The debt crisis Ray Dalio warned of may already be happening as US borrowings surge by $1 trillion in just weeks
Brian Snyder/Reuters
- Billionaire investor Ray Dalio's prediction of a US debt crisis may be coming true already.
- US national debt surged by $1 trillion in just one month since the borrowing ceiling was lifted by Congress.
- Dalio warned last month that the agreement made no difference and would only add to the nation's mounting debt pile.
Just last month, billionaire investor Ray Dalio warned the US is at the start of a debt crisis – and that may already be coming true.
The government's borrowings jumped by an eye-watering $1 trillion in just one month, following the early-June resolution of the protracted political standoff over the sovereign debt limit, Charlie Bilello, chief market strategist at Creative Planning, pointed out in a recent tweet. Total outstanding public debt has now climbed to $32.5 trillion.
Early in June, Congress passed a bill that would lift the US debt ceiling just when the nation was on the brink of a payment default. The decision came after months of squabble between Democrats and Republicans, and attracted a pool of critics in its wake, including Dalio and Berkshire Hathaway CEO Warren Buffett.
Bridgewater founder Dalio gave the deal a grade D at the time, saying it doesn't solve the problem of a deeply indebted US government and will only add to its increasing pile of borrowings.
"Dealing with the problem of adding too much to a pile of debt that is already too large: Grade D," Dalio said. "It won't make much difference," he added.
In a more dire warning, Dalio said last month that the US was at the start of a debt crisis – where there was an worsening shortage of buyers at a time when the government was selling so much debt.
"In my opinion, we are at the beginning of a very classic late, big cycle debt crisis, when the supply-demand gap, when you are producing too much debt and have a shortage of buyers," Dalio said.
He has also forecast the US will enter a balance-sheet recession, and that higher interest rates were set to weaken the economy.