Bridgewater Founder Ray Dalio Warns U.S. Debt Nearing ‘Inflection Point’
In a recent appearance on CNBC’s “Squawk Box,” Ray Dalio, the founder of Bridgewater Associates, issued a warning about the escalating U.S. government debt. Dalio emphasized that the mounting debt could lead to bigger economic, political, and social problems for the country.
The U.S. currently holds a total debt of $33.7 trillion, which surged by 45% since the onset of the Covid-19 pandemic in early 2020, according to Treasury Department data. Of this total, $26.7 trillion is owed by the public, and the government racked up a $1.7 trillion deficit last year as it tried to maintain spending levels.
Meanwhile, as the Federal Reserve raised interest rates to combat inflation, the government spent $659 billion on net interest costs in fiscal 2023 to finance the debt. Dalio cautioned that this approach is a recipe for trouble and could lead to long-term problems, as evidenced by the numbers.
In addition to these concerns, Dalio also pointed out that foreign buyers, who account for 40% of the demand for U.S. Treasurys, have been reducing their holdings, creating a supply-demand issue. Foreign holdings of U.S. government debt have decreased by $253 billion, or 3.3%, over the past year, with China significantly reducing its holdings by 17%.
As the debt continues to grow, Dalio stressed that it will accelerate further, compounding the supply-demand problem. He also highlighted the internal political and social conflict issues that are exacerbating the situation. All these factors signal that the U.S. is approaching an “inflection point” in its debt problems, according to Dalio.
The warnings from Dalio serve as a stark reminder of the challenges that lie ahead as the U.S. grapples with its escalating debt and the potential consequences it could have on the economy and society.
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