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Ray Dalio fears America is headed for a debt crisis — and keeps finding ever-more colorful ways to warn people about it.
The US debt has roughly tripled over the past 20 years to around $37 trillion, and annual interest payments now stand at around $1 trillion.
On an episode of the “Modern Wisdom” podcast released this week, Dalio said that America’s debt headache is “like being on a boat headed to rocks.”
Even though the politicians can see the danger, he said, they’re “arguing about how to turn” as they’re worried about angering voters by raising taxes or cutting benefits. He summed up his frustration with the status quo: “So, politics.”
The billionaire founder of Bridgewater Associates has been warning of the dangers of debt since at least 2018, when he published “Principles for Navigating Big Debt Crises.”
In the book, he argued that large amounts of borrowing inflate a bubble, which is followed by a contraction once the debts become unpayable. Pointing to the financial crisis a decade earlier and other past debacles, he argued that a debt cycle follows a predictable progression like a “disease.”
In late 2022, Dalio told the Greenwich Economic Forum that debt, political division, and foreign wars were a “perfect storm” facing the country.
In February this year, he said that “debt accumulates like plaque” in a financial system and could result in a “heart attack” for the US economy in the form of the central government and central bank going broke.
Dalio wrote in his latest book, “How Countries Go Broke,” that “debt problems spread very quickly, like an aggressive cancer.”
He also said that the US debt is close to triggering a death spiral in which the government needs to borrow more to cover the interest on its debt, and interest rates rise as holding US dollars and Treasurys becomes riskier.
Many economists have warned that the government’s interest payments could grow so large that it would have to raise taxes or cut social services just to service its debt.
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