Ray Dalio says U.S. reaching a point where our debt problem gets even worse

Hovering U.S. authorities debt is reaching some extent the place it can start creating bigger issues, Bridgewater Associates founder Ray Dalio mentioned Friday.

The hedge fund titan warned throughout a CNBC look that the necessity to borrow increasingly to cowl deficits will exacerbate the political and social issues the nation is going through.

“Economically robust means financially robust,” Dalio mentioned on “Squawk Field.” “Financially robust means: do you earn greater than you spend? Do you could have a great earnings assertion as a rustic? And do we’ve a great stability sheet?”

The U.S. is $33.7 trillion in debt, a complete that exploded by 45% because the Covid pandemic in early 2020, in response to Treasury Division information. Of that complete, $26.7 trillion is owed by the general public. Final 12 months, the federal government rang up a $1.7 trillion deficit because it sought to maintain up the tempo of spending.

Because the debt constructed up and the Federal Reserve raised rates of interest to attempt to tamp down inflation, the federal government spent $659 billion on web curiosity prices in fiscal 2023 to finance the debt.

Dalio mentioned that could be a recipe for bother.

“The more serious that will get, the extra we’re going to have that long-term downside,” he mentioned. “You’ll be able to see it within the numbers. It is only a matter of numbers. We’re close to that inflection level.”

Together with the essential finances points, Dalio additionally cautioned that overseas patrons, who make up about 40% of demand for U.S. Treasurys, have been backing off, making a supply-demand downside.

Knowledge via January signifies that overseas holdings of U.S. authorities debt complete $7.4 trillion, down $253 billion, or 3.3% over the previous 12 months. China specifically has reduce its holdings strongly, pulling again 17% in the course of the interval.

“You wish to hold spending on the similar degree, there’s the necessity to get increasingly into debt. The best way that works, it accelerates,” Dalio mentioned. “We’re on the level of that acceleration, which creates the supply-demand downside. It is made worse by the opposite points that we’re speaking about, the inner political concern, the inner social battle concern.”

Do not miss these tales from CNBC PRO: