Ray Dalio Explains Why He Prefers Gold Over Bitcoin

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Guest: Ray Dalio, Founder of Bridgewater Associates

Host: David Sacks

Podcast source: All-In Podcast

Ray Dalio: "AI Is Consuming Everything—And It Might Consume Itself"

Broadcast date: March 3, 2026

During his third appearance on the All-In Podcast, renowned investor Ray Dalio provided an in-depth analysis of the severity of the U.S. debt crisis and offered predictions about its potential future trajectory. He thoroughly discussed the five forces reshaping the global order, structural constraints facing government efficiency departments, the drivers behind gold reaching record-high prices, the reasons for Bitcoin’s underperformance, and the real story behind tariffs and trade deficits, while also explaining why he believes the U.S. may be nearing a breaking point.

Key Insights Summary

On the Nature of Debt and the Economy

• Problems with the debt cycle are like the circulatory system in the human body: when debt service costs rise relative to income and become unpayable, they constrict other spending, much like plaque buildup in arteries.

Structural challenges in government reform

• In an efficient government, making it even more efficient is not easy. Attempting reforms in a “surgical” manner—while being both effective and swift, yet avoiding significant opposition—is nearly impossible.

The underlying logic of currency

• Mechanically, money is essentially a form of debt. When you hold money, you are essentially holding a debt instrument—a promise that someone will give you money. When central banks have too much debt, their power is to print money.

The Irreplaceability of Gold

• Gold is the only long-term historical asset that can be transferred, cannot be mass-produced, and does not rely on anyone else’s promise. In other words, most currencies, debts, stocks, and other assets are merely promises by someone to deliver purchasing power.

Differences between Bitcoin and Gold

• Bitcoin lacks privacy; its transactions can be monitored and potentially even indirectly controlled. Central banks have no interest in purchasing or holding Bitcoin. Additionally, there are questions about the impact of emerging technologies, such as whether quantum computing could affect Bitcoin.

Misconceptions about tariffs and inflation

• A common mistake economists make is not including taxes in inflation. I mean, if your tax burden increases, that’s also inflation. Why should this be any different from the impact of rising home prices on you?

Three key factors for national success

• First, children must be properly educated. Second, society must provide an orderly and civilized environment. Third, you must avoid war. If these three points are achieved, the nation will succeed. This is a fact repeatedly proven by history.

The endgame of social division

• We are moving toward that “war”—in fact, we are already in it. When the positions people support become more important to them than the system itself, the system faces a crisis.

The paradox of AI "eating itself"

• Artificial intelligence seems to be consuming everything, but it might end up “eating itself.” It may not generate sufficient profits... China could treat AI as infrastructure akin to electricity, making it freely available to everyone. In such a scenario, how do we compete?

Metaphor regarding the current situation in the United States

• This is exactly our problem—the demand for instant gratification and ignorance about whether certain things contribute to productivity.

David Sacks: Looking back on the past year’s government policies, congressional actions, and economic performance, I’d like to ask you: Are we currently on the right path? Or has there been little change compared to a year ago? Or are we moving too slowly?

Ray Dalio:

I have studied the historical cycles of the past 500 years and found that five powerful forces are intertwined, collectively determining the answer to your question. First is the issue of debt and currency, which I will elaborate on shortly. Second is domestic polarization, including disparities in wealth and values. These gaps have led to irreconcilable divisions between left and right, influencing tax policies, democratic institutions, and the way everything operates. Third is geopolitical conflict among major powers—a classic pattern of “rising powers challenging established powers” that reshapes the global order. Fourth is technological advancement, which has played a critical role in every historical cycle. Finally, there are natural disasters, including droughts, floods, and pandemics.

When we talk about order, we refer to monetary order, and all monetary orders eventually collapse for the same reasons. Similarly, all political orders—whether domestic or international—also change. The U.S. political order has been relatively stable over the past 250 years, yet it still experienced a civil war. Internationally, shifts in order have been more frequent; the transition from a unipolar to a multipolar world is one example, and technology continues to reshape the world as well.

Now that these factors are in place, let me further explain the government’s fiscal position and answer your question. A country’s economy operates similarly to that of a company or an individual, except that the government has the ability to print money. If we view the government as a company or individual, its spending is approximately $7 trillion, while its revenue is only $5 trillion, resulting in a deficit of 40% of spending. For a long time, the United States has been running deficits, and current debt stands at six times its revenue—allowing for meaningful projections.

Problems in the debt cycle are like the circulatory system of the human body, where capital markets channel credit to different parts of the economy. If this credit is used to enhance productivity and generate sufficient income to cover debt service costs, it is a healthy process. However, the issue arises when debt service costs continue to rise relative to income and become unpayable, much like plaque buildup in arteries that squeezes out other spending.

The U.S. currently has a $2 trillion deficit, half of which consists of interest payments, and we also need to roll over $9 trillion in maturing debt. If this situation were applied to a company or an individual, it would clearly be a problem. To stabilize the situation, a deficit of 3% of GDP might be reasonable. However, the current state is highly unhealthy—not only because it crowds out spending, but also due to imbalances in the supply and demand for debt.

We need to roll over $9 trillion in maturing debt and additionally sell $2 trillion in new debt. Who are the buyers of this debt? Some are domestic buyers, and others are foreign buyers, accounting for about one-third. From their perspective, this situation carries higher risk.

First, the proportion of dollar-denominated debt in their portfolios is already high, potentially exceeding prudent investment limits, compounded by geopolitical risks. For instance, you can imagine potential conflicts with China or rising tensions with Europe. Europeans may fear being subjected to sanctions, such as the suspension of debt service payments due to sanctions, while the U.S. must also worry about whether it can attract sufficient funding.

These conditions I’ve described have occurred repeatedly throughout history. For example, similar dynamics were evident between 1929 and 1945. Therefore, while this fiscal situation is unhealthy for the U.S. government in itself, the larger issue is that other factors have exacerbated these problems.

David Sacks: You previously mentioned this issue and offered a diagnostic suggestion—that if we could reduce the deficit as a percentage of GDP to 3%, it would alleviate the impact. But that hasn’t happened. This time last year, we had high hopes for Elon Musk’s decision to lead the government efficiency department, as he planned to implement sweeping reforms, including cutting government spending and cracking down on fraud.

Do you believe the failure of this reform was due to the actions themselves being flawed, or because, at this stage of the cycle, the entire system has become unchangeable? Is it because there is too much capital flowing through the economy, making the entire system overly dependent on this capital, with too many individuals and businesses relying on it, leaving us structurally unable to escape this predicament? Does this attempt reveal whether government-led reform is still possible at this stage?

Ray Dalio:

In an efficient government, making it even more efficient is not easy. Especially when swift action is required, due to electoral pressures and the fact that people often dislike such reforms, you may ultimately lose public support. Moreover, in our society, whatever you do will be criticized and questioned. This raises the question: Can democracy and our system truly support an administrative leadership model that is both efficient and widely accepted?

For example, when we talk about cutting costs, programs like school lunch initiatives are often reduced. Attempting to carry out reforms in a “surgical” manner—efficient and swift, while avoiding significant opposition—is nearly impossible.

Looking back at history, whether from a political perspective or simply based on common sense, you’ll find it’s an extremely difficult challenge to identify an administrative leadership model that can satisfy the majority while rapidly advancing reforms.

David Sacks: Recently, there was another major news story highlighting potential widespread fraud in public funds in Nevada—for example, daycare centers that don’t even exist received billions of dollars in funding. Do you see this as a symptom of the current phase of the cycle? How do you view the relationship between this situation and the issues we’ve been discussing?

Ray Dalio:

Yes, this is indeed a manifestation of this stage in the cycle. If you want a well-managed government, you must ask yourself: How well can a government actually manage? For example, a visit to the Department of Motor Vehicles reveals just how large, complex, and chaotic this system can be. So, when you see these inefficiencies, should you be surprised? Probably not.

David Sacks: You previously mentioned that a portion of your portfolio is allocated to gold, which has risen from $2,900 per ounce to $5,200. How has gold performed over the past year? Is this due to the market finally recognizing the cyclical phases you’ve long highlighted, or because China has structurally moved away from the dollar and U.S. Treasuries in favor of accumulating more gold? Or is it because other central banks are also shifting toward gold? Or is it due to a surge in interest from individual speculators and market participants?

Ray Dalio:

This is related to longer-term cycles. We need to understand that gold is not merely a speculative precious metal, as most people assume. Gold is one of the oldest and most stable currencies and the second-largest reserve asset held by central banks. For this reason, central banks themselves are purchasing gold to bolster their reserves, due to a variety of factors—including economic supply and demand, political considerations, and geopolitics. At the same time, individuals and other investors are also seeking an alternative currency.

The issue is, what is money? Mechanically, money is essentially a form of debt. What I mean is, when you hold money, you’re actually holding a debt instrument—a promise that someone will give you money. As I mentioned earlier, when central banks have too much debt, their power is to print money. If you understand this, you’ll understand what’s happening now. The key question, David, is: what kind of money do you consider safe?

David Sacks: I want a currency backed by an asset, an asset with real physical constraints.

Ray Dalio:

In particular, assets that can be moved from one place to another. After all, money serves both as a medium of exchange and a store of value. If a country’s central bank or government wants to pay another government, it needs actual money—not fixed assets like buildings. To conduct a transaction, you must trade in something that can be transferred. Gold is the only long-term historical asset that can be moved, cannot be produced in large quantities, and does not rely on anyone else’s promise. In other words, most currencies, debts, stocks, and similar instruments are merely promises by someone to redeem purchasing power.

Wealth and money are distinct. Wealth can exist in forms such as stocks, buildings, or companies, but you cannot directly spend these assets. When you want to spend, you must convert wealth into money. Currently, the ratio of our wealth to money is extremely high. The problem is that when you try to convert wealth into money, they may choose to print more currency. This has been happening ever since we adopted fiat money.

David Sacks: So, when you speak with market participants, are they converting wealth or currency into gold? How much growth potential remains in the market cycle for gold priced in U.S. dollars?

Ray Dalio:

I typically observe who holds which assets, including those held by central banks, and the composition of these assets. I examine the ratio of wealth to money, or wealth to gold. We can see that the total amount of wealth, as well as the quantity of other currencies held by central banks, is extremely large compared to hard currency like gold.

The price of gold has risen from a very low level to a higher one, and this increase, along with changes in asset composition, has nearly restored levels to their historical average, though not quite fully. However, since the ratio of total wealth to money remains high, this is still a significant concern.

A practical example is that a wealth tax represents a potential risk. Someone might ask, “Are we currently in a bubble?” For instance, are AI-related stocks and similar stocks in a bubble? But we know that one characteristic of a bubble is the creation of demand for money, which forces people to sell assets to obtain the funds needed to meet those demands.

Typically, this demand arises from borrowing money to purchase assets, causing asset prices to rise. However, this situation cannot last, as debt service costs must be paid, and the assets themselves do not generate sufficient cash flow to cover these costs. Eventually, people are forced to start selling assets to repay debts or to raise cash for wealth taxes.

Regardless of whether people support wealth taxes, such a tax itself could drive wealth toward cash. The only way to obtain cash is by selling assets or borrowing against them, which can trigger cash flow issues. Additionally, the social impacts of wealth inequality make this issue even more politically complex.

Therefore, I believe that individuals, companies, and even nations should consider whether they hold sufficient gold. Even if you have no particular view on gold, you should allocate 5% to 15% of your portfolio to gold, as it has a negative correlation with other assets and typically performs well when the economy struggles, while other assets often underperform.

David Sacks: Why hasn’t Bitcoin exhibited trends similar to gold? Since our last conversation, gold has risen 80%, while Bitcoin has fallen 25%. What’s your perspective on Bitcoin’s performance, and why hasn’t it become the safe-haven asset many believed it would be?

Ray Dalio:

Bitcoin and gold have several key differences. First, Bitcoin lacks privacy—its transactions can be monitored and potentially even indirectly controlled. Central banks are unlikely to buy or hold Bitcoin. Therefore, not only individuals but also institutions and central banks are unlikely to adopt Bitcoin as a reserve asset. Additionally, there are uncertainties regarding emerging technologies, such as whether quantum computing could impact Bitcoin.

Bitcoin's market size is relatively small and easier to control. Although Bitcoin has attracted significant attention, its scale as a currency remains much smaller than that of gold. Therefore, these are the key dynamic differences between Bitcoin and gold.

David Sacks: What about silver? Over the past year, the price of silver has also risen significantly. Is it a derivative of gold, or are people simply following gold’s trend and speculating on silver?

Ray Dalio:

Silver is a byproduct of production, and its supply is difficult to increase. Historically, such as when the pound was tied to silver, silver was also regarded as a form of money, but it has gradually become a speculative asset, leading people to pursue it due to its popularity.

David Sacks: During our last conversation, you discussed the importance of maintaining low interest rates to mitigate the effects of the current economic cycle. What are your thoughts today on interest rate levels and the Federal Reserve’s actions over the past year? Have these measures been sufficient to alleviate the impacts we’re facing in this phase of the cycle?

Ray Dalio:

Interest rates are one of the three primary considerations in economic management, the other two being taxation and government spending. However, we cannot artificially suppress interest rates too low, because one person’s debt is another person’s asset. If interest rates are too low, creditors are adversely affected, leading to the familiar dynamic: increased borrowing is channeled into various assets, fueling bubbles.

At the same time, interest rates cannot be too high, or debtors will be overburdened and unable to cope. Therefore, a balance is required: rates must be high enough to meet creditors’ needs, but not so high that debtors cannot bear them. This balance becomes extremely difficult when there is a large amount of “dead assets” and liabilities in the economy—since every dead asset corresponds to a debt obligation.

This situation is further complicated in what is known as a "K-shaped economy." In other words, while certain parts of the economy experience bubbles—such as when people ask, “Who will be the next trillionaire?”—this concerns the wealthiest 1%. Meanwhile, other parts of the economy are struggling; for example, 60% of Americans read below a sixth-grade level. Making these individuals more productive, especially amid ongoing labor substitution challenges, is an extremely difficult task.

This balance becomes even harder to achieve when asset and liability levels are too large and significant inequality exists in the economy, making monetary policy formulation extremely complex.

David: Over the past year, numerous reports have noted that many central banks around the world have stopped purchasing U.S. Treasury bonds and have shifted their investments toward gold. Given this shift in global markets, does the Fed now have to resume buying Treasuries and expand its balance sheet again? In the current phase of the economic cycle, do you believe another expansion of the Fed’s balance sheet is inevitable?

Ray Dalio:

I believe this scenario is possible in the long term. Currently, the Federal Reserve is addressing this issue by shortening the maturity of debt, which naturally increases the risk of debt rollover. The government is attempting to reduce the issuance of long-term debt and maintain low short-term interest rates to curb the rise in long-term rates. At the same time, the government may use diplomatic means to persuade other countries to buy or hold U.S. Treasury securities or attract other forms of capital into the United States.

David Sacks: Over the past year, many economists have strongly opposed tariffs, expressing concerns that tariffs could lead to inflation and reduced consumer spending, potentially negatively impacting GDP growth. The president and administration implemented a series of tariff policies under the Emergency Economic Powers Act, despite the Supreme Court overturning this act in recent weeks. Reviewing the economic impact of tariffs, which of the economists’ predictions about tariff effects have proven accurate, and which have been incorrect? Have they overlooked or misunderstood any fundamental issues?

Ray Dalio:

First, an important aspect of tariffs is tax revenue. A common mistake economists make is excluding taxes from inflation. If your tax burden increases, that is also inflation. Historically, tariffs have been one of the primary sources of government revenue for much of history. For many countries, tariffs are a completely reasonable way to raise funds, and we should take them into account; additionally, foreigners also pay part of the cost of tariffs.

However, from a long-term perspective, one of our major challenges is that our economy is not self-sufficient. We have experienced the hollowing out of manufacturing and the middle class—a significant issue. The question now is whether we should attempt to rebuild these industries, or whether we should continue to maintain massive trade deficits. The U.S. trade deficit is unsustainable, as it relies on foreign capital to offset the gap—a dependency that cannot last. Therefore, we must find a way to correct this problem.

Tariffs can be part of a partial solution, and I believe they are entirely reasonable. But they are not a standalone solution; they must be part of a broader strategy. This includes developing the industries we need, building infrastructure, and attracting related sectors. Doing so is necessary not only for economic reasons but also for geopolitical considerations.

We are entering a world where tensions are escalating, shifting from a multilateral world order to a power-based, adversarial global economy. In this environment, threats between nations are growing, with the possibility of commodity wars and capital wars on the rise. Therefore, we must build economic and political independence as part of shaping the future world.

David Sacks: In this week’s State of the Union address, President Trump shared his vision that tariffs could completely replace U.S. income taxes. Do you believe this is a viable path? Could tariffs serve as an effective tax instrument, even fully replacing other forms of taxation?

Ray Dalio:

I don’t think this is realistic, primarily because of the scale of tariffs and their combined impact—tariffs are a regressive tax system, and we still need to address wealth inequality. In my view, wealth inequality is not only a major social issue but also a productivity issue. We must enhance the productivity of the majority through measures such as infrastructure development, and I believe this is an important problem that needs to be addressed.

David Sacks: According to my analysis, nearly half of all Americans currently work directly or indirectly for the government or for government service providers. Over the past year, the federal workforce has decreased by approximately 317,000 people, or 14% of the total federal workforce. This administration has downsized certain agencies and laid off some employees. Do you believe these individuals will enter the private sector and become more productive, or will they be absorbed by other government agencies, continuing to perform roles that contribute little to economic growth?

Ray Dalio:

I’ve studied this data, but I don’t believe I can fully answer this question. Overall, government efficiency is very low. While governments play an important role, even these roles are carried out extremely inefficiently. Other countries may manage areas like education more effectively—we need fundamental reform.

For example, education is one of the most worthwhile areas for investment. Regardless of where these government officials go, issues surrounding their relocation, their roles, and the inherent inefficiencies of the system remain problematic. In a capitalist system, there is an advantage: if something cannot attract investment or generate profit, it cannot survive. Yet even so, the system is still filled with inefficient human resources and ineffective mechanisms.

David Sacks: Is there currently insufficient productivity-driven economic growth to provide more people with opportunities to increase their income, wealth, and standard of living? Or are people themselves lacking the skills and education needed to be productive, meaning the system has failed them?

Ray Dalio:

The key to success lies in three points. First, educate children so they can become productive members of society and learn to interact civilly with others. Second, society must provide an orderly, civilized environment where people can compete and cooperate to enhance productivity and benefit the majority. Third, you must avoid war, including civil and international conflicts. If these three points are achieved, a nation will succeed. This is a fact repeatedly proven by history.

David Sacks: Are these responses to current societal issues—such as the rise of labor unions, growing support for socialist movements, and discussions around wealth taxes—solvable through education, a civil environment, and avoiding war?

Ray Dalio:

We need to stop infighting; the current situation is that we face irreconcilable differences. When people’s allegiance to their position becomes more important than the system itself, the system is at risk. Our system is in danger because people will not accept either the existing system or alternatives—they will choose to fight.

David Sacks: How does that affect productivity?

Ray Dalio:

When we try to build a sound educational system, we face chaos and inefficiency, with no one truly in control. Looking back at history, Plato wrote around 350 BC about the cyclical theory of democracy and its threats. The current situation resembles Rome during the time of Julius Caesar, who was assassinated in the Senate.

We need a strong leader to drive reforms and ensure the country functions well. But the challenge lies in getting these divided groups to stop fighting and focus on increasing productivity. This requires a firm leader who can compel everyone to change their behavior—ceasing their conflicts and concentrating on shared goals.

David Sacks: It sounds like we’re on an inevitable path that may ultimately force us to choose between some form of socialism and some form of fascism. Is this really the current state of the nation?

Ray Dalio:

I believe so—we are moving toward that “war,” and in fact, we are already in it; I call this the “fifth stage.” This dynamic emerges when a country’s fiscal condition is poor, accompanied by significant wealth and value disparities, irreconcilable divisions, and internal and external threats. I believe this is precisely our current situation.

I’m like a mechanic—my goal isn’t driven by ideology, but by a practical approach to make money in the market and describe what’s actually happening. From my perspective, this is the current situation.

David Sacks: What are your thoughts on the AI bubble? Many people believe that when they invest in technology, they are actually investing in the stocks of these companies. Do you think this is a misunderstanding?

Ray Dalio:

This is indeed a common misconception—there is a significant distinction between technology and company performance. Typically, many startups fail to survive, and only a small fraction achieve success, while the technology itself continues to evolve and improve. I want to emphasize that this dynamic has important implications for the market. We can look back at the dot-com bubble of 2000, or even to the late 1920s: technology continues to advance, but companies do not necessarily survive.

At present, artificial intelligence seems to be consuming everything, but it may end up “eating itself” by failing to generate sufficient profits. We cannot view this solely from a domestic perspective; we must also pay attention to China, where the economic philosophy differs from that of the United States. The U.S. economy is primarily profit-driven, whereas China may regard profit as a secondary consideration. For instance, they might treat artificial intelligence as infrastructure—like electricity—available free to everyone, even open-sourcing it. In this way, they could achieve higher adoption rates and enhance productivity through widespread use.

Under these circumstances, how do we compete? Assuming their technology is nearly as good as ours—and is free and open-source—while we must generate profits to sustain operations. This systemic difference also introduces potential risks for artificial intelligence, though many uncertainties remain.

David Sacks: Looking back at U.S. history, I often ask myself: How did we get to this point? The scale of debt, government spending, the role of the central bank, and the risks we face today all seem like outcomes that could have been avoided with different decisions made earlier. If you could go back in time and become one of America’s Founding Fathers, redrafting the Constitution, what different choices would you make? What provisions would you include in the Constitution to prevent the challenges we face today?

Ray Dalio:

This question reminds me of the “marshmallow test,” in which a child is given the choice between eating one marshmallow immediately or waiting 20 minutes to receive two marshmallows. Children who chose to wait typically demonstrated better decision-making skills in life. This is exactly where our problem lies—the desire for instant gratification and a lack of awareness about whether certain actions will lead to productivity.

However, I must also say that this system has demonstrated remarkable adaptability. We have weathered crises, cleaned up debt, and ultimately emerged stronger, always finding a way to overcome challenges. But balancing fiscal prudence with innovation is a difficult challenge. For example, with today’s artificial intelligence, none of us know what outcomes it will bring or whether it will yield returns. Crafting legal provisions that ensure fiscal responsibility and control without stifling innovation and entrepreneurship is truly difficult to achieve.

Perhaps my main suggestion would be to study history. Understand these patterns and strive for balance in all aspects. The key to everything is balance—whether it’s coping with the pain of failure or the pain of investing in failed projects, finding balance is what matters most.