Ray Dalio, founder of Bridgewater Associates, expressed concern over the U.S. government's financial trajectory following Treasury Secretary Scott Bessent's announcement of a plan to buy back over $4 billion in government debt.
Dalio highlighted that the U.S. is currently spending approximately 40% more than its revenue, leading to a significant budget deficit, which he estimates peaked at $432 billion in July. He emphasized that the total debt now far exceeds annual revenue, with debt service payments potentially reaching $11 trillion, or 200% of revenue.
Dalio proposed a three-part strategy to address the deficit: reducing spending, increasing tax revenue, and lowering interest rates, all of which he believes must occur simultaneously to avoid a traumatic adjustment. He warned that without immediate action, the U.S. could face a debt crisis within three years, influenced by various factors such as political changes or military conflicts.
In light of these risks, Dalio advised investors to reduce their exposure to debt assets and consider allocating 10% to 15% of their portfolios to gold and a small portion to bitcoin. His comments come amid a volatile week for U.S. financial markets, where rising long-term Treasury yields have negatively impacted stock performance