The founder and chief investment officer of Bridgewater Associates, the world’s largest hedge fund firm, has warned that the government could impose a capital ban on assets such as bitcoin. He added that regulators could also introduce tax changes that could be more shocking than expected.
Ray Dalio warns of government bans and taxes
Ray Dalio, founder and chief investment officer of Bridgewater Associates, wrote a post on Linkedin last week called: Why on earth would you own bonds as ….
He noted that bond markets currently offer ridiculously low yields that do not meet the financing needs of holders of these assets. The manager wrote: There is currently over $75 trillion worth of debt securities with various maturities, and their owners will eventually want to sell them to attract cash to buy goods and services.
However, Bridgewater’s Chief Investment Officer believes that current estimates show there is too much money in these financial assets to realistically expect a significant portion of this bond money to be converted to cash and redeemed for goods and services. He designed it: You have to do something about it… by printing more money and devaluing it, and by restructuring much of the debt and public finances, which usually involves large tax increases.
Dalio explained: Given how things have gone in the past and how things are going now, I think tax changes will also play an important role in the movement of capital flows to different assets and different places, and these movements will influence market movements.
The billionaire pointed out that as history and logic guide us, cash-strapped politicians will raise taxes, and they will not appreciate this movement of capital out of debt instruments and into other treasuries and tax areas, he warned:
It is entirely possible that they may prohibit the transfer of capital to other assets (e.g., gold, bitcoin, etc.) and to other locations. These tax changes may be more shocking than expected.
As an example, the Bridgewater Associates founder cited Elizabeth Warren’s unprecedented proposal for a property tax. Citing his research on property taxes in other countries at other times, he expects the proposal to lead to increased capital flight and other measures to avoid these taxes.
As a result, the U.S. could be seen as an inhospitable place for capitalism and capitalists, Dalio said, noting that there is a good chance a major tax bill will be passed in the next few years. Director Bridgewater closed with a warning:
Tax changes and the possibility of capital controls should be kept in mind.
Dalio has been interested in bitcoin for a few months now. Last November, he admitted that he could be wrong about bitcoin, but that he still feared governments banning the crypto currency. In December, he said bitcoin could serve as a diversifier for gold and similar assets. Then in January of this year, he said that bitcoin was a damn good invention, showing that his company has great interest in the cryptocurrency.
What do you think of Ray Dalio’s warning? Let us know your comments in the section below.
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