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Ray Dalio Issues Dire Warning About U.S. Debt: “We’re Approaching the Point of No Return”

Ray Dalio, billionaire investor and founder of Bridgewater Associates — the world’s largest hedge fund — has issued a stark warning about the United States' fiscal trajectory. In his newly released book, How Countries Go Broke: The Big Cycle, Dalio outlines how America’s ballooning debt burden is veering toward a long-term crisis that could have devastating consequences for both the U.S. and the global economy.

According to Dalio, the U.S. is not in immediate danger of a debt collapse, but the long-term risk is “very high,” with a rising threat of a “debt death spiral” — a self-reinforcing cycle of higher borrowing costs, weaker demand for U.S. Treasury bonds, and diminished government spending power.

A Closer Look at the Numbers: Debt Ratios and Investor Fear

The U.S. federal debt-to-GDP ratio, a key measure of a nation’s financial health, has surged from 104% in 2017 to a staggering 123% in 2024, according to Treasury Department data. In historical context, such levels are typically only seen during wartime or severe economic downturns. As this ratio climbs, so does investor skepticism.

In May 2024, the yield on the 30-year U.S. Treasury bond spiked to its highest level since the end of 2023, signaling weakening investor appetite for government debt. Yields rise when investors sell off bonds or demand higher returns for the risk they perceive in lending to the U.S. government.

Ajay Rajadhyaksha, head of macro research at Barclays, commented in a note:

“The U.S. long bond is already hovering near levels we haven’t seen since the 2008 financial crisis. As deficits keep rising and markets digest the implications of the recent tax policy, upward pressure on long-term yields is likely to continue.”

Policy Paralysis and Political Gridlock

Dalio doesn’t place all the blame on fiscal policy alone — he’s equally concerned about political dysfunction. At a Paley Media Council event in New York on May 22, he criticized both parties for failing to unite around a solution.

“It’s like being on a boat heading straight toward rocks,” Dalio said. “Everyone agrees we need to turn, but no one can agree on how to do it.”

Dalio warns that neither Democrats nor Republicans have presented a credible long-term plan to rein in the deficit or restructure entitlements and defense spending — two of the largest components of the federal budget.

The Tax Bill and Its Fallout

Dalio’s book highlights how recent tax policy changes — particularly those pushed during Donald Trump’s administration — have worsened the situation. While the 2017 Tax Cuts and Jobs Act was lauded for temporarily boosting corporate profits and stock prices, it came at a heavy cost. The law is projected to add over $1.9 trillion to the deficit over 10 years, according to Congressional Budget Office (CBO) estimates.

Unlike past tax cuts that were offset by spending reductions, these cuts lacked meaningful fiscal balancing. As a result, Dalio argues, the U.S. is now running budget deficits that are “more than the market can bear.”

JPMorgan Chase CEO Jamie Dimon echoed similar concerns last week at the Reagan National Defense Forum, saying:

“A crack in the bond market is going to happen — and when it does, it’ll shake up the entire financial system.”

Understanding the Debt Spiral

Dalio outlines the mechanics of a debt “death spiral” in simple but chilling terms. When deficits grow and debt servicing costs rise, the government must issue more bonds to cover those costs. But investors, sensing greater risk, demand higher interest rates. This sets off a feedback loop — higher interest rates → more debt issuance → higher rates again — that can eventually spiral out of control.

This situation not only hurts the government’s finances but also ripples through the economy. Higher interest rates make mortgages, car loans, and business credit more expensive, dampening growth and squeezing the middle class.

Long-Term Outlook: Urgent Reform Needed

Dalio concludes that the U.S. still has time to avoid a full-blown crisis — but not much. He urges policymakers to adopt a more conservative fiscal stance and prepare for harder economic times.

“Even though this progression has happened many times in history,” Dalio writes, “most policymakers and investors think their current circumstances and monetary system won’t change. The change is unthinkable — and then it happens suddenly.”

Alan Auerbach, an economics professor at UC Berkeley, added context in an earlier interview with CNN:

“We’re entering an unprecedented era of debt, one that rivals recessionary levels — except this time, there’s no clear plan in place to reverse course.”

Final Thoughts

With interest payments on U.S. debt now surpassing $1 trillion annually, and political will seemingly paralyzed, Dalio’s warning adds yet another urgent voice to the chorus of financial leaders expressing deep concern about America's long-term fiscal health.

Whether or not leaders heed the call, the clock is ticking — and the world is watching.