Economist Ray Dalio is warning the world of a potential “capital war” brewing between the United States and China. He believes, that it could have devastating implications on the dollar, which could potentially impact Bitcoin.
In such a scenario, how does a capital war between the two feuding global superpowers benefit the first-ever cryptocurrency?
Ray Dalio On Sound Money Concerns: A “Capital War” Could Damage The Dollar
There are several ways that countries can go to war. There can be a war of words, sanction showdowns, and even outright military firepower. But there’s one not so obvious way that two countries can deal devastating financial blows to one another, that economic expert Ray Dalio is warning of.
According to the billionaire investor, the ongoing tensions between the United States and China could soon erupt into a “capital war.”
“There’s a trade war, there’s a technology war, there is a geopolitical war and there could be a capital war,” Dalio explained to Fox correspondents on an airing of Sunday Morning Futures.
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Since early 2019, the two countries have been embroiled in a trade war, that resulted in hard assets like gold and Bitcoin beginning to pick up pace. Investors who saw the writing on the wall, that a major economic shakeup was coming, began loading up on safe haven assets that year.
A capital war would only escalate things further between two countries, and further fuel the uptrends that the precious metal and cryptocurrency have been on.
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Dalio says that the United States is acting as its own “worst enemy,” due to the ongoing money printing and mismanaged monetary policy. Deficits are skyrocketing by the trillions this year due to the pandemic relief efforts.
He believes that if the United States and China get into a capital war where one forbids investments in the other region, it could have “big implications” for the dollar.
Dalio further claims he’s worried about the “soundness” of money currently. The dollar is no longer sound money, and the Fed pledging to print another trillion at least as part of today’s stimulus package is proof.
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Bitcoin is as sound of money as it gets, hard-capped at just 21 million BTC to ever exist. Mathematical code keeps it that way, and no third-parties can intervene. It is for this very reason that Bitcoin could benefit enormously from a capital war.
If one country prevents the other from investing in a portion of the global market in an attempt to weaken the other, it could prompt a flight from the fiat of these feuding countries into a non-sovereign asset like gold or Bitcoin.
Gold has been soaring for that very reason, and Bitcoin has recently started to catch up.
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Beyond the capital war, a currency war could also be brewing. The United States is late to the game in developing a digital dollar, while China is preparing to roll out a digital currency of its own.
Here too, Bitcoin as a non-sovereign asset bound to no country or central authority gives the asset benefits in a world where two economic superpowers cannot see eye to eye.
Rather than let either of these two dominate the monetary supply moving forward, Bitcoin could become the next replacement for the global reserve currency.
And any of the scenarios that Dalio warns of, could be a catalyst for such a change to take place.
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Author: Tony Spilotro