Ray Dalio, founder of Bridgewater Associates, predicts a US debt crisis within three years. He notes that the government currently spends $7 trillion annually against $5 trillion in revenue, marking a 40% deficit. Rising interest rates are causing losses for bondholders, while the national debt surpassed $40 trillion as of August 18.
Foreign investors, particularly from China and Japan, hold nearly one-third of US debt. However, China reduced its holdings by 11% to $618 billion, and Japan by 4.5% to $1.1 trillion between July 2025 and July 2026. Dalio highlights that net interest expenses reached $1.05 trillion in the 2026 fiscal year, exceeding Pentagon spending.
Dalio warns that the AI boom is increasingly reliant on debt financing rather than equity. He suggests diversifying portfolios by reducing debt assets in favor of gold and a small position in Bitcoin. As of October 5, the yield on 30-year Treasury bonds reached 5.66%, reflecting the ongoing pressure on capital markets and the widening gap between savings and demand.
