China, Japan may pull back from US debt, billionaire investor Ray Dalio warns
The two countries have already been paring their holdings
Ray Dalio predicts that the United States will face a debt crisis within the next three years. The billionaire investor, founder of hedge-fund giant Bridgewater Associates, said this during a Bloomberg Television interview on Tuesday. He expects the debt crisis to occur by the fall of 2029. US debt hit $40 trillion in August, an inflation-adjusted increase of over $10 trillion or 33% since 2019.
The cost of servicing this massive debt is consuming nearly one-fifth of the federal budget, leaving less money for essential services. Dalio warned that the scale and growth rate of the national debt mean we are nearing our limits. He highlighted the AI boom's heavy reliance on debt and the danger of overinvestment in tech. Dalio also noted that geopolitical tensions have reduced other countries' demand for US debt.
He warned that the trend could tighten credit in riskier categories like auto loans, potentially exacerbating the wealth gap. Dalio has been sounding the alarm on a debt crisis for years, comparing it to "an aggressive cancer" threatening the US economy. He sees this as part of a "perfect storm" combining political division, foreign wars, and mounting debt.
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