Billionaire investor Ray Dalio. Taylor Hill/Getty Images
Ray Dalio says he owns gold, among other things, to hedge against debt and inflation risks.
The legendary hedge fund founder once again warned of rising global debt levels.
He has warned investors of a U.S. debt crisis that could plunge the economy into a balance sheet recession.
This is a machine translation of an article from our US colleagues at Business Insider. It was automatically translated and checked by a real editor.
Ray Dalio is holding on to gold to hedge against the risks of higher inflation and a possible debt crisis in the economy.
The billionaire investor and former CEO of Bridgewater Associates points to increasing debt levels around the world, with U.S. debt surpassing $34 trillion for the first time this year. Debt problems have also plagued China, Japan and European countries – posing a major risk to those countries’ currencies, he wrote this week in a post on LinkedIn.
“History and logic show that the debt and money become unattractive when there is a great risk that they 1) will not be repaid or 2) will be repaid with depreciated money,” Dalio wrote this Thursday, April 18.
The reasons for gold in the investment portfolio
When countries are heavily indebted, central banks are likely to print more money to pay off the debt, which is a problem in itself.
“This prevents a major haircut through devaluation of money (i.e. inflation),” Dalio warned, “Gold, on the other hand, is a form of money not backed by debt. It’s like cash, except unlike cash and bonds, which are devalued by the risk of defaults or inflation, gold is backed by the risk of defaults and inflation.
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That’s the main reason Dalio has gold in his own investment portfolio, he added, calling it a “good diversifier” given high debt levels.
Gold has experienced record-breaking highs in recent weeks. Given the looming risk of recession and inflation remaining at high levels, as well as fears of major geopolitical unrest in the Middle East, investors have been buying the precious metal with great interest.
Dalio has previously sounded the alarm about the US debt balance. In the past, he has warned markets of an impending debt crisis that could lead to a balance sheet recession – a downturn that occurs when people and companies spend money to pay down their debts instead of stimulating the economy.
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