Ray Dalio says the US is careening toward a debt crisis before the end of this decade.
The billionaire investor said in a Bloomberg Television interview on Tuesday that he anticipates a debt crisis “within the next three years,” or by the fall of 2029.
The author of “How Countries Go Broke” and founder of hedge-fund behemoth Bridgewater Associates said the scale of the national debt and the rate at which it’s growing mean we’re “approaching our limits.”
US debt breached the $40 trillion mark in August, representing an inflation-adjusted increase of more than $10 trillion, or over 33%, since 2019.
Dalio said that this trajectory is unsustainable because of the soaring cost of servicing the debt. Those interest payments exceed $1 trillion a year or almost one-fifth of the federal budget, leaving less money for Social Security, healthcare, defense, education, and other priorities.
“When debts accumulate faster than they’re paid back, then debt service costs grow,” he said. “That becomes a higher and higher percentage of one’s cash flow. And when that happens, it starts to squeeze out spending. And so then you have a problem.”
Dalio also underscored that geopolitical tensions have tempered other countries’ demand for US debt. Moreover, the AI boom has become “heavily debt-financed,” which threatens to tighten credit in riskier categories such as auto loans, he said.
The Wall Street veteran warned that trend could feed tensions over the wealth gap, as “the people who have less get squeezed the most in that part of the cycle.”
Dalio said he’s seeing even AI hyperscalers “begin to encounter issues” with accessing credit, and he’s “starting to see those limits being hit.”
He suggested that AI companies are overinvesting to ensure they’re competitive in an uncertain future market, potentially inflating a tech bubble.
He added that bubbles burst when people need cash, for example, if they need to repay loans or pay a wealth tax, and that’s a phenomenon to “keep an eye on.”
Dalio has been sounding the alarm on a debt crisis for years. He’s described rising debt as an “aggressive cancer,” and said it “accumulates like plaque” on a financial system and threatens to cause a “heart attack” for the US economy.
He’s also said the debt threat has combined with political division and foreign wars to form a “perfect storm,” and he feels like he’s “on a boat headed to rocks.”
