Ray Dalio, founder of Bridgewater Associates, speaks to CNBC on the floor of the New York Stock Exchange (NYSE) in New York City, USA, on April 27, 2026.
Brendan McDiarmid | Reuters
Billionaire investor Ray Dalio says Treasury Secretary Scott Bessent’s bond buyback announcement this week fits into a broader pattern that could signal a coming crisis.
The founder of Bridgewater Associates said Mr. Bessent’s plan to expand bond purchases could spell trouble for the U.S. economy. With Japan’s government reducing its exposure to the U.S. bond market and long-term U.S. Treasury yields surging, investors may want to prepare their portfolios for increased risk by holding cryptocurrencies and cryptocurrencies, Dalio said. gold.
“I believe the government’s fiscal position is at an inflection point,” Dalio said in a LinkedIn post published Friday. “If we don’t take action now, the debt will grow to a level that cannot be dealt with without significant trauma.”
US 30 year government bond yield, 5 days
Dalio noted that the Treasury Department’s ability to buy back bonds is “limited.” Bessent told CNBC on Thursday that the team intends to “create a market” and that the deal would likely be worth more than $4 billion.
Rapid increase in deficit
Dalio said the United States is spending about 40% more than it is receiving inflows, resulting in a sharp increase in the budget deficit. The U.S. budget deficit exceeded $432 billion in July, but Bessent told CNBC it likely peaked under President Donald Trump’s administration.
Bessent said in an interview that his team is looking at ways to cut spending by hundreds of billions of dollars. But Dalio said there is “very little” ability to do so unless it is considered aspirational or essential.
Dalio said that after years of overspending, the total debt is now dwarfed by what the United States brings in each year. Dalio said if the U.S. government were a business, its debt service would be about $11 trillion, or about 200% of its annual revenue.
Dalio, 77, warned that the costs of repaying principal and servicing debt will only increase over time.
A three-pronged approach
To resolve this, Dalio said the United States needs to carefully adopt a three-part strategy to bring the budget deficit down to 3% of gross domestic product.
First, Dalio said the U.S. government needs to cut spending. Second, he said there is a need to increase tax revenue. Finally, the New York native and Harvard Business School graduate said interest rates need to be lowered.
“All three need to happen at the same time to prevent any one from becoming too large,” Dalio said. “If any of them are too big, the adjustment will be traumatic.”
Dalio warned against forcing such adjustments through “force.” For example, “it would be very bad if the Federal Reserve forced interest rates to fall unnaturally,” he said.
Dalio said it’s important to take action now while the economy remains healthy. The recession requires increased government spending, he said.
Dalio said the exact timing of a debt crisis could depend on a variety of variables, from military conflicts to political upheavals. On the current trajectory, the United States could find itself in such a crisis as early as a year or as late as five years. “My guess, and I think it’s a bad guess, is that if we don’t change our path, it’s going to happen in two or three years.”
To prepare, Dalio recommended investors be underweight debt assets such as bonds.
10% to 15% of your portfolio could land in gold, and a “little” more could land in gold. Bitcoinsaid the hedge fund founder.
Dalio’s post came at the end of a volatile week for U.S. financial markets. Rising long-term government bond yields put pressure on stock prices, S&P500 Make 3 weeks progress.
