Ray Dalio's grave warning: President Donald Trump has only 3 years to slash fiscal deficit by over half before bond markets plunge the U.S into a debt death spiral
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Dalio claimed that US president Donald Trump has only three years to bring the nation's fiscal deficit down sharply or else there will be a risk of igniting a debt crisis that could drive the country into a «death spiral», Fortune reported.
His alert is focused on the increasing national debt, already exceeding $36 trillion. He characterized it as a perilous accumulation, drawing a parallel with plaque in the arteries of America's financial system, as per the report.
He said “The United States will run a deficit of about 7.5% of GDP if the Trump tax cuts continue, which I expect,” as quoted by Fortune.
Bond market's breaking point
As US Treasury debt has reached record highs, Dalio is concerned that soon bond investors will no longer be able to take on the increasing debt, driving interest rates to unsustainable levels. He claimed that unless the Trump administration can persuade bond investors to accept a lower return on their investment, an “economic heart attack” is imminent if continued government profligacy is unaddressed, as per the report.
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