Ray Dalio, founder of Bridgewater Associates, has raised alarms about the United States’ national debt, predicting an imminent crisis.
What Happened: According to a report by Fortune, Dalio expressed his concerns during his speech at the CONVERGE LIVE event in Singapore on Thursday.
Dalio highlighted a severe imbalance between supply and demand, noting that the debt-to-GDP ratio has reached 122%, surpassing the nation’s economic output. He warned that the U.S. might soon face difficulties selling its debt, as foreign investors like China and Japan are pulling back.
The Congressional Budget Office (CBO) projects that the debt ratio could escalate to 166% by 2054.
“We have a very severe supply and demand problem. Some people think we’ll handle it because we’ve handled it so far. I don’t think they understand the mechanics of debt,” he said, according to the report.
Dalio emphasized that the U.S. will eventually need to sell debt that global markets may not be interested in purchasing, a scenario he described as “paramount importance.”
Dalio suggested that the current federal budget deficit of 7.2% of GDP is unsustainable, advocating for a reduction to around 3%.
He hinted at potential measures such as debt restructuring and political pressure on foreign governments to purchase U.S. debt.
Joao Gomes, a finance professor at Wharton Business School, echoed Dalio’s concerns, noting the declining interest from traditional debt buyers. He warned that if investors demand higher interest rates, it could lead to significant economic disruptions.
Why It Matters: Dalio’s warnings are not new, but they are increasingly urgent.
In February, he cautioned that the U.S. faces an “economic heart attack” if fiscal cuts are not made, comparing the $36 trillion national debt to plaque in the financial system’s arteries.
He emphasized the need for fiscal responsibility, urging the government to reduce deficits to 3% of GDP within three years, or risk economic instability.
His systematic approach to understanding global economic cycles highlights debt as a critical factor, likening it to the circulatory system of financial markets.
The urgency of Dalio’s message is underscored by the potential for “shocking developments” if the U.S. does not address its debt issues promptly.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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