Star investor Ray Dalio fears that the United States could be directly to a dangerous downward spiral. Fiscal carelessness can become the risk of global stability.
• Ray Dalio speaks warning
• Markets would already show cracks
• Appeal to politics
In his new book “How Countries Go Broke: The Big Cycle”, the well-known investor and Bridgewater founder Ray Dalio warns of a dangerous development in US financial policy. Although the immediate risk of a debt crisis is low, in the long term, however, the largest economy in the world is heading for a “death spiral” that could not only threaten the prosperity of the United States, but also the stability of the global markets.
The way to the debt trap
According to CNN, Dalio describes a well -known dynamic from economic history: states are in financial need when increasing debts lead to higher interest payments, which in turn require new debts. Such a vicious circle can develop into a “Dehth Spiral” – a scenario in which more and more debts have to be accepted in order to operate existing obligations, while investors are only willing to borrow against ever higher interest rates.
According to Dalio, the United States is already well advanced in this way. The situation is currently still stable, but the fiscal location is increasingly deteriorating. In particular, tax policy under Trump – above all his “Big Beautiful Bill” – massively increases the debt burden. At the same time, political measures would be missing, Dalio continued.
Markets probably show the first cracks
According to the investor, the first effects would already be noticeable on the bond market. Because in May the returns for 30-year US state bonds reached the highest level since 2023. Higher interest rates could relieve investors in view of the rising debts by compensating for the perceived risk. For the government, this should mean that loans become more expensive, which should also increase the pressure on the state budget.
“I think we should be afraid of the bond market. I can tell you that the situation is very, very serious,” quotes CNN Dalio in this context. In his opinion, there would be a risk that the United States could enter into a critical phase in around three years.
Ray Dalio is not alone with his warning: JPMorgan boss Jamie Dimon recently spoke of a possible “crack” in the bond market. So the worries seem to increase that the markets are the high New debt cannot cope with permanently.
A political dead end
Political paralysis in Washington is particularly worrying for Dalio. Democrats and Republicans would recognize the problem, but would not find a common line for a solution. “It is as if you are sitting on a boat that is heading for rocks. And you agree that you should turn, but cannot agree on how to turn,” said Dalio according to CNN.
The appeal to politics
The stock exchange expert therefore calls for more budget discipline. Especially in economically stable times, the government has to handle its finances more carefully in order to remain capable of action in crises. “For me, this means that the political decision -makers in the United States should be conservative and no less conservative in dealing with the state finances, because the worst would be if it was difficult for state finances in difficult times,” he warned. The story shows that systems are often considered stable until they suddenly tip over. Although there was a “very low risk”, but a “very high long -term risk”, as Dalio’s book states.
Editor finance.net