Ray Dalio warns of U.S. debt crisis within three years

Ray Dalio, founder of Bridgewater Associates, has warned that the United States could face a debt crisis within the next three years, potentially by 2029. Dalio described the situation as a “debt-induced economic heart attack,” where the rapid growth of debt and interest obligations begins to squeeze out essential government spending.

As of October 2024, U.S. federal public debt has surpassed $40 trillion. The cost of servicing this debt has become a significant fiscal burden, with net interest payments exceeding $1 trillion annually—a figure that has recently surpassed defense spending. This rising cost is driven by a cycle where increased debt necessitates more bond issuance, leading investors to demand higher yields.

Dalio also noted that geopolitical tensions and rising interest rates in countries like Japan may reduce international demand for U.S. Treasuries. Additionally, he highlighted that the AI boom has been heavily debt-financed, which could lead to credit tightening in other sectors and exacerbate wealth inequality.