The United States is currently in the “cycle of death” for the debts that can lead to an economic “heart attack” if both parties do not work together Start cut immediatelyAccording to Rai Dalio, founder of the world's largest hedge box.
During a recent conversation in “Podcast All in” With the co -host David Friedberg, Dalio indicated that the “death cycle” usually indicates how long has a company or government a lot of debts and should borrow it to serve it. According to Dalio, investors perceive this completely, causing credit for the worst and interest rates to increase.
This is the worst thing that can happen to a highly owed entity. It is noted that the main question is whether the debt creates a big income enough to alleviate this problem.
“This is like, I do not know, eat vegetables or something like that. It is a healthy process. If not, the credit begins to build this debt, and begins to become like plaque in the arteries. You can just measure it just like you can be measured in The arteries, and you can see how this circulatory device is restricting, “Tell Dalio” All-in “.
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Ray Dalio, founder of the world's largest hedge box, warned the participating participating in “The All-in PodCast” David Friedberg of serious economic consequences that the national debt was not treated quickly. (Podcast All)
If the service of interest and debt is constantly shining a critical view of the government, Dalio claims that this can lead to an “economic heart attack”.
A large amount of debt creates the need for someone to buy. Not only create the risk of debt, the urgency to offer the new offer, but those holders may sell these debt assets, which leads to huge supply for demand, according to Dalio.
In the event of a high debt burden or a significant defect in the demand, the Central Bank of the government can print more money and buy it. If they do not do so, the price of debt must rise to borrowing, and the snowball decreases to the uninvited credit contraction, in turn weakens the economy and causes bad economic conditions.
Dalio says that the government can allow this or print money and buy debts to achieve income from it. However, this will Inflation And reduce the value of the debt.
“In both cases, you don't want to keep this debt because there is a problem in the service of debt or that there is a decrease.”
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The American national debt has exceeded $ 36 trillion. (All in the Podcast/Jemal Countis/Peter G. Peterson Foundation/Chip Somodevilla/Getty Images)
Today, the United States has 36.4 trillion dollars Federal government debts The GDP (GDP) of 29.1 trillion, which gives debt to gross domestic product by 125 %. This percentage increased steadily since the epidemic began in 2020, when the debts of the federal government reached $ 20 trillion, and the GDP was only 21 trillion dollars. Since the epidemic, the federal government debts increased by 80 %, while GDP increased by 38 %.
Despite the recent efforts to reduce interest rates again, the markets have decreased, causing high interest rates of US debt to the levels that have not been felt since before the 2008 global financial crisis. To maintain the growth of the economy, the US government runs An annual deficit of a trillion dollars, or approximately 7 % of GDP, while paying more than one trillion dollars annually in interest alone on the current debts.
Dalio expressed a sense of urgency regarding the growing debts and going into the potential benefits of Ministry of Governmental efficiency (Doge) And how the need to reduce costs will inevitably stand up to the already established political divisions.
Dalio, who is promoting his personal resolution, said that the deficit, which is equivalent to selling bonds, must be reduced from 7.5 percent to 3 percent of GDP.
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“Dalio has different views on how to cut it. I forget it. I really don't care,” Dalio said. “Only, you must have a unified agreement. Everyone in Congress, the president, etc. You should pledge to do so. Then the question is how to do so. But they should know this number (equivalent to about 900 billion).”
Dalio worries that the timetable for closing this gap may be long. He says it is not just a Doug issue but also less organizational changes and productivity, which can, partially come from artificial intelligence (AI) or even revenues produced by definitions and translation into profit.
When I was asked if America was better off President Donald Trump Former President Biden in the financial context, Dalio said: “Yes, I think we are.”
“With regard to profitability and the possibility of cutting the pieces, I think Republicans are likely to make these moves more than Democrats. But you also have to take into account the effects, social effects and other effects that will come from this. Follow.
Pie is a pie on government spending. (Fox News)
But these cuts will be brutal, according to Dalio. He points out that “how the cake is divided” with regard to the budget of the government will be very political and that “sabotage will be enormous.”
“We are really guessing how these sabotage effects will be. They are too much – but you are completely right. You will waste a lot of jobs,” he said. “A lot of change will happen in terms of turmoil. Do we have a plan? How can we even agree on how to deal with that? I don't think we are at a time, it may be the case in the rest of our lives, as this agreement will be easy.”
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Economic Policy Innovation Center (EPIC) She released a new model In December, this said, “It is possible” that the United States government will exhaust the ability to pay its debts by June 16, 2025.
“The government is expected to run about $ 2 trillion of deficit next year. This means that the spending obligations incurred by Congress and the government are more than we will attend tax revenues,” Matthew Dicrson, EPIC's budget policy manager. Fox News digital. “To be able to pay the things the government promised to pay on time, you need to increase the debt limit.”
