Billionaire investor Ray Dalio has claimed that fewer nations are willing to hold the US dollar as America’s share in the global economy declines and China’s role in international trade expands. Dalio, the founder of Bridgewater Associates, suggested that Western sanctions on Russia have highlighted the new risks of holding dollar assets. Central banks around the world are less inclined to hold the greenback, he said, adding that “dollars are debt”. In the past, nations have been willing to expose themselves to such debt so they can trade globally as the dollar has been widely used in international transactions. However, the financial restrictions on Moscow have been pushing the Russian economy towards the yuan. Russia also had $330bn in currency reserves frozen, which has further prevented it from transacting in dollars or euros. Dalio believes that such sanctions have increased the perceived risks associated with dollar assets.
In an interview for Tom Bilyeu’s YouTube channel posted on 9 June, Dalio highlighted the weaponisation of the dollar as a factor in its diminishing role. A number of public figures have recently acknowledged that sanctions policies can hurt the hegemony of the greenback. Within the next decade, the US dollar will play a much less dominant role than it does today, partly due to its weaponisation, renowned economist Jeffrey Sachs said earlier in April.
Their comments come amid efforts for “de-dollarisation” led by BRICS members, of which Russia and China are a part. The importance of the US fiat in international trade is decreasing and as a result, the dominance of the dollar is fading, according to Dalio. With China promoting the use of its currency, the yuan in trade deals with countries such as Brazil, Kazakhstan and others, the need for the dollar is likely to decrease in the future.
The supply-demand picture is worsening, particularly as the US continues to have to sell international bonds to fund its deficit, Dalio claimed. The US’s greatest weapon to use, as distinct from a military weapon, is sanctions, he said, adding that “sanctions means you freeze assets, those assets are the bonds. That happened with Russia and there are threats of it with other countries, China and so on.”
Dalio’s comments suggest that the international community is starting to see the dollar as a geopolitical weapon, which makes it vulnerable to attack through sanctions, and to the rise of other currencies. The US’s strategic goal to choke Russia, China or other countries through sanctions with a restriction on access to the dollar may also undermine the image of the greenback as a stable reserve currency.
