Dalio: U.S. debt is growing too fast, brewing an atmosphere "very similar" to the pre-World War II era

Bridgewater founder Ray Dalio has warned that the rapid growth of U.S. government debt, combined with increasingly intense internal and external conflicts, is creating an atmosphere “very similar” to the eve of World War II, posing a severe challenge to the current order.

In a media interview on Friday, Dalio compared the rapid rise of U.S. debt to “plaque in an artery,” saying that as it grows relative to income, it will ultimately “squeeze spending.”

Apart from the debt issue, he noted that current wealth inequality and ongoing global conflicts are also “deeply concerning.”

According to estimates by the U.S. Congressional Budget Office, publicly held debt accounted for 99% of U.S. GDP last year and is expected to reach 116% by 2034, surpassing any period in U.S. history.

Debt Crisis Warning Upgraded

Dalio has long warned about the risks of the spiraling rise in U.S. debt. He blames the issue on bipartisan politicians in the U.S. and calls it a “deficit/debt bomb.” Last month, he pointed out that soaring debt poses a threat to the “monetary order.” He has called for measures to both increase taxes and cut spending.

According to estimates by the U.S. Congressional Budget Office (CBO), publicly held U.S. national debt reached 99% of GDP last year. The agency predicts that by 2034, this ratio will climb to 116%, surpassing any period in U.S. history.

In Dalio’s view, the debt crisis does not exist in isolation, but intertwines with increasingly severe social division and geopolitical risks. He said that ongoing global conflicts and wealth inequality together create an environment that is “reason enough for concern.”

He made it clear that because of “irreconcilable differences,” a “form of civil war” is developing in the United States. Dalio warned that these conflicts will eventually “evolve into a test of power among all parties.” He stressed that it is crucial to confront and resolve these disputes:

“If we do not worry about these things, then we will face even greater risks.”

Bridgewater Performance Rebounds

On a personal level, Dalio earlier this year sold his remaining shares of Bridgewater and exited its board, completing a gradual withdrawal process that began in 2017. The investor—known for demanding “radical transparency”—founded this multi-billion-dollar macro hedge fund in 1975.

Bridgewater is expected to achieve its largest gain since 2010 this year. The fund has been in reboot mode for several years, with CEO Nir Bar Dea initiating personnel adjustments and asset reductions to improve performance.

As of December 31 last year, Bridgewater managed $92 billion in assets, down from nearly $140 billion at the start of 2023.

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