Ray Dalio says U.S. reaching a point where our debt problem gets even worse

Hovering U.S. authorities debt is reaching a degree the place it should start creating bigger issues, Bridgewater Associates founder Ray Dalio mentioned Friday.

The hedge fund titan warned throughout a CNBC look that the necessity to borrow increasingly more to cowl deficits will exacerbate the political and social issues the nation is going through.

“Economically sturdy means financially sturdy,” Dalio mentioned on “Squawk Field.” “Financially sturdy means: do you earn greater than you spend? Do you’ve a superb earnings assertion as a rustic? And do we have now a superb stability sheet?”

The U.S. is $33.7 trillion in debt, a complete that exploded by 45% for the reason that Covid pandemic in early 2020, in response to Treasury Division knowledge. Of that whole, $26.7 trillion is owed by the general public. Final yr, the federal government rang up a $1.7 trillion deficit because it sought to maintain up the tempo of spending.

Because the debt constructed up and the Federal Reserve raised rates of interest to attempt to tamp down inflation, the federal government spent $659 billion on web curiosity prices in fiscal 2023 to finance the debt.

Dalio mentioned that may be a recipe for bother.

“The more severe that will get, the extra we’re going to have that long-term downside,” he mentioned. “You’ll be able to see it within the numbers. It is only a matter of numbers. We’re close to that inflection level.”

Together with the essential finances points, Dalio additionally cautioned that international consumers, who make up about 40% of demand for U.S. Treasurys, have been backing off, making a supply-demand downside.

Knowledge by means of January signifies that international holdings of U.S. authorities debt whole $7.4 trillion, down $253 billion, or 3.3% over the previous yr. China specifically has reduce its holdings strongly, pulling again 17% throughout the interval.

“You wish to maintain spending on the identical degree, there may be the necessity to get increasingly more into debt. The best way that works, it accelerates,” Dalio mentioned. “We’re on the level of that acceleration, which creates the supply-demand downside. It is made worse by the opposite points that we’re speaking about, the interior political problem, the interior social battle problem.”

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