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Billionaire investor Ray Dalio closely monitors the precarious fiscal situation in the United States.
Dalio, the founder of hedge fund Bridgewater Associates, expressed his concerns regarding the mounting debt crisis during an interview with CNBC’s Sara Eisen. The interview, which took place at the Managed Funds Association, revealed Dalio’s apprehension about the potential speed and severity of the crisis, which he believes will depend on the supply-demand dynamics in the market.
Last month, the U.S. debt levels exceeded $33 trillion for the first time. The surge in debt comes as lawmakers negotiate a critical spending bill, with a looming deadline of October 1. Failure to reach an agreement could result in a government shutdown and escalate the perceived risk associated with the country’s debt.
The U.S. debt levels have experienced a significant surge in recent years, primarily due to a substantial increase in federal spending between fiscal 2019 and fiscal 2021, as reported by the U.S. Department of the Treasury. This mounting debt situation has sparked concerns among investors who fear that rising interest rates could further worsen the fiscal crisis and dampen demand for government-issued Treasury bonds.
However, Dalio emphasizes that the economic challenges extend beyond high debt levels alone. He predicts that the economy may experience a meaningful slowdown, with potential growth close to zero percent or a modest 1% to 2%.
“I foresee a significant deceleration in economic growth,” stated Dalio.
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