Billionaire Ray Dalio Says US Government Will Be Forced To Deal With Incoming ‘Debt Bomb’ – Here’s How

Bridgewater Associates founder Ray Dalio says that America is going to be forced to deal with its soaring debt problem.

The billionaire tells his 1.7 million followers on the social media platform X that the US will likely lower interest rates and print money to address the nation’s ballooning debt obligations.

However, he warns that such measures are not very effective.

“When countries have too much debt, lowering interest rates and devaluing the currency that the debt is denominated in is the preferred path government policy makers are most likely to take, so it pays to bet on it happening. At the moment of my writing, we know that the projections are for big deficits and big increases in government debt and debt service expenses ahead…

I also shared last week why I believe the political system in the US won’t be able to get its debt problems under control. We know how debt service costs (paying back interest and principal) will grow rapidly to squeeze out spending, and we also know that, at best, it is highly doubtful that there will be an increase in demand for the debt commensurate with the supply that needs to be sold. I laid out in detail what I think the implications of all this are in ‘How Countries Go Broke,’ where I offer a description of the mechanics behind my thinking. Others have stress tested it, and thus far there has been almost total agreement that the picture I am painting is accurate.”

Dalio believes the US will eventually have to both cut spending and raise taxes to save itself from the looming fiscal crisis.

“There is no way that the deficit/debt bomb problem can be sustainably dealt with unless there is a mix of tax revenue increases and spending decreases that are determined in a bipartisan way. Our representatives in Washington, D.C., both Republicans and Democrats, know this is true. They understand the need to reduce the deficit by having those from both sides chip in a bit (e.g., a 4% increase in tax revenue and a 4% spending cut) which would lead to a supply/demand balance improvement for US debt which in turn would lower interest rates.”

 

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