Billionaire Ray Dalio Warns of U.S. Debt Crisis, Calls for Urgent Action

Billionaire investor Ray Dalio has issued a stark warning about the U.S. economy, suggesting that the country is heading toward a dangerous "debt death spiral" due to its growing fiscal deficits.

Speaking in a CNBC interview, the Bridgewater Associates founder explained that a healthy credit system benefits all participants, from borrowers to lenders, as long as debt is used productively to generate income.

However, he believes the U.S. government is now borrowing at an unsustainable pace, potentially outstripping demand from buyers. This could force the government to take on more debt just to cover existing obligations, a scenario that Dalio says could spiral out of control.

He compares the situation to a clogged circulatory system, where excessive debt functions like plaque restricting blood flow. With interest payments alone approaching $1 trillion annually, the ability to allocate funds elsewhere is becoming increasingly constrained.

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Dalio also highlights a critical supply-and-demand imbalance in the credit markets. With the U.S. deficit projected at around 7.5% of GDP, the government must sell a significant amount of debt to cover its shortfall. But if investor appetite fails to keep pace, the situation could deteriorate rapidly. He describes this as a classic debt cycle where borrowing becomes self-perpetuating, leading investors to lose confidence and offload government debt—pushing the system closer to collapse.

To prevent a full-blown crisis, Dalio argues that the U.S. must take decisive action by reducing its deficit to 3% of GDP, a strategy he calls “the 3% solution.” Achieving this, he says, would require both spending cuts and lower interest rates. He warns that failure to implement these measures could lead to dire consequences, urging political leaders to take responsibility before it’s too late.

Kostadin Dimitrov