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The US-China economic competition is heating up, says investor Ray Dalio
The Chinese think they are on the rise, while America is declining. On GZERO World, Ian Bremmer talks to billionaire Ray Dalio, head of the world's largest hedge fund, who thinks rising US debt, a widening wealth gap among Americans, and the meteoric rise of China all play into Beijing's plans to overtake the US as a global superpower.
Just recently, the US national debt topped $30 trillion for the first time in history, while household debt jumped by $1 trillion, the most since 2007. For Ray Dalio, this rising debt is widening the gap between all the money out there and what it can buy.
Rising debt, in conjunction with long-term high inflation will hurt the US dollar, which in the future might lose its status as the global reserve status to the Chinese yuan, which will become "digital gold." The euro and the Japanese yen are also in similar danger.
Does this mean investors should bet on China over the US? America has a better system, tech and universities Dalio says, but the Chinese "has us outnumbered" in population and pace of per capita income growth.
But while China’s economic growth has been impressive, even during COVID, the pandemic has widened inequality and political divisions in the US.
For Beijing, it's a sign that the East is rising as the West declines.
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Should investors bet on China over the US?
Hard to say these days, even for a billionaire hedge-fund manager like Ray Dalio.
On the one hand, America has a better system, better tech, and better universities. On the other hand, China "has us outnumbered" in population and pace of per capita income growth.
China, he explains, has not only become a powerful competitor. The US has changed, too.
"[The] America that I remember is a different, uh, and grew up with is a different America than it exists today in terms of like equal opportunity and the American dream."
Watch the GZERO World episode: Does China's rise have to mean America's decline?
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Want to fix US political division? Narrow the wealth gap, says investor Ray Dalio
What happened on January 6, 2021, did not at all surprise billionaire investor Ray Dalio.
History, he says, shows that both right-wing and left-wing populism begins to gain power when there's a large wealth gap.
So, what comes next?
"It's entirely possible that neither party will accept losing, um, on, uh, the presidential election."
But it's not too late to prevent another US civil war — and Dalio thinks that, of all things, capitalism can help.
"The financial dynamic needs to satisfy the political dynamic" by narrowing the wealth gap.
Watch the GZERO World episode: Does China's rise have to mean America's decline?
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Does China's rise have to mean America's decline?
The US and China are as wary of each other as they've ever been. But the Chinese think they are on the rise, while America is declining.
On this episode of GZERO World, Ian Bremmer talks to billionaire Ray Dalio, head of the world's largest hedge fund, who thinks rising US debt, a widening wealth gap among Americans, and the meteoric rise of China all play into Beijing's plans to overtake the US as a global superpower.
For instance, Dalio believes that too much national and household debt — combined with rising inflation — is a ticking time bomb that'll surely hurt the US dollar, which in the near future might lose its status as the global reserve status to the Chinese yuan.
And then there's dysfunctional US politics, which for Dalio have a lot to do with rising inequality — caused in part by too much cheap money in the hands of those who already have a lot of it.
Does this mean investors should bet on China over the US? America has a better system, he says, but the Chinese have become a much better competitor in many areas.
Also, what's up with crypto these days?
Podcast: No Empire lasts forever: How China’s rise could trigger a new world order
Listen: What keeps Ray Dalio, one of America’s most successful investors, up at night? Three things: spiraling debt, a weakening dollar and a rising China. China is closing the gap on US economic dominance as its geopolitical influence grows, Dalio tells Ian Bremmer on the GZERO World podcast.
The US economy is negatively impacted not only by its debt but also by the widening wealth gap among Americans, and these all play into Beijing's plans to surpass the US as a global superpower, says Dalio, author of Principles for Dealing With the Changing World Order” and founder of the world’s largest hedge fund. Does this mean investors should bet on China over the US?
Subscribe to the GZERO World Podcast on Apple Podcasts, Spotify, Stitcher, or your preferred podcast platform, to receive new episodes as soon as they're published.- The US and China are too busy to fight - GZERO Media ›
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Why "cheap money" is worrying billionaire US investor Ray Dalio
Just days ago, the US national debt topped $30 trillion for the first time in history. Household debt jumped by $1 trillion last year, the most since 2007.
For Ray Dalio, the billionaire head of the world’s largest hedge fund, rising debt across the board is a big problem because it's increasingly widening the gap between all the money out there and what it can buy.
“If the quantity of money and credit, which is buying power, increases faster than the quantity of goods and services and financial assets, that the prices of goods, services and financial assets will rise, [and] the value of money will go down."
Um, okay, so what does that mean if you're not an economist? Once the value of putting money into even very safe instruments like bonds starts to decline, he says, return on investment could become negative, so you lose money.
What's more, if you already expect long-term high inflation, Dalio anticipates a supply-demand imbalance that'll hurt the US dollar's status as the global reserve currency. Also, it's not just an American problem: the euro and the Japanese yen are in similar danger.
And who benefits from a weak dollar? China's yuan, which Dalio says will become "digital gold."
Watch his interview with Ian Bremmer on the upcoming episode of GZERO World.
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