On October 6, Ray Dalio, founder of Bridgewater Associates, warned in an interview with Bloomberg that the United States could face a debt crisis within three years.

Dalio emphasized that the government operates under the same principles as a private borrower, with one key difference: it has the ability to print money. He explained that when debt accumulates faster than it is paid off, servicing that debt consumes an increasing portion of revenues, which in turn limits other expenditures. According to Dalio, the U.S. is spending approximately $7 trillion annually against revenues of $5 trillion, resulting in a 40% deficit that has persisted for several years.

The rise in interest rates, driven by an imbalance between supply and demand, translates into losses for bondholders. He noted that the liabilities of one market participant become assets for another. When asked if a 6% yield on 30-year Treasury bonds would be a psychological threshold, Dalio responded that the focus should not solely be on yield levels but rather on the ratio of savings to capital needs. An imbalance in this area raises the cost of money and curtails some demand.

Source: Bloomberg.

Dalio believes that the budget deficit will not shrink; rather, it is inelastic and will likely widen during economic downturns. This will necessitate funding from other sectors. The housing market is expected to react quickly, but those most affected will be the less affluent, as loans for items like cars will dry up first, while large projects such as data centers will feel the pressure later. This situation, he argues, could exacerbate conflicts surrounding wealth inequality.

The billionaire pointed out that nearly a third of U.S. debt is held by foreign investors, primarily from China and Japan. He indicated that Beijing is unwilling to further increase its holdings for both economic and geopolitical reasons, stating:

“When the relationship between debtor and creditor is complicated by confrontation, a very complex dynamic emerges.”

Tokyo, on the other hand, is aiming to repatriate a significant portion of its investments.

In addition to the government, funds are also being consumed by AI and other large-scale initiatives. Dalio noted that the boom, largely concentrated in a single industry, increasingly relies on debt financing instead of equity capital. The narrowing sources of savings are driving interest rates higher.

On August 21, 2026, Dalio advised investors to reduce their holdings in debt assets in favor of gold (10–15% of their portfolio) and a small position in Bitcoin.

As of August 18, 2026, U.S. national debt surpassed $40 trillion for the first time. By October 5, the yield on 30-year bonds reached 5.66%. Chinese investments in Treasury securities decreased by 11% from July 2025 to July 2026, totaling $618 billion, while Japanese holdings fell by 4.5% to $1.1 trillion.

According to the Congressional Budget Office, for the 11 months ending September 30, 2026, net interest expenses for the federal government reached $1.05 trillion, exceeding the Pentagon’s military program costs of $833 billion.

Earlier in August, Dalio highlighted signs of an AI bubble and compared the current market situation to the years 1929 and 2000.

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