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Business Insider
27-06-2025
- Business
- Business Insider
Ray Dalio shares 3 trades to weather a US debt spiral
Famed investor Ray Dalio is ringing the alarm on America's growing mountain of debt. The Bridgewater Associates founder has been warning about unsustainable deficits, likening the situation to a looming " financial heart attack" in a recent discussion of his new book "How Countries Go Broke: The Big Cycle." "It's like a plaque building up in the arteries," Dalio said of debt service during an event in New York on Thursday. "You can see interest rates and debt service payments starting to squeeze out other consumption." This year, the US is on track to bring in revenues of around $5 trillion and spend $7 trillion, contributing $2 trillion to the national deficit, Dalio said. On top of that, interest payments to service the debt will come out to $1 trillion. "We have to, in the next, year sell about $12 trillion. We have $1 trillion that we can pay in interest. We have $9 trillion in debt service in terms of principle, and then we have to sell another $2 trillion because we had a deficit," Dalio said. In order to return to financial health, the US must lower its budget deficit from 6.5% to 3% of GDP through a combination of cutting spending, increasing tax revenue, and lowering interest rates, Dalio said. That puts the US in a tough spot because all three parts of the solution are difficult and controversial — just look at DOGE, the ongoing debate over the Big Beautiful Bill, and Trump's feud with Jerome Powell — making it extremely hard to move to an actionable outcome. And with the US at risk of a recession, the debt situation could become even more severe since government borrowing tends to increase in times of economic downturn, Dalio said. Mounting debt creates a supply and demand problem where the government has to raise interest rates to make US debt attractive to investors or print more money. "When faced with the choice, they print money," Dalio said of governments. 3 trades for a debt spiral Luckily, there are some actions investors can take to protect their portfolio from the negative effects of mounting national debt and widening deficits. The most important things one can do are to hedge portfolios against inflation and diversify holdings, Dalio believes. "Look at the value of your portfolio in inflation-adjusted terms, not in nominal terms," Dalio told the audience. Dalio's a big fan of Treasury Inflation-Protected Securities (TIPS), which are government bonds that return more when inflation is high. It's the best investment vehicle for a middle-class American who's risk-averse and looking for inflation protection, in his opinion. "The safest investment that you can get right now is an inflation-indexed bond," Dalio said. "You'll get a bit over 2% of real return above inflation." Gold is another one of Dalio's top picks. The yellow metal has been a time-tested store of value, and it's no different today. Gold provides diversification, inflation protection, and a hedge against geopolitical risks. It's typically negatively correlated to other investments, meaning that it can perform well in times of economic downturn. "There's a saying that gold is the only asset that you can have that's not somebody else's liability," Dalio said. "It's a prudent thing to have somewhere between 10 or 15% of your portfolio in gold." And finally, a little bit of bitcoin can also bolster your portfolio. Dalio has changed his mind on bitcoin over the years, initially calling it a speculative asset and eventually owning a small amount himself starting in 2021.
Yahoo
09-06-2025
- Business
- Yahoo
Ray Dalio on America's $37 trillion debt problem
In today's CEO Daily: Diane Brady talks to Bridgewater founder Ray Dalio. The big story: Trump urges confrontation with L.A. protestors. The markets: Looking up. Analyst notes from UBS on the impact of the L.A. riots, Goldman Sachs on U.S. debt, Pantheon Macroeconomics on China exports rebounding. Plus: All the news and watercooler chat from Fortune. Good morning. This past week, I talked with Ray Dalio, the billionaire investor and founder of Bridgewater Associates, about the period of profound political and economic change we're in right now. In his latest book, How Countries Go Broke: The Big Cycle, he writes about the confluence of forces threatening to undermine U.S. prosperity. (We also ran this excerpt on his views of AI.) Of particular concern to Dalio and others: America's escalating national debt, which is about to hit $37 trillion and could increase by $2.4 trillion under the Republican bill now moving through Congress. In Dalio's view, servicing that debt squeezes out more productive spending, makes us beholden to investors who are increasingly reluctant to buy our bonds (Hello China!), and prompts actions like interest-rate hikes or currency devaluation that can harm the economy. 'You get both the central government and the central bank creating debt to pay for debt and you begin a spiral,' he says. 'There are no easy answers.' He also suggests a '3% solution' that involves halving the annual deficit-to-GDP ratio to 3% by cutting spending, raising taxes, and lowering interest rates. For investors, Dalio has long preached diversification, which he defines as a portfolio of 15 uncorrelated assets. As for Fortune 500 leaders, Dalio's advice is to 'immunize yourself: What is a currency-neutral position? What is an interest rate-neutral position? Do you have secure funding? What is your flexibility for being able to source?' 'We are coming into a period of much greater risk,' adds Dalio. 'I made a lot of money with these kinds of understanding for many years. I'm now at a point in time where I want to pass along knowledge that could be helpful.'More news CEO Daily via Diane Brady at This story was originally featured on Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
04-06-2025
- Business
- Yahoo
Billionaire Ray Dalio warns of 'economic heart attack' as debt crisis escalates
Billionaire Ray Dalio warns of 'economic heart attack' as debt crisis escalates originally appeared on TheStreet. Billionaire investor Ray Dalio issued a dire warning on June 4 about the U.S. economy, stating that it is on the verge of suffering an "economic heart attack" due to unsustainable national debt. In a post on X and a summary of his new book, "How Countries Go Broke: The Big Cycle," He compared the debt system to a circulatory system that is clogged with waste. When debt service becomes an impediment to essential expenditures, and Chinese, Japanese, and even U.S. investors refuse to buy U.S. bonds, he warned, the government must either borrow again or print money—neither outcome is desirable. In the case of the latter outcome, it leads to inflation and the debasement of the dollar. "This dynamic leads to a self-reinforcing debt, money-printing, and inflation spiral," Dalio wrote, while describing the current government trajectory as a textbook example of a country headed for fiscal also believes Bitcoin might get more traction in such a crisis. He said, "Most countries have similar debt and deficit problems. The UK, EU, China, and Japan all do. That is why I expect a similar debt and currency devaluation adjustment process in most countries, which is why I expect non-government produced monies like gold and bitcoin to do relatively well." Dalio explained that the U.S. is $30 trillion in debt, with debt service projected at $10 trillion in 2023—that is twice what the U.S. will receive in revenue from taxes in a year. Dalio predicted that without immediate legislative intervention, the U.S. economy may face a crisis in three to five years. His resolution is a "3 percent deficit plan" involving a combination of spending reductions (tax cuts), some degree of higher taxation, and lower interest rates. Echoing concerns about America's fiscal trajectory, Senator Cynthia Lummis put forward a radical alternative. Lummis has said multiple times that "The BITCOIN Act is the only way to solve our nation's $36T debt." However, in a recent interview with Bloomberg Crypto, Lummis stated that a Bitcoin Reserve of one million BTC (almost 5% of the total), if held for twenty years, could, over time, erase half of the U.S. debt. She said, "My purpose for a strategic Bitcoin reserve is to set it up, have a million Bitcoin, 5% of all Bitcoin, hold it for 20 years, and it will eliminate half of the US debt." Interestingly, New York City Mayor Eric Adams has also recently proposed a Bitcoin bond, named BitBond, to address the U.S. debt crisis. Billionaire Ray Dalio warns of 'economic heart attack' as debt crisis escalates first appeared on TheStreet on Jun 4, 2025 This story was originally reported by TheStreet on Jun 4, 2025, where it first appeared.
Economic Times
04-06-2025
- Business
- Economic Times
Ray Dalio joins Jamie Dimon in warning U.S. debt nearing point of no return, approaching death spiral
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 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. ALSO READ: National Donut Day 2025: Free deals from Dunkin', Krispy Kreme and others Dalio highlighted that, 'Even though this progression has happened many times in history, most policy makers and investors think their current circumstances and monetary system won't change,' adding, 'The change is unthinkable — and then it happens suddenly,' as quoted in the report. 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.
Yahoo
03-06-2025
- Business
- Yahoo
Ray Dalio: ‘We should be afraid of the bond market'
The US is at a low risk of an imminent debt crisis — but high risk in the long term, billionaire investor Ray Dalio writes in a new book. The US government debt situation is 'nearing the point of no return' and approaching a 'death spiral' that could threaten the stability of the world's largest economy, he writes in the book, 'How Countries Go Broke: The Big Cycle,' published Tuesday. Some economists and investors have been sounding the alarm about the deficit for years. But this year, Wall Street has begun to heed caution as President Donald Trump's tariffs and tax bill agenda have stoked volatility in the bond market, which is the usually quiet bedrock of the US and global economies. Investors are increasingly concerned about the potential for Trump's 'big, beautiful' tax bill to 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. In May, the rate the US government has to pay investors for a 30-year loan spiked to its highest level since 2023. That's because investors either sold or refused to buy bonds and demanded higher compensation in exchange for what looked like a riskier loan to the US government. Dalio is the latest billionaire to sound the alarm over the US debt and deficit, with worries that the vast government debt will crowd out spending on essential services to leave a hollowed-out economy that can't work for its citizens and which spooks global investors. There is a 'very low imminent risk' of a US government debt crisis, but a 'very high long-term risk,' Dalio writes in the book. 'Even though this progression has happened many times in history, most policy makers and investors think their current circumstances and monetary system won't change,' Dalio writes. 'The change is unthinkable — and then it happens suddenly.' A higher deficit means the Treasury might need to sell more bonds to finance its spending and interest payments. A debt 'death spiral' describes when a government needs to issue more bonds to raise money to pay its existing debts, but faces less demand and has to pay investors more and more interest for them to bite. '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',' Dalio writes. The higher interest rates investors demand to loan the government money leave less money for running a country, increase interest rates for consumers and businesses and generally leave a country with fewer options to raise cash. 'To me, that suggests that US policy makers should be more, not less, conservative in dealing with the government's finances because the worst thing possible would be to have its finances in bad shape during difficult times,' Dalio writes. Trump's tax bill is set to raise the deficit because it slashes tax revenues without enough cuts to spending to balance things out. The current US deficit is on unsustainable path and is 'more than the market can bear,' Dalio said at an event on May 22 in New York ahead of the book's release. He said that he anticipates it will be roughly three years before the United States is in a 'critical situation.' 'I think we should be afraid of the bond market,' Dalio said. 'I can tell you that this is very, very serious.' Tax cuts can be a boon for Wall Street, and the stock market cheered Trump's tax cuts during his first term. But what makes this time different is adding to the deficit while the federal debt burden has ballooned: The ratio of federal debt to gross domestic product, or the total value of goods and services produced in the economy, soared from 104% in 2017 to 123% in 2024, according to the Treasury Department. 'We're now talking about deficits and a national debt-to-GDP ratio that are really going to be unprecedented, except for recent recessionary times,' Alan Auerbach, a professor of economics at UC Berkeley, previously told CNN. Dalio's book comes out days after JPMorgan Chase CEO Jamie Dimon said on Friday at the Reagan National Economic Forum that a 'crack' in the bond market 'is going to happen.' 'The US long bond is already near its highest levels since the (2008 financial crisis),' said Ajay Rajadhyaksha, an analyst at Barclays, in a recent note. 'As markets absorb the details of the new tax bill, and realize that deficits are likely to keep rising for the foreseeable future, the risk is that longer yields keep rising as well.' Nor have Democrats and Republicans shown they can work together on the problem, Dalio said at the May 22 event. 'It's like being on a boat that's headed for rocks,' he said, 'and they agree that they should turn, but they can't agree on how to turn.' Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
