Ray Dalio warned in an August 21 LinkedIn post that the United States is heading toward a government debt crisis, pointing to a $4 billion Treasury buyback, rising bond yields and a weakening dollar as warning signs. He said the reckoning will come in three years, give or take two, unless Washington changes course, while the Congressional Budget Office projects a $1.9 trillion deficit for 2026 alone.
Billionaire investor Ray Dalio warned that the United States is moving toward a debt crisis, likening the strain on the economy to a heart attack triggered when debt-financed spending chokes off the normal flow of money. He made the case in an August 21 LinkedIn post, citing a $4 billion Treasury debt buyback, rising bond yields, a weak dollar and a Japanese sell-off of U.S. bond holdings as signs the pressure is building.
Dalio said the reckoning "will come in three years, give or take two" unless the current fiscal course changes. He added that the U.S. will run a $2 trillion budget shortfall this year, with $11 trillion in debt service payments. Earlier this month, the country's debt topped $40 trillion for the first time.
CBO projects a $1.9 trillion deficit for 2026
The Congressional Budget Office estimates the 2026 deficit at about 6% of GDP, or $1.9 trillion. Dalio proposed bringing that down to 3% of GDP through spending cuts, lower interest rates and higher tax revenue pursued together, warning that leaning too hard on any single lever would jolt the economy.
However, Treasury Secretary Scott Bessent claimed the budget deficit has peaked under President Trump and that the country can grow its way out of the debt. In July, the Federal Reserve described the U.S. financial system as sound and resilient.
Debt projected to reach $64 trillion within a decade
Government estimates project the gross federal debt will reach $64 trillion within a decade, growing faster than the economy. The Government Accountability Office said that trend could raise borrowing costs for mortgages and cars while pushing up living costs and holding back wages. Other experts cited in the report said rising debt could also mean higher taxes with no additional services, since new revenue would go toward interest payments.
Dalio recommends diversifying away from bonds
To prepare for a possible crisis, Dalio recommended diversifying across asset classes, underweighting bonds and putting a portion of a portfolio into Bitcoin along with 10% to 15% into gold. Financial planners Odaro Aisueni and Don Grant added that households should build emergency funds, pay down debt and keep an eye on job security in their industries to prepare for a potential downturn.
Source: Moneywise
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