Ray Dalio Warns of U.S.-China ‘Capital War’ That Would Hit Dollar

(Bloomberg) — Billionaire investor Ray Dalio said conflict between the U.S. and China could expand into a “capital war” that he suggested would harm the dollar.

The founder of Bridgewater Associates laid out a scenario for the next clash between the two countries, based on measures he said are within the realm of possibility. He also warned that loose fiscal policy and ideological divisions are pushing the U.S. into decline.

“There’s a trade war, there’s a technology war, there is a geopolitical war and there could be a capital war,” Dalio said on Fox’s “Sunday Morning Futures.”

“If you say by law ‘Don’t invest in China,’ or even possibly withholding the payment of bonds that the United States owes payment on in China — these things are possibilities, and they have big implications, such as for the value of the dollar,” he said.

The U.S. is already endangering the dollar’s stability by being “our own worst enemy,” he said.

The dollar has fallen against all major currencies tracked by Bloomberg in the past three months.

“The things I worry about the most are the soundness of our money,” Dalio said. “You can’t continue to run deficits, sell debt or print money rather than be productive and sustain that over a period of time.”

“If we don’t work together to do the sound things, to be productive, to earn more than we spend, to build the stability of our currency and build the balance sheet, we are going to decline,” he added. “We are declining because of those things.”

Contact editor Joshua Dummer (joshuadummer@caixin.com)