Ray Dalio joins Jamie Dimon in warning U.S. debt nearing point of no return, approaching death spiral

Economic Times

04-06-2025

Billionaire investor Ray Dalio has sounded a dire warning for the future of the US economy, pointing out that the country is gradually moving toward a "death spiral" that can threaten the stability of the world's largest economy, as per a report.
Dalio wrote in his new book called 'How Countries Go Broke: The Big Cycle', which was published on Tuesday, that "there is a very low imminent risk of a US government debt crisis, but a very high long-term risk,' quoted CNN.Dalio's warning in his book comes just days after JPMorgan Chase CEO Jamie Dimon recently said that a 'crack' in the bond market 'is going to happen,' quoted CNN.
Their warnings come amid US president Donald Trump's tariffs and tax bill agenda, which have increased volatility in the bond market, according to the report. Investors are also worried that Trump's 'big, beautiful' tax bill might put pressure on the federal debt burden at a time when there is uncertainty about the outlook for the economy and the appeal of US assets, reported CNN.
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According to the report, a higher deficit would lead the Treasury to sell more bonds to finance its spending and interest payments, which would cause debt 'death spiral." The term debt death spiral is used to describe a government that needs to issue more bonds to raise money to pay its existing debts but faces less demand and has to pay investors more interest, reported CNN.
Dalio also wrote in his book that, 'A spiral of rising interest rates leading to worsening credit risk, leading to less demand for the debt, leading to higher interest rates is a classic debt 'death spiral',' as quoted in the report.
Is the US about to face a debt crisis now?No, Dalio says the risk is low right now but very high over the long term, meaning it's a problem that's building up slowly.
Should I be worried about my investments? It is good to stay informed and consider how changes in the economy might affect your financial plans.