Billionaire hedge fund manager Ray Dalio has a bearish outlook on the US economy, citing the escalating debt crisis as the Trump administration attempts to wrangle an annual deficit that topped $1.8 trillion in fiscal 2024 alone.
In an interview with Bloomberg's Odd Lots podcast published Monday, Dalio said the US is on the brink of experiencing an "economic heart attack" within the next three years if the administration does not commit to actively reducing the deficit, which now makes up about 7.5% of GDP.
"When debts rise relative to the incomes that are needed to service the debt, it's like plaque building up in the circulatory system," he said, adding the debt crisis has now entered a critical "inflection point" as interest payments pile on top of existing debt.
Since 2000, the national debt has more than tripled to an estimated $36.2 trillion, according to the US Treasury Department.
Dalio, who founded hedge fund giant Bridgewater Associates, suggested reducing the deficit to 3% of GDP through a mix of tax adjustments and spending cuts.
“If you don’t do that, then you own it, OK? You have to take responsibility for the consequences,” he said.
Dalio compared the potential economic situation to the 1971 monetary system crisis, suggesting consequences could include a spike in interest rates and a depreciation of fiat currencies as central banks print more money in the midst of potential debt restructurings.
"If it gets bad, then you could have more extreme things happen," he warned.
The looming debt crisis comes on the heels of greater growth concerns from Wall Street watchers.
Rates have declined as investors worry that President Donald Trump's tariff plans will hurt economic expansion and the labor market, potentially prompting the Federal Reserve to lower the cost of borrowing even as inflation remains elevated.
Recent data has highlighted these growth concerns, marking the return of "bad news for the economy is bad news for stocks." On Monday, ISM Manufacturing prices paid came in at their highest since June 2022 while new orders fell into contraction, suggesting a "stagflationary" environment in which growth slows but price increases remain elevated.
Read more: From $5 eggs to insurance premiums, here's where prices are rising
Investors have also taken notice. Consumer confidence plummeted in February, notching its biggest monthly decline in nearly four years as 12-month inflation expectations jumped and recession fears escalated. The latest consumer sentiment reading also highlighted greater concerns around tariffs and the impact those and other policies could have on inflation and the broader economy.
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