Zinger Key Points
- Ray Dalio says the supply-demand imbalance in the bond market can be improved if the projected deficit could be lowered to 3%.
- "Our problem isn’t the deficit. Our problem is the politics, the fragmented politics," Dalio says.
- Get the Real Story Behind Every Major Earnings Report
Bridgewater Associates founder Ray Dalio believes the key to lowering interest rates and balancing out the bond market is reducing the U.S. budget deficit.
What To Know: In an interview from the World Economic Forum on CNBC’s “Squawk Box” Tuesday morning, Dalio indicated that there’s a supply-demand imbalance in the bond market that can be improved if the projected deficit could be lowered to 3%.
“We have a projected deficit of 7.5% of GDP. That means all those bonds have to be sold,” Dalio said.
“When I calculate who are the buyers of the bonds, there will not be enough buyers. And then where it could be worse in this dynamic is those who own bonds also sell the bonds, and when that happens there’s a tremendous supply … and then we have problems. We can get into what it looks like, but it’s happened many times before. So we have to stabilize that, and we can do it.”
The billionaire investor told CNBC that he calls it “the 3% solution.” Most people understand that you can lower the deficit by cutting spending and raising taxes, but they often overlook what happens when the economy is strong.
“If you do it when the economy is good, you will get a lower interest rate. A lower interest rate means less cost of the debt because we have so much debt that the interest costs on the debt is more important than spending and taxes,” Dalio said.
The federal budget jumped close to 40% in 2024 versus the prior year, pushing the national debt above $36 trillion. Dalio told CNBC that it’s up to the politicians to work together to figure it out. It’s certainly achievable if everyone agrees on the 3% target, he added.
“Our problem isn't the deficit. Our problem is the politics,” Dalio said. “The fragmented politics.”
Read Next:
Image via Shutterstock
© 2025 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
