Ray Dalio Predicts US Debt Crisis Within Three Years

Ray Dalio, founder of Bridgewater Associates, warns that the United States is likely to face a debt crisis within the next three years. He attributes the risk to a mechanical process where debts accumulate faster than they are repaid, causing debt service costs to consume an increasing percentage of cash flow and squeeze out other spending.

Dalio notes that the U.S. currently spends approximately $7 trillion annually while taking in $5 trillion, creating a significant deficit. This imbalance, combined with geopolitical tensions, has reduced the appetite of foreign creditors—specifically China and Japan—to hold U.S. debt. He suggests that rising interest rates, with 30-year yields potentially heading toward 6%, result from this supply-demand imbalance for capital.

He predicts the situation will lead to a "wealth conflict" as credit is rationed. According to Dalio, lower-income sectors, such as housing and auto loans, will be the first to be squeezed out during this process.