"The world has gone mad" - Ray Dalio | Buying stores of value (Gold, Silver, Bitcoin?)

Part of the transcript (too many words to include everything in the description):

“The world has gone mad and the system is broken.”

This is a direct and somewhat shocking quote from Ray Dalio, the founder of the world’s largest hedge fund - a man who knows a thing or two about capitalism.

So why exactly would a man who has profited so greatly from capitalism believe that the system has become broken over time?

Right, let’s get into it. Why exactly does Dalio have such a seemingly pessimistic view?

His article begins by discussing globally low interest rates, even negative rates in certain countries.

Dalio discusses why lenders are happy to lend money with such low rates. He believes this comes down to the enormous amount of money they have to invest.

This being a direct consequence of central banks printing money and buying up financial assets, in their attempts to raise economic activity and inflation.

So, the question is why isn’t money printing - also known as quantitative easing - pushing up economic activity and inflation?

Dalio believe this is because investors who are getting money want to invest it, rather than spend it. As a result, the price of financial assets is increasing, while economic growth and inflation have remained sluggish.

As the price of investments rise, theirs future expected returns drop.

This diminished return on investment holds true for bonds, equities and nearly all investments.

However, unlike bonds that offer investors a consistent return and this number is decided upfront, other investments offer variable returns.

Put another way, nobody knows what the future returns of a stock will be. As a result, the expected return in left to the imagination of investors.

Because many investors have witnessed incredible success stories of tech companies in years gone by, their imaginations often run wild.

This, combined with the excess cash held by many investors, has led to these investors virtually throwing cash at companies.

Today, there are more companies than at any time since the dot-com bubble, that don’t have to make profits to achieve extremely high valuations.
In fact, many highly valued companies do not even have a viable path to profitability that they can implement in the future.

So far, this sounds extremely familiar to many situations in history - a bubble.

Money has been printed and borrowed with ease. Those with money are choosing to invest rather than spend, causing asset prices to rise much faster than the economy.

Dalio has lived through several bubbles in the past, so why is he viewing today’s situation with such concern?

The answer is because of how he believes governments are going to act moving forwards.

The majority of countries globally have large deficits i.e. they’ve borrowed money in order to spend more than they have earned… or as you and me would say… most governments are in debt.

Dalio believes that these government deficits will continue to grow substantially. Therefore, governments must sell huge amounts of extra debt.

Usually, the purchasing of this debt will drive up interest rates… BUT governments can’t afford to have higher interest rates with the markets already looking dangerously overgrown.

As a result, the money to buy this extra government debt will almost certainly come from central banks printing more money.

Dalio says “this whole dynamic in which sound finance is being thrown out the window will continue and probably accelerate, especially in the reserve countries and their currencies i.e. in the US and the US Dollar, Europe and the Euro and Japan and the Yen.”

In other words, Dalio believes that the reserve currencies of the world are being actively undermined as stores of value by their own governments.

For the general economy, this is likely to be a serious problem.

For all of you fans of alternative stores of value such as gold, silver and Bitcoin for many in this community, these words may not carry such a negative note for your ears.

Dalio then goes on to discuss his final and equally considerable concern in the US … pe