Ray Dalio issues a stern warning: The U.S. must immediately cut its debt, or the economy will face a "heart attack" crisis
Ray Dalio stated that Trump should commit to reducing the U.S. budget deficit from 7.5% of GDP to 3%; if no action is taken, the U.S. may face a "heart attack" in the bond market. In addition, he also believes there is a risk of a "debt death spiral" in the private credit sector
Hedge fund giant Ray Dalio has issued a new warning about the U.S. economy, stating that if Trump does not significantly reduce the debt, there will be terrible consequences.
On Thursday, Dalio gave a serious warning about the state of the U.S. economy during an interview with CNBC at the World Government Summit in Dubai. He compared the current situation in the U.S. to a patient facing severe health issues, emphasizing the need for decisive action.
Dalio stated:
It’s like if I were a doctor talking to you about your condition, I would say that the situation is very, very serious. All of these are major issues.
What you need to do is reduce the deficit from about 7.5% of GDP to 3%, and you can do that. You can take certain measures to reduce the deficit and make it healthier, so the real issue is a political one.
Dalio's warning highlights the severity of the U.S. debt problem, as the total U.S. national debt has continued to rise in recent years, reaching approximately $36.22 trillion as of February 11, with $28.9 trillion held by the public in the form of securities.
High levels of debt not only increase the government's interest expenses but also make the economy more vulnerable in future crises, while potentially leading to rising inflation and placing a heavy burden on future generations.
Dalio called on government officials and leaders to take decisive action, warning:
If no action is taken, the U.S. could face an "economic heart attack" or a "bond market heart attack."
The government needs to be responsible, and leaders should commit to reducing the U.S. budget deficit from 7.5% of GDP to 3%, or resign.
This warning not only targets public debt but also addresses potential risks in the private credit sector. Dalio believes there is a risk of a "debt death spiral" in the private credit sector. He explained:
When debtors need to borrow new debt to pay off old debt, the debt death spiral accelerates, and this situation worsens, ultimately leading to investors being unwilling to hold the debt