Wednesday, March 2, 2011

Manager of Largest US Hedge Fund Sees Currency Breakup

Ray Dalio, of Bridgewater Associates which manages $58.9 billion, started his career trading commodities on Wall Street in the wake of the collapse of the Bretton Woods agreement. He thinks the current currency structure will break the way Bretton Woods did.

The “symbiotic” relationship between China and the U.S., in which the U.S. dollar is dominant, is coming to an end, Dalio predicts during an interview with AR Magazine (a hedge fund insider publication).

While Dalio seems to give an edge to the yuan over the dollar, I'm not sure this is the completely correct view. The dollar will continue to collapse but the yuan shouldn't be to far behind, given the money printing they are doing, largely to support the dollar.

Who is going to really trust any of these currencies?  The elite may try to push through some kind of basket of currencies perhaps some form of the IMF's SDR program, and they may be able to pull something off in the short-term, but the inflationary inclination of governments and elitists will destroy such a basket in no time.

The elite will hate it, but as Ron Paul has said, the system is going to implode on itself and the only money people will ultimately trust is one governments can't print: GOLD.


  1. China has one major advantage over the U.S. when it comes to currency: stuff.

    They have lots of things they can use to back a currency with, outside of straight up fiat. Precious metals, commodities, labor, etc. If every country suffered an economic reset, much like the world did in WWII, China is in a much better position to re-engage as a world economic power than the U.S. Think of the parallels between the U.S. and Britain in 1938 and China and the U.S. today.

    Britain was already in debt up to her eyeballs before WWII began, and engaged in rampant borrowing with the U.S. to survive Hitler. It bankrupted their empire. We're doing the same with China as our creditor . . . except there's no war! If we DO see a major war breakout as the U.S. gets weaker and weaker, then how well will we recover compared to China? Will we EVER recover? Britain never did. She imploded and stayed fairly small ever since. We're burdened with useless banker parasites that will demand bailouts after all is said and done while China moves on. Not a pleasant thought.

  2. Some interesting remarks released by the PBOC that are getting played down in the limited US feeds:

    If China attempts to transition from a manufacturing to a services based economy via the central planning route, you can bet it will end with disaster.

  3. Bob, I saw that last night. I have a hard time believing that the world would jump on board with the PBOC's idea. While I don't trust the Fed or the US Gov't, I have no more trust in the Chinese gov't to behave any differently. I think the world is looking for a stable currency that cannot be inflated at the will of a government for economic or political purposes. My bet is that some kind of backed global currency along the idea of the IMF's SDR is what replaces the dollar.


  4. Unfortunately, even a gold standard managed by a government is likely to ultimately be cheated and fail, as North has pointed out. Only free, private money has a chance of not being gamed.