The founder and chief investment officer of Bridgewater Associates, the worldâ€™s largest hedge fund firm, has warned that the government could â€œimpose prohibitions against capital movementsâ€ into assets such as bitcoin. He added that regulators may also impose changes in taxes that â€œcould be more shocking than expected.â€
Ray Dalio Warns About Government Prohibitions and Taxes
Ray Dalio, founder and chief investment officer of Bridgewater Associates, wrote a post on Linkedin last week entitled: â€œWhy in the World Would You Own Bonds Whenâ€¦â€
He pointed out that the bond markets currently offer â€œridiculously low yields,â€ which â€œdo not meet these asset holdersâ€™ funding needs.â€ The executive wrote, â€œThere is now over $75 trillion of US debt assets of varying maturities,â€ adding that their holders will at some point want to sell them to get cash to buy goods and services with.
However, Bridgewaterâ€™s chief investment officer estimates that â€œat current valuations, there is way too much money in these financial assets for it to be a realistic expectation that any significant percentage of that bond money can be turned into cash and exchanged for goods and services.â€ He elaborated: â€œIt has to be accommodated â€¦ via printing a lot of money and devaluing it, and restructuring a lot of debt and government finances, usually including large increases in taxes.â€
Dalio explained: â€œBased both on how things have worked historically and what is happening now, I am confident that tax changes will also play an important role in driving capital flows to different investment assets and different locations, and those movements will influence market movements.â€
The billionaire fund manager emphasized that â€œIf history and logic are to be a guide, policymakers who are short of money will raise taxes and wonâ€™t like these capital movements out of debt assets and into other storehold of wealth assets and other tax domains,â€ warning:
The Bridgewater Associates founder used Elizabeth Warrenâ€™s proposed wealth tax as an example, stating that it â€œis of an unprecedented size.â€ Citing his study of â€œwealth taxes in other countries at other times,â€ he expects this proposal â€œwill most likely lead to more capital outflows and other moves to evade these taxes.â€
Consequently, â€œThe United States could become perceived as a place that is inhospitable to capitalism and capitalists,â€ Dalio opined, emphasizing that â€œthe chances of a sizable wealth tax bill passing over the next few years are significant.â€ In conclusion, the Bridgewater executive cautioned:
Dalio has been studying bitcoin over the recent months. In November last year, he admitted that he may be wrong about bitcoin but was nonetheless worried about governments outlawing cryptocurrency. In December, he said bitcoin could â€œserve as a diversifier to gold and other such storehold of wealth assets.â€ Then, in January this year, he said that â€œbitcoin is one hell of an invention,â€ revealing that his firm looking closely at the cryptocurrency.
What do you think about Ray Dalioâ€™s warning? Let us know in the comments section below.
Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.