Bridgewater founder Ray Dalio warned Wednesday that serious supply and demand issues with US debt could have a major disruptive effect on the global economy.
This is the latest in a string of harsh warnings about US increasing debt from US hedge fund billionaires, with the country’s debt currently standing at over $36.2 trillion.
“The first thing is debt issues. There’s a very tough supply and demand issue,” Dario told CNBC’s Sara Eisen on Converge Live in Singapore. “(The US) needs to sell the amount of debt the world doesn’t want to buy.”
He said this was imminent and “most important.”
The US deficit should move from a forecast level of 7.2% of gross domestic product to about 3% of GDP, Dario said.
“That’s a big deal. You’re going to see a shocking development in terms of how it’s dealt with,” he added.
Asked if the US debt issue could lead to a period of austerity, Dario said the issue could lead to debt restructuring, and that the US could pressure other countries to buy debt, or cut payments to some creditors.
“Looking at history, you’ll see these things happen over and over again, just as you look at history, like you’re looking at political and geopolitical changes that seem unimaginable to most people,” Dario said. “We’ll be surprised at some of the developments that we’ve seen that are as shocking as those developments.”
His comments, created on the same panel as Salesforce CEO Marc Benioff, come in as he rides a roller coaster of tariffs for the recent market.
The uncertainty in trade policy has been added to Wall Street’s unrest, with investors concerned about the impact of the brewing trade war on the global economy.
Trump’s trade policies, which are believed to be designed to re-adjust the economic order that favors America, include tariffs on Canada, Mexico and China.
Tariffs that will cause battles between countries.”
When asked about the potential consequences of the boiling trade conflict, Dario described the current situation as an “extension of a pattern of history” and chose 1930s Germany as an example.
Dario said that there had been some cuts in debt at the time, along with the increase in tariffs and accumulation of its domestic bases. “Being nationalist, protectionist, militaristic, that’s how these things work,” Dario said.
“The problem is, in fact, all these conflicts, all of this battle. So tariffs will cause a fight between the countries,” Dario said.
“But think about us, Canada, Mexico, China and all of that kind of battle. There’s a fight and that’s what will have to be the outcome. I think that’s the main thing to pay attention to,” Dario said.
Dario said he shares these views as a politically neutral observer, comparing his approach to that of mechanics and physicians. “I’m not an ideologue,” he added.
