U.S. Debt Crisis Could Trigger Global Economic Turmoil, Warns Ray Dalio

Bridgewater's Ray Dalio has expressed grave concerns over the U.S. debt situation, warning that an unsustainable imbalance between debt supply and demand could have severe global repercussions.

With the U.S. national debt surpassing $36.2 trillion, Dalio argues that the country may soon find itself unable to attract enough buyers for its debt. This could trigger a series of disruptive economic events, affecting not only the U.S. but the broader world economy.

Dalio has repeatedly stressed that reducing the U.S. deficit is critical. He believes the country’s debt-to-GDP ratio, which is currently alarmingly high at 125%, must be lowered to around 3%. Without action, Dalio foresees a potential restructuring of U.S. debt, which could lead to instability in global markets. He has also suggested that the U.S. may be forced to press other nations to buy its debt or even suspend payments to some creditors.

Amid rising tensions in the global economy, Dalio has linked the U.S. debt crisis to broader issues such as geopolitical instability and trade uncertainties. He sees these issues compounding the U.S.’s financial troubles, making it even more difficult to address the growing deficit. Dalio’s warning highlights a critical juncture for U.S. economic policy, suggesting that immediate action is needed to prevent a full-blown financial crisis.

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The investor’s “3% solution,” which combines spending cuts, tax reforms, and careful interest rate management, remains his preferred method for addressing the deficit. However, Dalio remains skeptical about efforts that don’t tackle spending directly, cautioning that only a comprehensive approach will be effective in reducing the national debt and securing future economic stability.

Alexander Stefanov