Ray Dalio Warns: US Debt Growth Echoes Pre-WWII Era

Ray Dalio Sounds Alarm on Mounting US Debt Risks

Ray Dalio, the founder of the giant hedge fund Bridgewater Associates, has issued a stark warning about the trajectory of US public debt, drawing unsettling parallels between the current situation and the period leading up to World War II. In an interview with Bloomberg TV, the 76-year-old Dalio expressed deep concern about the speed at which debt is accumulating, stating that it's "like plaque building up in the arteries, which ultimately squeezes the capacity to spend in the economy."

Soaring Public Debt: A Ticking Time Bomb

Dalio has long been a prominent voice cautioning against the risks of escalating US debt. In previous statements, he described the problem as threatening the global monetary order. Dalio places blame on politicians from both parties, calling for a dual approach to address what he calls the "deficit/debt bomb," through a combination of tax increases and spending cuts.

Alarming Figures

Estimates from the Congressional Budget Office (CBO) indicate that US public debt reached 99% of GDP last year. This figure is projected to rise to 116% by 2034, a level unprecedented in US history. This increase reflects structural challenges facing the US economy, including rising healthcare costs, social security programs, and military spending.

More Than Just Debt: An Environment Ripe with Risk

Dalio believes that rising public debt is only part of the bigger picture. He points out that ongoing global conflicts and the widening gap between rich and poor are creating an environment "full of worries." Other economists argue that these factors increase uncertainty and reduce investor confidence, negatively impacting economic growth.

Warning of Internal Conflicts

When asked if a new world war was on the horizon, Dalio said that the US and other regions around the world are experiencing "some form of civil war," with "irreconcilable differences." He emphasizes that these conflicts will serve as a test of each side's strength, stressing the importance of resolving these disputes. "If we ignore these problems, the risks will escalate further," he adds.

The End of the Dalio Era at Bridgewater

Dalio founded Bridgewater in 1975, where he became known for implementing a culture of "radical transparency." He began gradually withdrawing from the company starting in 2017, and completed the sale of his remaining shares earlier this year, deciding to leave the board of directors, thus ending this era.

Bridgewater in Reboot Mode

The Connecticut-based company is expected to achieve its largest annual profit since 2010. Bridgewater has been in "reboot mode" for the past few years, with CEO Nir Bar Dea adjusting the organizational structure and reducing the size of assets to improve performance. According to economic reports, this approach aims to streamline operations and increase focus on core investment strategies.

Decline in Asset Size

Bridgewater's assets under management totaled $92 billion on December 31 of last year, down from nearly $140 billion at the start of 2023. This decline reflects pressures faced by large hedge funds in a changing economic environment, as well as other factors such as investment withdrawals by some clients.