Ray Dalio, the billionaire hedge fund manager, has issued a stark warning about the United States’ political trajectory under the Trump administration, drawing parallels to past autocratic regimes.
US Risks Debt-Induced Collapse, Warns Ray Dalio
Dalio, the founder of Bridgewater Associates, expressed concerns about the increasing wealth and value gaps, as well as the declining trust in the US. In an interview with the Financial Times on Tuesday, he likened the current political and social climate to the period of the 1930s and 1940s, which led to strong autocratic leadership and state intervention in the private sector.
He pointed to President Donald Trump‘s recent decision to acquire a 10% stake in chipmaker Intel (NASDAQ:INTC) as an example of this autocratic leadership. He also criticized the silence of many investors, attributing it to fear of retaliation if they criticize the president’s policies.
He noted that the U.S. government is spending about $7 trillion a year while only raising $5 trillion in revenue, creating a significant imbalance that would require massive new debt issuance.
"The great excesses that are now projected as a result of the new budget will likely cause a debt-induced heart attack in the relatively near future," stated Dalio.
"I'd say three years, give or take a year or two."
Dalio, Dimon Warn Of Debt Crisis And Bond Market Strain
Dalio’s warning comes in the wake of his previous concerns about the U.S.’s fiscal situation. In a recent interview, he advised investors to consider allocating about 15% of their portfolio to either gold or Bitcoin, given the looming US debt crisis. He pointed out that the US dollar is being undermined due to excessive borrowing and deficit spending, leading to currency debasement.
Furthermore, Dalio has also raised concerns about the long-term stability of the U.S. dollar, pointing to historical cycles that could lead the country back to a gold-backed currency.
A brewing storm is taking shape in the bond market, warned JPMorgan Chase CEO Jamie Dimon, who believes years of unchecked debt and monetary expansion have left the financial system exposed to sudden rupture.
"You're going to see a crack in the bond market," Dimon cautioned, alerting regulators and investors to an impending dislocation.
Debt Surpasses Pre-Pandemic CBO Projections
The U.S. national debt has been a growing concern, reaching an all-time high of $37 trillion, as reported by the Treasury Department. This figure exceeded the Congressional Budget Office’s pre-pandemic projections for 2030, mainly due to the multi-year COVID-19 pandemic that began in 2020.
Trump’s approval of the Republicans’ tax cut and spending bill earlier this year also contributed to the sharp rise in debt, leading to additional government expenditure. The Congressional Budget Office estimates that the law will add $4.1 trillion to the national debt over the next decade.
READ NEXT:
Image via Shutterstock
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
