Ray Dalio, Chief investment officer of Bridgewater Associates, warned, in an interaction with CNBC, that the US was facing a severe supply-demand issue with its debt, which according to him could have profound global economic consequences.
Dalio pressed the issue by stating that the US needs to sell a substantial amount of debt, but the there might not be enough buyers willing to buy it. He referred to this issue as imminent and of "paramount importance."
Dalio highlighted that the US deficit, currently projected at 7.2 percent of GDP, must be reduced to around 3 percent. “That’s a big deal. You are going to see shocking developments in terms of how that’s going to be dealt with,” he added.
When asked whether this could lead to a period of austerity, he suggested that possible outcomes might include debt restructuring, the US pressuring other countries to buy its debt, or even cutting payments to certain creditor nations.
Drawing historical parallels, Dalio pointed to the economic policies of Germany in the 1930s, where debt write-downs, tariff hikes, and protectionist policies were used to bolster the domestic economy. He argued that similar patterns are playing out today, with rising nationalism, protectionism, and geopolitical tensions shaping global economic policies.
Dalio also addressed the potential fallout of escalating trade disputes, warning that tariffs could intensify conflicts between countries. While he clarified that he was not necessarily referring to military confrontation, he stressed that economic battles—such as those between the US, Canada, Mexico, and China could have serious worldwide ramifications.
He further urged observers to pay close attention to how these economic and geopolitical tensions unfold, as they could bring unexpected and disruptive changes.
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