Ray Dalio warns that mounting U.S. debt problems could lead to ‘shocking developments’

Ray Dalio, founder of Bridgewater, warned on Wednesday that the U.S. faces a critical supply-demand problem regarding its debt, which could severely disrupt the global economy. With the national debt exceeding $36.2 trillion, Dalio emphasized that the U.S. will soon have to sell more debt than the world is willing to buy, a situation of "paramount importance." He also stressed that the U.S. deficit needs to reduce from 7.2% to around 3% of GDP, which will result in significant developments that could be shocking.

Dalio speculated that the U.S. might resort to debt restructuring, pressuring other countries to buy its debt, or even halting payments to certain creditors. He drew parallels to historical political and geopolitical shifts, suggesting that unexpected developments are likely.

In the same discussion, Dalio also addressed trade tensions, noting that tariffs could lead to conflicts between nations. He cited historical patterns, drawing comparisons to 1930s Germany, which saw a mix of debt write-offs, tariff hikes, and protectionist policies. Dalio warned that these types of disputes could lead to significant consequences, though he clarified that he wasn't predicting military confrontations but rather economic and political struggles.