Investing.com – Billionaire investor Ray Dalio said the United States was at the start of a debt crisis and warned the economy was ahead for tougher times.
“In my opinion, we are at the beginning of a very classic debt crisis, at the end of the cycle, when the gap between supply and demand, when you produce too much debt and you have a shortage of buyers,” Dalio said at the Bloomberg Invest conference on Wednesday.
“What is happening today when we have to sell all this debt is that there are enough buyers,” he added. “When I look at the question of supply and demand for this debt, there is a lot of debt, it has to be bought and it has to have a high enough interest rate,” added the founder of Bridgewater.
Mr Dalio was relying on the recent debt ceiling bill passed by Congress and President Joe Biden. To bolster its liquidity reserve, the Treasury Department has already announced plans to issue $1.6 trillion in treasury bills this year through the end of 2023.
“When looking at the buyers, it appears there is a significant shortage of buyers for this government debt. But we are now about to see what the supply and demand picture will look like in the over the next two years,” Mr. Dalio said.
Mr Dalio has previously commented on the US government’s handling of the impasse over the borrowing limit, giving the deal a D grade, which fails to address the key problem of ever-rising debt.
Regarding the future, Mr. Dalio was pessimistic. He noted that interest rates are likely to remain at their current level, with little room for improvement, which will result in a weaker US economy.
“The slowdown doesn’t have to be big, because of the household sector, but it is a balance sheet recession. Things will get worse in the economy,” he added.
2023-06-08 12:48:00
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