Ray Dalio Warns of US Debt Crisis Within Three Years

Bridgewater Associates founder Ray Dalio warned that the United States faces a potential debt crisis within approximately three years. Dalio cited a $2 trillion shortfall between $5.5 trillion in revenue and $7.5 trillion in spending, urging investors to reduce bond holdings and allocate 10% to 15% of portfolios to gold to hedge against fiscal instability.

To avoid this crisis, Dalio advocated for reducing the budget deficit from 6% to 3% of gross domestic product through spending cuts, increased tax revenue, and lower interest rates. This warning comes as Treasury Secretary Scott Bessent attempts to stabilize the bond market by boosting buybacks of long-dated debt.

Rebecca Patterson of the Council on Foreign Relations also highlighted increasing volatility in the U.S. bond market, attributing the instability to actions by the U.S. Treasury. Patterson noted that U.S. debt-to-GDP is approximately 100% and projected to reach 120% over the next decade. She argued that the current yield pickup from longer-term assets does not justify the risk, suggesting that the U.S. bond market is beginning to resemble a developing market in its volatility.