Ray Dalio Is Getting Pre–World War II Vibes As US Debt Spirals Out Of Control: ‘Plenty to Worry About’

Bridgewater Asset Management founder Ray Dalio has once again warned about a looming debt crisis in the U.S., even as a 10-day-old shutdown due to a lack of consensus among lawmakers over a funding deal cripples the government. His comments were made in an interview with Bloomberg aired on Friday.

Calling the outsized increase in debt relative to income growth a “plague in the arteries,” Dalio said it then begins to squeeze spending. The situation has created a climate eerily similar to that of the years before World War II, he said. The spiraling U.S. debt is one of the billionaire investor’s oft-repeated concerns. Aside from the debt, Dalio also flagged global conflicts and wealth inequality as factors that have served to create an environment with “plenty to worry about.”

Dalio, 76, warned about a “civil war of some sort” developing in the U.S. and other parts of the world due to the “irreconcilable differences.” “These conflicts will become tests of power by each side,” he said, adding that “If we don’t worry about these things, then we have greater risks.”

The market has largely overlooked the looming headwinds and has continued to push higher even as analysts are wary about an imminent crash. The broader S&P 500 Index trades just shy of its peak. The SPDR S&P 500 ETF (SPY), an exchange-traded fund (ETF) that tracks the broader gauge, has gained 15.5% year-to-date, and the tech-focused Invesco QQQ Trust (QQQ) ETF has advanced a steeper 20%.

On Stocktwits, retail sentiment toward the SPY improved to ‘neutral’ as of early Friday, while that toward the QQQ remained ‘extremely bearish.’ The message volume was at ‘normal’ and ‘high’ levels, respectively.

Dalio, who blames U.S. politicians for the debt crisis, said that the “deficit/debt bomb” can be tackled by a mix of tax revenue increases and spending cuts. While Republicans see spending cuts as key to bridging the yawning fiscal deficit, their Democratic counterparts have expressed unwillingness to cut spending on welfare programs and instead batted for measures such as a billionaire tax to boost revenue. The stalemate seen over the funding bill exemplifies this thinking as Democrats oppose any move to repeal the Obamacare Act. 

Even as the U.S. struggles under the weight of debt, Treasury Secretary Scott Bessent announced Thursday that the country has finalized terms of a planned $20 billion financial rescue of debt-straddled Argentina.

For updates and corrections, email newsroom[at]stocktwits[dot]com.

Read Next: Dow, Nasdaq 100 Futures Flicker As Shutdown Impasse Dents Ongoing Momentum — Strategist Says Bull Market ‘Still Young’

Share

·

Add us on