Ray Dalio, who is the founder of Bridgewater Associates LP, was recently seen speaking at the Greenwich Economic Forum in Greenwich, Connecticut, US, on Tuesday, October 3, 2023. According to Bloomberg | Bloomberg | Getty Images, the billionaire investor raised concerns about the rapidly increasing U.S. debt and deficits, suggesting that it could potentially instill fear in investors eyeing the government bond market. During an event for the Paley Media Council in New York, Dalio expressed his apprehensions, stating, “I think we should be afraid of the bond market. It’s like… I’m a doctor, and I’m looking at the patient, and I’ve said, you’re having this accumulation, and I can tell you that this is very, very serious, and I can’t tell you the exact time. I would say that if we’re really looking over the next three years, to give or take a year or two, that we’re in that type of a critical, critical situation.”
The founder of Bridgewater Associates, known for being one of the largest hedge funds globally, has been cautioning about the expanding U.S. deficit for quite some time now. Recent developments have seen investors demanding lower prices to acquire the bonds covering the government’s extensive budget deficits, leading to an increase in yields on the debt. Last week, mounting concerns regarding the fiscal situation prompted a significant credit rating downgrade from Moody’s. The 30-year Treasury yield traded at levels not witnessed since 2023, at approximately 5.14% on Thursday. With mounting financing costs, escalating spending, and diminishing tax receipts, deficits have been on an upward trajectory, propelling the national debt past the $36 trillion mark. By 2024, the government had allocated more funds towards interest payments compared to any other expenditure aside from Social Security, defense, and healthcare. Dalio highlighted, “We will have a deficit of about 6.5% of GDP — that that is more than the market can bear.”
Despite the grim financial outlook, Dalio expressed skepticism about politicians’ ability to reconcile their differences and alleviate the country’s debt burden. In a party-line vote earlier on Thursday, House members passed legislation that slashes taxes and boosts military spending. This bill, now awaiting Senate approval, could potentially inflate the U.S. government’s debt by trillions, widening the deficit at a time when concerns over inflation due to increased tariffs are already impacting bond prices and driving up yields. Dalio remarked, “I’m not optimistic. I have to be realistic. I think it’s the essence of the challenge of our country that anything related to bipartisanship and getting over political hurdles… essentially means ‘give me more,’ which leads to these deficits.”
