Dalio warns: We are on the brink of a "capital war."

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Ray Dalio, founder of Bridgewater Associates, has warned that the world is on the brink of a "capital war" amid intensifying geopolitical tensions and increased volatility in capital markets.

On February 3, according to CNBC, Dalio said in an interview at the World Government Summit in Dubai that a "capital war" refers to weaponizing money through measures such as trade embargoes, blocking access to capital markets, or leveraging debt ownership.

The legendary investor emphasized that although we are not yet in a "capital war", we are very close to this threshold, and mutual fear could easily push the world into a conflict where money is used as a weapon. He noted that recent moves by the Trump administration regarding Greenland have heightened tensions. According to Xinhua News Agency, the Trump administration had previously threatened to launch a trade war against Europe, or even use military force, if its demands regarding the Danish territory of Greenland were not met.

European investors holding dollar assets are concerned that they could be subject to sanctions, while the U.S. side also fears losing access to European capital support. According to Citigroup Research data, from April to November last year, European investors accounted for 80% of foreign purchases of U.S. Treasury bonds. Dalio emphasized that "capital and money are critical," and countries around the world are implementing capital controls, with sovereign wealth funds and central banks preparing for such controls.

Amid sharp market fluctuations, Dalio reiterated that gold remains the best safe haven asset and advised investors to maintain diversified portfolios to cope with uncertainty.

Significantly Rising Risk of "Capital War"

Dalio stated clearly that the world is currently "on the edge," meaning that although we have not entered a "capital war," we are very close. "We can easily cross the edge into a 'capital war' because there is mutual fear," he said.

He specifically mentioned European investors' concerns about holding dollar assets and fears of being sanctioned. At the same time, the U.S. worries that it may lose access to capital or the support of European buyers. This mutual fear is raising the risk of a "capital war."

Dalio pointed out that capital controls are happening globally, with sovereign wealth funds and central banks preparing countermeasures. He emphasized, "We are on the edge—this does not mean we are now in a 'capital war,' but it does mean that this is a reasonable concern."

Dalio cited historical cases to warn of current risks. He noted that "capital wars" have historically revolved around "major conflicts." Before the United States entered World War II, it imposed sanctions on Japan, escalating their "contentious relationship." Dalio stated:

"One can imagine similar situations in today's world; even leaders of various countries have discussed the issue of mutual dependence between the U.S. and Europe."

He explained that the flip side of a trade deficit is capital, that there are capital imbalances, and that capital can be used as a tool of war.

Historically, "capital wars" have often involved measures such as foreign exchange controls and capital controls. Dalio warned that today's geopolitical tensions are similar to environments that previously led to "capital wars."

Trump's Tariff Policies Increase Market Volatility

Since returning to the White House last year, Trump has imposed a series of punitive tariffs on trade partners and political rivals, only to partially retract them later. These decisions have caused sharp fluctuations in financial markets.

The Trump administration's hawkish stance on the Greenland issue has further heightened tensions. This incident highlights the fragility of the current geopolitical climate and the potential impact of policy uncertainty on global capital flows.

The unpredictability of tariff policies affects not only trade relationships but also erodes confidence in capital markets and increases investor worries about capital controls and the weaponization of finance.

Gold Remains the Preferred Hedging Tool

Although the gold market has recently experienced heavy selling, Dalio maintains that gold is still the best place to store funds. By Tuesday, gold and silver had shown initial signs of recovery.

"You can't judge by the day," Dalio said when asked whether recent price fluctuations should call into question gold's status as the safest haven for capital. He noted that gold is up about 65% compared to a year ago and down about 16% from its peak, so investors should not pay excessive attention to short-term ups and downs.

Dalio recommends that central banks, governments, or sovereign wealth funds consider maintaining a certain proportion of gold in their portfolios. "Gold is a very effective diversification tool that can hedge against underperformance in parts of the portfolio," he said.

He stressed that gold, as a diversification tool, performs uniquely well during difficult periods but relatively less so during boom times; overall, it is an effective hedging asset. "I believe the most important thing is to have a diversified portfolio," Dalio concluded.

Risk Warning and DisclaimerThe market carries risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the special investment goals, financial situation, or requirements of individual users. Users should consider whether any opinions, views or conclusions in this article fit their specific circumstances. Investments made in accordance with this article are at your own risk. ```