Ray Dalio says Trump will drag America into a full-blown debt crisis

Ray Dalio has a warning, and it’s not subtle. The billionaire behind Bridgewater Associates says Trump is leading the U.S. straight into a debt crisis that could hit within three years. If nothing changes, the country will be drowning in financial trouble with no way out.

“If you don’t do it, you’re going to be in trouble,” Dalio said on Bloomberg’s Odd Lots podcast. He compared the situation to a heart attack. “You’re getting closer. My guess would be three years, give or take a year, something like that.” His concern? A $1.8 trillion deficit, reckless tax policies, and a government that keeps piling up debt without a clear plan to pay it off.

U.S. debt is growing, and buyers are disappearing

Dalio isn’t just talking about numbers on a screen. He says the U.S. is running out of people willing to buy its debt, a major red flag for anyone paying attention. Foreign central banks, domestic banks, and even the Federal Reserve have all pulled back from buying U.S. Treasuries—a rare and dangerous shift. JPMorgan flagged this in late 2022, but the problem has only grown.

“When you’re putting a lot more debt on top of that pile of debt, so it’s not just existing debt that’s a problem, but you have to add more debt sales,” Dalio said. The issue? “You’ve got to sell those to people or institutions or central banks and sovereign wealth funds.” But what happens when those buyers don’t show up? Rates rise, borrowing gets more expensive, and the cycle spirals.

“Nowadays with sanctions and too many bonds and so on, when I calculate who are the buyers and how much do we have to sell, I find a big imbalance and I know how that works,” said Dalio.

Debt restructuring could be coming

Dalio sees this ending one of two ways—either the U.S. gets serious about cutting its deficit to 3% of GDP, or the government could be forced into a massive debt restructuring. If that happens, it won’t be called a default. It’ll be spun as a policy shift.

“You could see then the government saying that they’re going to restructure the debt,” Dalio said. “They won’t say it’s a default. They will say ‘under this policy we’re going to be better off.’” He’s been watching this pattern for decades.

Dalio compares the situation to 1971, when Richard Nixon cut the U.S. dollar off the gold standard overnight. Markets had no idea it was coming. Now, he sees a similar risk: if the government stops payments to certain bondholders or freezes U.S. Treasuries held by sanctioned countries, it could trigger a shockwave through global markets.

Some have speculated about a Mar-a-Lago Accord—a scenario where the U.S. weakens the dollar while still trying to maintain its dominance in global finance. Dalio doesn’t see it working. “I don’t think it’s a depreciation of the dollar in relationship to all other currencies. I think all other currencies will depreciate with the dollar.” In other words, it would be an “ugly contest,” much like the 1970s and 1930s, where every major currency tanked against gold and hard assets.

Bitcoin and gold could be safe havens

Dalio doesn’t believe in sitting on the sidelines. He says investors need to ask themselves one key question: “What’s the alternative money that is stable in supply?” That’s where Bitcoin and gold come in.

“Bitcoin might be a part of that, could be a big part of that, but what is the alternative money? Because debt is money and money is debt.” He likes Bitcoin as an option because, unlike real estate, it isn’t locked down and can’t be seized or taxed as easily. But he still leans towards gold.

“Oh, yes. I think that gold…” he said, before stopping himself from telling people to run out and buy it. “What you don’t know about the future is far greater than anything that anyone knows about the future.” His recommendation? Holding 10-15% of a portfolio in gold as a hedge against economic chaos.

It’s not just debt that has Dalio worried. The broader economic picture is getting worse. Recession odds for 2025 are climbing, and Trump’s trade war policies could push things over the edge.

High consumer spending has been propped up by debt, but credit card delinquencies just hit a 13-year high. Inflation has already forced Americans to cut back, and tariffs on China, Mexico, and Canada will only raise costs further. Yale’s Budget Lab says the average U.S. household could lose $2,000 per year because of Trump’s tariff plans.

Confidence is collapsing. Inflation and unemployment fears have spiked, and consumer spending fell in January for the first time in nearly two years. Businesses are feeling it too. The Goldman Sachs Analyst Index shows shrinking sales, new orders, exports, and employment.

Corporate America isn’t planning to invest either. BCA Research reports that capital expenditure plans have fallen into negative territory. Small businesses are also pulling back on hiring. The NFIB survey shows hiring plans shrinking, and Challenger’s job cut tracker saw layoffs jump 245% in February.

Stock market risks are piling up

Before Trump came back, S&P 500 valuations were already high, but now the market is facing even bigger risks as he keeps pulling off his trade shenanigans. Companies that rely on overseas revenue could get hit hard if trade tensions keep escalating, according to an analysis by the Financial Times.

Some hoped tax cuts would help, but with higher import costs and uncertainty over new tariffs, those benefits are fading.

Financial instability is another problem. Matt King, founder of Satori Insights, says the U.S. could lose its “safe haven” status if concerns over fiscal irresponsibility and Federal Reserve independence keep growing. “A combination of concerns around fiscal irresponsibility, Fed independence and some of the more extreme proposals . . . as part of a Mar-a-Lago accord might just do the trick,” he said.

The Federal Reserve is caught in a tough spot. Rates are still high, and the economy is slowing. But inflation expectations are rising again, making it harder for the Fed to justify cutting rates. If they keep rates high, growth slows even more. If they cut too soon, inflation could come roaring back.

Analysts are slashing their GDP forecasts for this quarter. Businesses have been hoarding imports before tariffs take effect, creating a temporary economic boost. But once that stops, growth could slow dramatically.

Cryptopolitan Academy: Tired of market swings? Learn how DeFi can help you build steady passive income. Register Now