Ray Dalio: The Monetary Order Is Breaking Down

Davos delivered a number of noteworthy speeches and soundbites today, including Ray Dalio stating emphatically that the global monetary order is breaking down.

Ray Dalio begins by stating “The monetary order is breaking down. What I mean by monetary order is fiat currencies and debt as a storehold of wealth is not being held by central banks the same way.”

He goes on to state that when you have trade wars, you also have capital wars, and gold plays an increasingly integral role in this type of environment.

“When you have conflicts, international geopolitical conflicts, even allies prefer not holding each other’s debt. They’d prefer to go to a hard currency. It’s logical, it’s factual, and it’s repeated throughout history.”

Dalio is a bit longwinded, and takes a bit of time to get to the heart of the matter, but eventually he gets there:

“Gold would represent between 5% and 15% of a normal portfolio…and central banks would have a higher percentage than they currently have….then you make tactical tilts to the portfolio, and I’ve been clear that I would be tilting away from bonds, and toward gold.”

Dalio makes it clear that he believes central banks still don’t own enough gold, and this is also true for many funds and large portfolio managers.

U.S. Treasury Secretary Bessent then discussed a critical minerals summit that he held last week:

“I hosted at Treasury last Monday a critical minerals summit to try to get the rest of the world to move with the speed that the U.S. is, to try and avoid this chokehold that China has on critical minerals.”

And finally, Canadian Prime Minister Carney may have stolen the show with his speech at Davos today.

“For decades, for decades, countries like Canada prospered under what we called the rules-based international order. We joined its institutions. We praised its principles. We benefited from its predictability. And because of that, we could pursue values-based foreign policies under its protection. We knew the story of the international rules based order was partially false. That the strongest would exempt themselves when convenient. That trade rules were enforced s asymmetrically. And we knew that international law applied with varying rigor depending on the identity of the accused or the victim.

This fiction was useful and American hegemony in particular helped provide public goods. open sea lanes, a stable financial system, collective security and support for frameworks for resolving disputes. So we placed the sign in the window. We participated in the rituals and we largely avoided calling out the gaps between rhetoric and reality. This bargain no longer works. Let me be direct. We are in the midst of a rupture, not a transition.

Over the past two decades, a series of crises in finance, health, energy, and geopolitics have laid bare the risks of extreme global integration. But more recently, great powers have begun using economic integration as weapons, tariffs as leverage, financial infrastructure as coercion, supply chains as vulnerabilities to be exploited. You cannot live within the lie of mutual benefit through integration when integration becomes the source of your subordination.”

And the coup de grace:

“But let’s be cleareyed about where this leads. A world of fortresses will be poorer, more fragile, and less sustainable. And there’s another truth. If great powers abandon even the pretense of rules and values for the unhindered pursuit of their power and interests, the gains from transactionalism will become harder to replicate. Hegemons cannot continually monetize their relationships.”

It is an understatement to say there is a lot to think about these days.

Gold received the message from Davos loud and clear.

Gold (Daily)

Sending a big hug and a smile to all my dear readers this evening 🙏we will get through this, Truth and Light will prevail.

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