Dalio Warns: We Are on the Edge of a "Capital War"

Bridgewater Founder Ray Dalio Warns Global “Capital War” Is on the Edge Amid Geopolitical Tensions and Market Volatility

On February 3rd, CNBC reported that Dalio, speaking at the World Government Summit in Dubai, UAE, said that “capital war” refers to the weaponization of funds through measures such as trade embargoes, blocking access to capital markets, or leveraging debt ownership.

The legendary investor emphasized that although we have not yet entered a “capital war,” we are very close to that critical point, and mutual fears could easily push the world into a conflict where money is used as a weapon. He pointed out that recent actions by the Trump administration toward Greenland have escalated tensions. According to Xinhua News Agency, previously, the Trump administration threatened to initiate a trade war with Europe if its demands regarding Denmark’s territory of Greenland were not met, and even did not rule out the use of military force.

Investors holding dollar assets in Europe are worried about potential sanctions, while the U.S. is also concerned about losing access to European capital support. According to Citi research data, from April to November last year, European investors accounted for 80% of foreign purchases of U.S. Treasury bonds. Dalio stressed that “capital and money are crucial,” and that around the world, capital controls are being implemented, with sovereign wealth funds and central banks preparing for such measures.

In times of market turbulence, Dalio reaffirmed that gold remains the best safe-haven asset and advised investors to maintain diversified portfolios to cope with uncertainty.

The risk of “capital war” has significantly increased

Dalio clearly stated that the current world is “on the edge,” meaning that while we have not yet entered a “capital war,” we are quite close. “It’s easy for us to cross the line into a ‘capital war’ because of mutual fears,” he said.

He specifically mentioned European investors’ concerns about holding dollar assets, fearing sanctions. Meanwhile, the U.S. is worried about losing access to capital or support from European buyers. This bidirectional fear is heightening the risk of a “capital war.”

Dalio pointed out that capital controls are happening globally, with sovereign wealth funds and central banks already devising responses. He emphasized, “We are on the edge — this doesn’t mean we are in a ‘capital war’ right now, but it’s a reasonable concern.”

He cited historical examples to warn of current risks. He noted that “capital wars” have historically revolved around “major conflicts.” Before the U.S. entered World War II, sanctions against Japan escalated tensions between the two countries. Dalio said:

“People can imagine similar situations today, and even different country leaders have discussed issues of U.S. and European interdependence.”

He explained that the flip side of trade deficits is capital, and there is capital imbalance, which can be used as a tool for war.

Historically, “capital wars” have often involved measures like foreign exchange controls and capital restrictions. Dalio warned that the current geopolitical tensions resemble environments that have historically led to “capital wars.”

Trump’s Tariff Policies Worsen Market Volatility

Since returning to the White House last year, Trump has implemented a series of punitive tariffs against trade partners and political opponents, then partially rolled them back. These decisions have triggered intense fluctuations in financial markets.

Trump’s hardline stance on Greenland further escalated tensions. This incident highlights the fragility of the current geopolitical environment and the potential impact of policy uncertainty on global capital flows.

The unpredictability of tariff policies not only affects trade relations but also shakes investor confidence in capital markets, increasing concerns about capital controls and financial weaponization.

Gold Remains the Preferred Hedge

Despite recent sharp sell-offs in the gold market, Dalio insists that gold remains the best place to store funds. As of Tuesday, gold and silver have shown initial signs of recovery.

“Don’t judge based on daily movements,” Dalio said when asked whether recent price fluctuations should cast doubt on gold’s status as the safest capital refuge. He pointed out that gold has risen about 65% compared to a year ago, and has fallen about 16% from its peak, so investors should not focus excessively on short-term ups and downs.

Dalio recommended that central banks, governments, or sovereign wealth funds consider maintaining a certain proportion of gold in their investment portfolios. “Gold is a very effective diversification tool that can hedge underperforming parts of a portfolio,” he said.

He emphasized that gold, as a diversification asset, performs exceptionally well during tough times and relatively weaker during prosperous periods, but overall remains an effective hedge. “I believe the most important thing is to have a diversified investment portfolio,” Dalio concluded.

Risk Warning and Disclaimer

Market risks are present; investments should be cautious. This article does not constitute personal investment advice and does not consider individual users’ specific investment goals, financial situations, or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Invest accordingly at your own risk.