Ray Dalio, the enigmatic founder of Bridgewater Associates, has donned his Cassandra cloak once more, this time to foretell a grim economic and financial future. After President Trump’s budget bill waltzed through Congress, Dalio took to the social media platform X to share his prophetic musings.
According to Dalio, Trump’s “One Big Beautiful Bill” will inflate the US national debt from a mere $230,000 per American household to a staggering $425,000 per household over the next decade. A veritable feast of fiscal indulgence, one might say. 🍾
The ramifications of this ballooning national debt, Dalio warns, are not to be taken lightly.
“Now that the budget bill has passed Congress, we can see what the projections look like for deficits, government debt, and debt service expenses. In brief, the bill is expected to lead to spending of about $7 trillion a year with inflows of about $5 trillion a year, so the debt, which is now about 6x of the money taken in, 100% of GDP, and about $230,000 per American family, will rise over ten years to about 7.5x the money taken in, 130% of GDP and $425,000 per family.
That will increase interest and principal payments on the debt from about $10 trillion ($1 trillion in interest, $9 trillion in principal) to about $18 trillion (of which $2 trillion is interest payments), which will lead to either a big squeezing out (and cutting off) of spending and/or unimaginable tax increases, or a lot of printing and devaluing of money and pushing interest rates to unattractively low levels.”
Dalio’s prescription for this looming fiscal crisis is as straightforward as it is unpalatable: cut spending and raise taxes to lower the annual deficit to GDP ratio. A bitter pill, indeed, but one that must be swallowed to avoid the impending storm. 🌪️
“This printing and devaluing is not good for those holding bonds as a storehold of wealth, and what’s bad for bonds and US credit markets is bad for everyone because the US Treasury market is the backbone of all capital markets, which are the backbones of our economic and social conditions. Unless this path is soon rectified to bring the budget deficit from roughly 7% of GDP to about 3% by making adjustments to spending, taxes, and interest rates, big, painful disruptions will likely occur.”
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2025-07-05 10:26