From: allin
Ray Dalio, a global macro investor for approximately 50 years, discusses the role of Bitcoin and gold as financial assets, particularly in the context of global debt cycles and currency depreciation [00:03:40]. He emphasizes their importance as alternative stores of wealth when traditional currencies and debt markets face challenges [00:20:28].
Gold as a Store of Wealth and Reserve Asset
Ray Dalio holds gold, noting he has “not nearly as much as as gold” [00:00:07]. He considers himself a “gold guy” [00:33:16], viewing it as a diversifier [00:33:11] and an uncorrelated asset that can reduce portfolio risk [00:39:16].
Key characteristics and observations about gold:
- Currency Depreciation Indicator Currencies tend to depreciate particularly relative to gold [00:20:28]. For instance, Japanese bond holders lost about 80% of their money relative to gold [00:21:20], and while the dollar has been relatively strong, it has not been strong when measured in gold [00:22:53]. All currencies have generally gone down relative to gold [00:23:00].
- Central Bank and Sovereign Wealth Fund Accumulation Central banks and sovereign wealth funds have shifted to holding lesser amounts of debt bonds while accumulating gold or other “hard values” [00:23:30].
- Third Largest Reserve Currency Gold is currently the third largest reserve currency globally, following the US dollar and Euro, and preceding the Japanese Yen [00:23:46].
- Ideal Qualities for Storing Wealth An international money like gold is ideally:
- International [00:27:41]
- Mobile [00:27:46]
- Relatively private and secure [00:27:51]
- Purest Play Gold is considered the “purest play” for a store of wealth because it can be transferred between countries and is used by central banks as a reserve [01:31:33]. Central banks are actively going to and holding gold [01:31:42].
Bitcoin’s Role in the Digital Age
Ray Dalio confirms he owns “some” Bitcoin, although “not nearly as much as as gold” [00:00:06]. He sees Bitcoin as an asset against which currencies can depreciate [00:20:28].
Key observations about Bitcoin:
- Market Performance Bitcoin has “gone up” [00:22:38], demonstrating a market action similar to gold, where currencies decline relative to them [00:23:00].
- Privacy and Taxation Concerns While it has benefits, crypto is considered “very easily taxed” by governments because they often know “where it is and who’s doing what” [01:31:46]. This contrasts with gold’s relative privacy and mobility [01:31:46].
Comparison and Context
Both gold and Bitcoin are discussed as alternatives to holding traditional debt assets, which become less attractive during periods of monetary expansion and currency devaluation [00:09:54].
“When that Debt Service burden rise or there’s a big Supply demand imbalance if the government most importantly the central bank doesn’t print money buy it then there has to be a rise in the price of the debt to constrict borrowing… or they can print money and buy the debt and monetize it when they do that that’s inflationary and it lowers the value of the debt” [00:09:47]
In such environments, assets that “benefit rather than suffer from the reduced value of money” are preferred [00:27:15]. Both gold and Bitcoin have shown appreciation against devaluing currencies [00:22:38].
[!NOTE] The discussion highlights the critical difference between nominal gains (e.g., markets going up in dollar-denominated value) and real purchasing power [00:15:05]. When more dollars are created, the value of each dollar decreases, meaning assets may appear to go up in price, but their real purchasing power might decline [00:15:16]. This is why investors should focus on returns in “real dollars” or “what you can buy” [00:41:16].