Investment expert Ray Dalio: invest in gold before they trash the dollar

In the following is our translation of an analysis by Ivan Danilov from RIA Novosti.
 
Danilov, as well as other Russian analysts, focuses on the issues that Americans should also focus on but don’t.
 
Now, I want the reader to consider something absolutely vital to the West’s survival. It’s not the threat of communism or socialism because the Western economy is firmly in the grip of the predatory capitalists who control our minds with the msm and our pocketbooks with their Federal Reserve and its willing agents in Washington and Wall Street. It’s not immigration, though that is an important secondary issue. It is not abortion, because the most vocal pro-life activists are hypocritically oblivious to the routine murder of children by the IDF, which they support believing God wants them to (though the Bible does not contain a single passage to that effect). It’s not the Deep State and its persecution of their wonderful saviour Donald Trump (because the Deep State is the Israel-controlled warmongering Establishment, of which Donald is the ringleader). It’s not personal freedom because the US is not sovereign and without national sovereignty there is no freedom. It’s not the mythical “Russian threat” or “Chinese threat” because these two countries are the only ones based on sound economic principles and, ironically,  will probably be the only fall-back allies when the dollar collapses (though US pols will, of course, blame them, not their own irresponsible policies, for the collapse).
 
No. It’s a set of issues no one in America wants to mention because every politician knows that honestly addressing these would be poison to his/her career because a coterie of agents, some of them even foreign, and not the voters, is in full control of US policies and msm. These issues include:
 
the eternal US wars and interventions (such as regime changes),
 
government overspending – particularly on arms the US does not need,
 
the debt-based US economy with no real backing, and
 
the unwieldy US debt that increasingly threatens to bring down America.
 
And yet, what is really crucial is not these issues themselves but the fact that that presidential and congressional campaigns come and go and yet no candidate (with few exceptions, such as Ron Paul, and recently, Tulsi Gabbard) dares to broach any of these subjects. Of course, on the campaign trail, Trump pretended to care about war but out of the other side of his mouth he was preparing us for war by telling us that Iran is the “biggest state sponsor of terror,” which was and is the biggest lie of our era because sentient Americans know that Saudi is the breeding ground of Wahhabist terror groups like ISIS and Al-Qaeda. The West has a serious case of cognitive dissonance. We know but we also know we don’t dare to know. America is a gulag without jail keepers. The people themselves are the prison guards.
 
So given the fact that voters are constantly distracted away from the most vital issues by far, it is absurd to speak of “American democracy.” The US and its vassals are the farthest thing from democracies imaginable and we need to stop pretending that the West is the free world. It is in fact a gulag. If you wonder whether that is so, then ask yourself why Julian Assange is in jail.
 
QUOTE from the article below:
 
“It is terrible to imagine what will happen to the currency reserves of those countries that are oriented solely toward the dollar if Dalio’s forecast of America’s future comes true.”
 
The issue addressed by Danilov below is one we reported on here. I had said that both left and right agree that the dollar should be devalued and that the excuses were:
 
on the right:
 
that this would enhance the US trade surplus.
 
on the left:
 
That this would somehow help the poor.
 
But these excuses were a diversion from the real issue, namely, that the Fed had run out of tricks to keep the unbacked dollar afloat and enable the US to pay down the debt, but that devaluing the dollar would also further impoverish the struggling American worker.
 
It is almost amusing to hear Americans complain that their country is becoming communistic or socialistic when in fact the name of the enemy is predatory capitalism. If the West were becoming more socialist, why pray tell, is the gap between rich and poor growing like a cancer?
 
Danilov does not mention it, but we need to consider the possibility that this coming initial devaluation, the concept of which has just recently been floated by the msm, may not be the last one. After all, there were 3 rounds of quantitative easing, whereby the Fed bought back its assets (for which no buyers could be found), so why not several devaluations? If devaluation of the USD became a trend rather than a one-off policy, the poor could multiply exponentially and at some point, the US could join the Third World. It may sound absurd, but then, at one time, people would have scoffed at the notion that the US debt could explode to well over GDP and US Treasuries would be hard to unload on the market.
 
BEGIN TRANSLATION
 
American billionaire predicts dollar devaluation
 
July 20, 2019
 
Ivan Danilov
 
American billionaires are usually big optimists in matters related to the US economy and the US currency. Perhaps the cause of this professional bias is associated with the presence of billions of dollars in personal accounts. Maybe this is due to an informal "social burden" in the sense that it is not seemly for a billionaire to create panic among the population and investors in American assets. However, rules are made to be broken, and Ray Dalio – a well-known financier, billionaire and founder of the large investment fund Bridgewater Associates (which manages assets of more than $ 124 billion) – published an op-ed in which he made several unpleasant predictions about the future of American economy, the dollar and world financial markets. The article evoked quite an emotional reaction from the business media, ranging from the American agency Bloomberg to the Australian Sydney Morning Herald. To reduce the position of the billionaire to several theses, Mr. Dalio’s forecast can be expressed as follows: the dollar will undergo a serious devaluation, the Western system of social guarantees (including pensions and medical care) will be glutted with depreciated money, social conflicts will sharply increase, and against the backdrop of all these crises gold will be a great investment.
 
Reading Ray Dalio’s article on the “changing paradigms” of financial markets, it’s hard to shake the sensation that it was not written by the influential American billionaire, but by a Russian or Chinese financial columnist, for Dalio rather unceremoniously points out those vulnerabilities of the US financial system and the Federal Reserve’s monetary policy about which opponents of the USA have been writing for many years, and supporters of more sane economic policy in the States themselves.
 
According to the founder of Bridegewater Associates, the reason for the US transition to the actual devaluation of its own currency is that all the methods of stimulating the American (and generally Western) economy have already been exhausted or nearly exhausted, and so much debt has been accrued that without devaluation, it can’t be eliminagted: “Since these forms of mitigation (monetary policy. - Note auth.) (that is, lower interest rates and QE [QE - the purchase by central banks of government and mortgage bonds]) stop working and there remains the problem of too many debt and non-debt obligations (for example, pension and medical obligations), other forms of mitigation (most obviously, currency depreciation and monetization of the [government] financial deficit) will become increasingly likely."
 
It is probably worth translating into a colloquial Russian technical term that Ray Dalio uses: “monetization of the deficit” is, in fact, a Venezuelan or Zimbabwean solution to the government’s financial problems, which assumes that the government does not pay pensions, benefits and salaries to state employees, or earn money (for example, by collecting taxes or dividends from public corporations), but simply prints money. And in very large quantities, which inevitably leads to the devaluation of the printed currency, because the money loses its purchasing power.
 
The future, in which the central banks of the western world (and above all the United States) transition to radical measures to support the economy (and in fact to efforts to contain a systemic crisis), such as negative interest rates, looks completely unattractive. The social sphere will suffer (since pensions and benefits will be paid with devalued money), and inflation will simply “burn” the savings of those who have them. The forecast of the American billionaire is unlikely to appeal to the next American president – regardless of whether it is Trump (who hopes to be re-elected in 2020) or one of the candidates of the Democratic Party. Ray Dalio predicts the American future for the next few years: “I think it’s very likely that sometime in the next few years 1) central banks will exhaust opportunities to stimulate markets in a weak economy and 2) there will be a huge amount of debt and other obligations (such as pensions and health care), which will have to be paid out and which will not be financed by (government) assets. In other words, I think that the paradigm we are in will most likely end when a) the real interest rate will be reduced so low that investors holding debt obligations will not want to hold them and will start to move on to something that they consider better, and b) at the same time a greater need for money to finance [government] obligations will contribute to [the so-called] “great contraction.” At this point, there will not be enough money to meet the needs, so some combination of large monetized deficits, a depreciation of the currency and a significant increase in taxes. These circumstances are likely to increase the conflicts between wealthy capitalists and poor socialists. Most likely, during this time, debt holders will receive very low or negative nominal and real yields in devalued currencies, which will effectively be a wealth tax."
 
The problem is this: Ray Dalio’s forecast emphasizes that the devaluation of the dollar will be a “wealth tax,” but this is only part of the consequences of the scenario he describes, and far from the most important. The fact is that a sharp devaluation of the currency (which, from the consumers’ point of view, looks like a sharp increase in prices compared to their income) is always primarily a “tax on the poor.” That is, for those who do not have real assets, for those who do not have passive income, there are no stocks, and there is only a salary and a hope of retirement.
There is a high likelihood that will be the Western social sphere will be sacrificed at the altar of the interests of the American and European governments, and the interests of the western banking sector as a whole, since the social obligations gained by Western governments in the era of economic stability will be paid by monetization. That is, by the payment of depreciated money. Consequently, formally, everything will be fair, but in fact the state will simply throw off the shackles of social obligations to the citizens.
 
As the main way to rescue savings and the best tool for investment in this black economic period, the founder of Bridgewater Associates offers the oldest tool for capital accumulation, ie, gold. The benefits of gold are obvious: it cannot be printed, it cannot be devalued by government decree, negative interest rates on bank deposits (which are already in some European countries and most likely in the whole Western world in the future) are not dominant, and against the background of negative yields on government bonds and other debt instruments (which Dalio writes about in his forecast) gold looks not only like a good savings tool, but also a high-return investment.
 
The American billionaire’s advice is equally applicable to both ordinary investors and to large investment funds. And is is even more applicable to government currency reserves. It is terrible to imagine what will happen to the currency reserves of those countries that are oriented solely toward the dollar if Dalio’s forecast of America’s future comes true. Against this background, the actions of the Russian Central Bank appear quite prudent and timely, increasing the amount of gold in Russian foreign exchange reserves at an accelerated pace. Each month, news agencies appear on the tapes of the Central Bank buying gold, and even the Western media (which often showed some scepticism about Russia's increasing gold reserves to the detriment of the US dollar) admit that, by and large, this strategy has already justified itself. In the sense that the price of gold (and hence the value of Russian reserves) is growing. as reported by the US agency Bloomberg.
 
END TRANSLATION