Bridgewater Associates founder Ray Dalio said Treasury Secretary Scott Bessent’s plan to increase government debt buybacks is part of a broader pattern that could signal a looming US debt crisis.
Dalio recommended investors reduce their exposure to bonds and instead hold 10% to 15% of their portfolios in gold, along with “a bit” of bitcoin.
Spending far outpaces revenue
In a LinkedIn post published Friday, Dalio warned that the US government is spending roughly 40% more than it brings in each year.
The federal budget deficit topped $432 billion in July alone.
If the government were a business, Dalio said debt service payments would total approximately $11 trillion — about 200% of annual revenue.
He wrote:
“I am confident that the government’s financial condition is at an inflection point. If this is not dealt with now, the debts will build up to levels where they can’t be managed without great trauma.”
Three-year window
Dalio estimated a crisis could arrive in “three years, give or take two” if the current trajectory is not changed.
He proposed a three-pronged approach: cut spending, raise tax revenue, and lower interest rates — all concurrently so no single adjustment becomes “traumatic.”
He cautioned against the Federal Reserve artificially forcing rates lower.
Why gold and bitcoin
Dalio said investors should be underweight debt assets like bonds, which face growing risks as the government struggles to attract buyers for its enormous deficits.
Rising long-term Treasury yields have already pressured stocks, snapping the S&P 500’s three-week advance.
Meanwhile, US government debt surpassed $40 trillion this week, and Japan has been reducing its US bond exposure.
Both gold and bitcoin rallied sharply after Bessent’s buyback announcement, with bitcoin surging from $64,000 to nearly $80,000.
Dalio’s shift toward bitcoin marks a notable evolution for a hedge fund legend who once dismissed crypto — and strengthens the case for assets that governments cannot simply print more of.
