Dario Issues Major Warning: U.S. Debt Crisis Heading Towards "Death Spiral," with Extremely High Long-Term Risks!

Billionaire investor Ray Dalio, founder of Bridgewater Associates, the world's largest hedge fund, warned in a new book that while the short-term risk of a debt crisis in the US is low, the long-term risk is high.

In his book "How Countries Go Broke: The Big Cycle," published on Tuesday, he wrote that the US government's debt situation is "approaching a point of no return" and is heading toward a "death spiral" that could threaten the stability of the world's largest economy.

He explained that higher deficits mean the Treasury may need to sell more bonds to finance its spending and interest payments. The debt "death spiral" refers to the situation where the government needs to issue more bonds to raise funds to repay existing debt, but demand is decreasing, forcing it to pay investors increasingly higher interest rates to attract them.

"A spiraling rise in interest rates leads to a deterioration in credit risk, which leads to a decrease in demand for debt, which leads to higher interest rates—a classic debt 'death spiral'," Dalio wrote.

In his book, he emphasized that the "imminent risk" of a US government debt crisis is "very low," but "the long-term risk is very high."

Dalio added that the higher the interest rates investors charge the government for borrowing, the less money is available for governing the country, and interest rates for consumers and businesses will rise, typically leaving a country with fewer options for raising funds.

"In my view, this suggests that US policymakers should be more conservative in managing government finances, as the worst thing is to have a weak government fiscal position during difficult times," he wrote.

For years, some economists and investors have been warning about deficits. But this year, as President Trump's tariff and tax agenda has caused volatility in the bond market, which is typically a cornerstone of stability for the US and global economies, Wall Street has become cautious.

Amid uncertainty about the economic outlook and the attractiveness of US assets, investors are increasingly concerned that Trump's "big and beautiful" budget bill could put even more pressure on the federal debt burden. Even Musk, once Trump's "closest ally," has warned that the bill is disgusting and will lead to a surge in the federal budget deficit.

Jamie Dimon, CEO of JPMorgan Chase, also said last Friday that the bond market is "about to crack." Barclays analyst Ajay Rajadhyaksha said, "US long-term bond yields are already approaching their highest levels since the [2008 financial crisis]."As the market absorbs the details of the new tax bill and realizes that deficits are likely to continue rising in the foreseeable future, there is also a risk that long-term bond yields will continue to rise."

Dario is the latest billionaire to sound the alarm on US debt and deficits, worrying that massive government debt will crowd out spending on essential services, leaving a hollowed-out economy that cannot serve its citizens, which has unsettled global investors.

On May 22, before the publication of his new book, Dario also warned at an event in New York that the current US deficit is unsustainable and "beyond the market's capacity to bear." He said he expects the US to be in a "critical situation" in about three years.

"I think we should be afraid of the bond market. I can tell you, the situation is very, very serious," he said.

Dario also warned at the time that Democrats and Republicans had not shown that they could work together on this issue.

"It's like being on a ship heading for the rocks. They agree that they should turn, but they can't agree on how to turn," he said.