Ray Dalio Warns of Beginning of US Debt Crisis

Ray Dalio announced the beginning of the debt crisis in the United States

According to the billionaire, the US is at the beginning of a debt crisis, when there is a gap between supply and demand

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Billionaire Ray Dalio, founder of Bridgewater Associates, the largest hedge fund in the US, has warned that the US is at the very beginning of a debt crisis with a gap between supply and demand. writes Bloomberg. According to Dalio, the debt crisis cycle lasts on average about seven years.

US inflation remains persistently high along with higher real interest rates, Dalio told the conference Bloomberg Invest. “In my view, the US is at the beginning of a debt crisis of a large economic cycle, where there is a change between supply and demand, where you issue too much debt and there is a shortage of buyers,” Dalio said.

Fed interest rates will not rise much above current levels and will not rise in the coming years, Dalio said. However, according to him, the situation in the American economy will only worsen in the future, which can cause great political instability in the United States.

The Fed raised the rate ten times in a row to curb record inflation – since March 2022, the rate has increased from 0-0.25% to 5-5.25% per annum. Last time such an increase was followed by the subprime crisis in the US, which escalated into the 2008 crisis. At the end of April 2023, inflation in the United States slowed to 4.9% in annual terms after 5% in March, but the figure still remains above the Fed’s target of 2% per annum.

Ray Dalio stepped down as chief investment officer of Bridgewater Associates, the largest hedge fund in the US last October, but remains a significant owner and remains on the board of directors. He founded Bridgewater Associates almost 50 years ago and is now developing his family office and plans to open a branch in Abu Dhabi. According to the Billionaires Index Bloomberg As of June 8, Dalio’s net worth is $16.5 billion.

Dalio is also known for his All-Weather Portfolio strategy. This is a model set of assets, which, in theory, should consistently make a profit for tens and even hundreds of years. The strategy does not bring super profits and can overtake stock indices only during periods of downturn in the market. On the other hand, this approach gives relatively small portfolio drawdowns during the days of general panic: up to two to six times less than standard portfolios, and usually no more than 5%.