Renowned investor Ray Dalio has sparked a heated debate about the fate of the U.S. dollar, claiming that the conflict between Donald Trump and Fed Chair Jerome Powell is not about policy details, but about control over the value of money.
๐ฃ Trump wants to print, Powell wants to tighten
โWhen thereโs too much debt, the classic way to deal with it is to push real interest rates down and devalue the currency,โ Dalio said. Thatโs what Trump wants. Powell is resisting it. Thatโs the core of the fight.
Trump, as a political leader, is pushing for expansionary fiscal policies to boost growth, markets, and voter satisfaction. Meanwhile, central banker Powell aims to preserve the dollarโs stability and prevent runaway inflation. But as Dalio notes, Powell is now facing a loss of respect for the central bankโs independence.
โ๏ธ Devaluation vs. stability: who will control the dollar?
โPresidents always want cheaper money. But now itโs gone much further,โ says Dalio. Trump is allegedly actively promoting a weaker dollar, while Powell is trying hard to stop the decline.
Whoโs right? Dalio suggests looking at market indicators:
๐น Stock markets have surged 14% in the past year โ reaching historic highs.
๐น The dollar has dropped 5% against major currencies, 27% against gold, and 45% against Bitcoin.
๐น Real interest rates remain low โ around 2% on 10-year bonds.
๐น Credit spreads are extremely tight โ the market expects no tightening.
According to Dalio, all of this signals that money is too cheap, and confidence in its value is rapidly fading.
๐ Global threats and technological paradoxes
Dalioโs warning goes beyond the U.S. He notes the global economy is weak, and the U.S. is propping up growth on its own. Even domestically, things are divided:
๐น The tech sector is booming, driven by AI investments
๐น Real estate and consumer sentiment are weakening
๐น Unemployment is creeping up (currently 4.1%) but remains relatively low
And the outlook? โThe risks are enormous,โ Dalio warns. Trade wars, geopolitics, debt bubbles, and inequality could all trigger inflationary pressure. At the same time, technological innovation has a deflationary effect, which could widen the wealth gap.
๐จ Dalio's warning: Money is losing value
โDefending the value of money isnโt popular,โ Dalio says. โBut everything is at stake. One personโs debt is anotherโs asset. If the Fed eases, your savings lose value.โ
And here comes the key question: Will the dollarโs value be protected? Dalioโs answer: No.
He believes the U.S. is repeating mistakes from 1970โ1982, when inflation spiraled out of control. Only a massive hike in real interest rates stopped the bleeding. Thatโs the kind of pain it takes for monetary tightening to be taken seriously.
โSo even if tightening comes one day, itโs almost certain that it wonโt happen anytime soon,โ Dalio warns. Donโt expect Powell to slam the brakes unless the system completely collapses.
๐ฌ His advice? โBet on weak money โ that is, a falling dollar and low or declining real interest rates.โ
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