Billionaire global investor Ray Dalio has warned the world is on the brink of a global capital war, with the US facing potential retaliation from Europe and other nations over President Donald Trump's push to take over Greenland.
“The other side of trade is capital. And there are big imbalances. That means there are big interdependencies,” Mr Dalio told The National at the World Economic Forum Annual Meeting in Davos.
“The United States needs a lot of capital. We're seeing the central banks build up gold reserves, as is traditional when great conflicts emerge. And so we also could see that related to Greenland, that you could see them not making the purchases of American capital. And then that would have a dynamic for the capital markets, which would be probably more significant in its impact than the trade wars.”
US Treasury Secretary Scott Bessent has dismissed concerns that EU allies could use retaliatory measures, including the “nuclear option” of selling off US Treasuries, in response to Washington's stance on Greenland.
But Mr Dalio, founder of Bridgewater Associates, said it was a risk that Americans cannot ignore. “We’ll see,” he said regarding Mr Bessent’s remarks, warning that time and history are not on his side.
With the US heavily reliant on foreign capital, Mr Dalio said tensions over Greenland could lead to a shift away from the US dollar, with central banks already building up gold reserves. "We're seeing the beginning of the end of the monetary system as we know it," he added.
With governments now rapidly shifting away from a rules-based order to power politics, he said the world had reached a crossroads.
“We’re at the brink. We haven’t crossed the brink, but we’re at the brink, OK?” he said. “I think the order, as we've had it, is a naive order. It was a naive order that everybody's going to get together, like in the United Nations or the World Trade Organisation and the World Court, and they would make their decisions in that agreed upon way. That was naive, particularly since the enforcement [aspect], they don't have.”
He said the US was acting in its own self-interest but questioned whether the policy is pragmatic. “One might say, based on history, that this power-based system is more the norm," he added. "The United States is not being as naive in doing that. It's also in its self-interest.”
