Ray Dalio warns of US debt crisis: Global economy may face "shocking" changes

Imbalance between supply and demand of US Treasury bonds may trigger global economic turmoil.

Bridgewater Associates founder and billionaire Ray Dalio issued a warning on Wednesday, March 12, stating that the United States is facing a serious debt supply and demand issue, which could have profound implications for the global economy. He believes that the amount of government bonds that the United States needs to sell has far exceeded market demand, leading to a series of 'shocking' fiscal changes.

This is not Dalio's first warning about the continuously rising debt level in the United States. As of now, the total amount of US national debt has exceeded $36.2 trillion, with a government fiscal deficit reaching 7.2% of GDP, far above a healthy level. Dalio bluntly stated that the US fiscal deficit must be compressed to 3% of GDP, otherwise the global market may witness unprecedented turbulence.

Debt pressure is imminent, and the United States may take extreme measures.

At the CONVERGE LIVE event in Singapore, Dalio emphasized to CNBC reporter Sara Eisen that the occurrence of this debt crisis is not a distant issue, but one that is imminent and crucial. He stated, 'The United States must sell a large amount of national debt, but the market is not willing to buy, this is a serious supply-demand issue.'

When asked whether the United States might enter fiscal tightening due to debt issues, Dalio proposed three possible responses:

Debt restructuring - the United States may renegotiate or modify some debt terms to ease repayment pressure.

Pressuring other countries - the United States may use diplomatic or economic means to force other countries to purchase US Treasury bonds.

Reduce payments to some creditor countries — in extreme cases, the United States may even choose to suspend or reduce debt payments to certain countries.

He added, "Just as we are witnessing political and geopolitical transformations, many things may seem unimaginable to most people, but history repeats itself, and we will witness some astonishing developments."

Trade war risks rise Dalio: tariffs will intensify international conflicts

In addition to debt issues, Dalio also expressed concerns about the uncertainty of global trade policies. He pointed out that the market is experiencing a 'roller coaster of tariffs,' and US trade policies are triggering a series of market fluctuations, exacerbating Wall Street's anxiety.

In recent years, the U.S. government has been promoting an 'America First' economic strategy, imposing tariffs on major trading partners such as Canada, Mexico, and China, in an attempt to reshape the global economic order. However, Dalio warned that this approach could intensify international conflicts. He compares the current situation to Germany in the 1930s, when the country responded to economic difficulties by reducing debt, increasing tariffs, and developing the domestic market.

He analyzed: "The country is becoming nationalist, protectionist, and even militarized, which is the pattern of historical development."

Dalio emphasizes that the risks brought by the tariff war are not limited to the economic level, but may also lead to confrontation and conflict between countries. He pointed out: 'When countries such as the United States, Canada, Mexico, and China enter into tariff disputes, this will trigger conflicts, although it may not necessarily be military confrontation, but the consequences cannot be ignored.'

Dalio: I am a neutral observer without any political stance

Facing these major economic and trade challenges, Dalio said he was only taking a neutral position to analyze global trends. He compared his role to that of a mechanic or doctor, focusing on diagnosing and explaining problems rather than having political intentions. "I am not an advocate of ideology, I only make observations and recommendations based on history and data," he said.

This conversation took place on the occasion of Dalio and Salesforce CEO Marc Benioff sharing the stage, discussing the future direction of the global market. With the ongoing deterioration of the US debt issue and the increasing uncertainty brought about by trade policies, market investors undoubtedly need to be more cautious in dealing with this potential financial storm.

This article Ray Dalio warns of a US debt crisis: the global economy may face a "shocking" change, first appeared on Chain News ABMedia.