Ray Dalio: The rapid growth of U.S. debt is brewing an atmosphere "very similar" to that before World War II

Ray Dalio, the founder of Bridgewater Associates, warned that the rapid growth of U.S. government debt, combined with escalating internal and external conflicts, is creating an atmosphere "very similar" to that on the eve of World War II, posing a severe challenge to the existing order.

In an interview with the media on Friday, Dalio likened the rapid rise of U.S. debt to "plaque in the arteries," stating that its growth relative to income will ultimately "squeeze spending."

In addition to the debt issue, he expressed "deep concern" over the current wealth inequality and the ongoing global conflicts that are continuing to fester.

According to estimates from the U.S. Congressional Budget Office, last year, publicly held debt accounted for 99% of U.S. GDP, and it is projected to reach 116% of GDP by 2034, exceeding any period in U.S. history.

Debt Crisis Warning Escalates

Dalio has long warned about the spiraling debt risks in the U.S. He attributes this issue to politicians from both parties, calling it a "deficit/debt bomb." Last month, he pointed out that the soaring debt poses a "threat to the monetary order." He called for measures that combine tax increases with spending cuts.

According to estimates from the Congressional Budget Office (CBO), last year, U.S. Treasury debt held by the public reached 99% of GDP. The agency predicts that by 2034, this ratio will climb to 116%, exceeding any period in U.S. history.

In Dalio's view, the debt crisis is not isolated but intertwined with increasingly severe social divisions and geopolitical risks. He stated that ongoing global conflicts and wealth inequality together create an environment "with ample reasons for concern."

He explicitly pointed out that due to "irreconcilable differences," a "form of civil war" is developing in the U.S. Dalio warned that these conflicts will ultimately "evolve into a test of power among various parties." He emphasized the importance of confronting and resolving these disputes:

"If we do not worry about these matters, we will face greater risks."

Bridgewater Associates Performance Recovers

On a personal level, Dalio sold his remaining shares in Bridgewater Associates earlier this year and stepped down from the board, completing a gradual exit process that began in 2017. The investor, known for advocating "radical transparency," founded this multi-billion dollar macro hedge fund in 1975.

Bridgewater Associates is expected to achieve its largest gain since 2010 this year. The fund has been in a reboot mode for the past few years, with CEO Nir Bar Dea making personnel adjustments and cutting assets to improve performance.

As of December 31 last year, Bridgewater Associates managed assets totaling $92 billion, down from nearly $140 billion at the beginning of 2023