Ray Dalio, founder of Bridgewater Associates, warned Tuesday that the United States could “go broke” due to mounting government debt problems, as the nation grapples with unprecedented interest payments reaching $2 million per minute.
What Happened: In a post on X, Dalio announced an upcoming book examining how countries face financial collapse, titled “How Countries Go Broke: Principles for Navigating the Big Debt Cycle.” His warning comes as U.S. debt has surged past $36 trillion, with interest payments exceeding $892 billion in fiscal year 2024.
The International Monetary Fund projects U.S. annual interest payments will reach $1.7 trillion by 2034, with cumulative interest costs over the next decade approaching $12.9 trillion. The U.S. currently accounts for 34.6% of global debt, which stands at $102 trillion.
“Big debt crises are inevitable,” Dalio wrote, explaining that lending is rarely perfectly aligned with the income needed to service it. “Even though this progression has happened many times in history, most policymakers and investors think their current circumstances and monetary system won’t change.”
Why It Matters: The debt situation has sparked concern among other financial experts. JPMorgan’s Jack Manley highlighted a “peculiar chicken-and-egg situation” where high interest rates, intended to fight inflation, may actually be contributing to economic resilience and continued inflationary pressures.
Dalio suggests that while debt crises can be managed through proper restructuring and monetary policy, they require a careful balance between deflationary measures (debt restructuring) and inflationary approaches (money creation). He emphasized the importance of spreading debt reduction over time rather than attempting dramatic short-term fixes.
The IMF has warned that without significant fiscal adjustments, including spending cuts and increased taxes, the U.S. debt burden could severely impact government budgets and economic growth. The mounting debt has also raised concerns about the dollar’s status as the world’s primary reserve currency.
Dalio plans to release additional installments of his study, examining historical patterns and potential solutions for navigating the current debt cycle.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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