Ray Dalio, a billionaire, claims that countries are less eager to purchase US dollars now that the United States confronts increased competition from China in international trade.
In a recent interview on The Julia La Roche show, the investing legend asserts that central banks around the globe are hesitating to acquire additional US dollars because they believe their portfolios are already overloaded with USD.
“Dollars are debt. In other words, when a central bank holds a dollar, they hold a debt asset, and the world generally holds a lot of US dollar-denominated debt, so the holders of that debt would say, “I’m already overexposed to US dollar-denominated debt.” Consequently, there is less desire to purchase the debt.”
According to Dalio, countries that amass more U.S. dollars face two primary hazards. The billionaire investor claims that the United States’ sanctions against Russia demonstrated how simple it is to restrict a country’s access to its US dollar reserves. In addition, the rise of China in international trade discourages other nations from increasing their US dollar holdings, according to Dalio.
“This enthusiasm to purchase the debt is also diminished by two major factors. One is that the United States’ share of world trade has decreased while China’s has increased, so you should save [USD] for international expenditure. In addition, sanctions have increased the perceived danger that these debt assets will be frozen in a manner similar to Russia. Consequently, a growing number of countries around the world face this risk.
Due to these factors, there is less desire to hold debt denominated in US dollars, which results in fewer US dollars. Therefore, the supply-and-demand picture is worsening, especially as we continue to sell them abroad to finance the [budget] deficit.”
“Dollars are debt. In other words, when a central bank holds a dollar, they hold a debt asset, and the world generally holds a lot of US dollar-denominated debt, so the holders of that debt would say, “I’m already overexposed to US dollar-denominated debt.” Consequently, there is less desire to purchase the debt.”
According to Dalio, countries that amass more U.S. dollars face two primary hazards. The billionaire investor claims that the United States’ sanctions against Russia demonstrated how simple it is to restrict a country’s access to its US dollar reserves. In addition, the rise of China in international trade discourages other nations from increasing their US dollar holdings, according to Dalio.
“This enthusiasm to purchase the debt is also diminished by two major factors. One is that the United States’ share of world trade has decreased while China’s has increased, so you should save [USD] for international expenditure. In addition, sanctions have increased the perceived danger that these debt assets will be frozen in a manner similar to Russia. Consequently, a growing number of countries around the world face this risk.
Due to these factors, there is less desire to hold debt denominated in US dollars, which results in fewer US dollars. Therefore, the supply-and-demand picture is worsening, especially as we continue to sell them abroad to finance the [budget] deficit.”
