US Faces 'Financial Heart Attack,' Ray Dalio Warns — Shares Investment Strategies: 'The Safest Investment That You Can Get Right Now Is An Inflation-Indexed Bond'

Billionaire investor Ray Dalio has voiced his apprehension regarding the mounting U.S. debt, comparing it to an imminent “financial heart attack.”

What Happened: Dalio, the founder of Bridgewater Associates, cautioned about the unmanageable deficits at a recent New York event. He drew a parallel between the debt service situation and a plaque buildup in arteries, which could potentially hamper other consumption.

Dalio pointed out that the US is estimated to yield revenues of approximately $5 trillion this year, while spending is anticipated to hit $7 trillion. This would contribute $2 trillion to the national deficit, with an extra $1 trillion needed for interest payments on the debt.

As per the report by Insider, the investor proposed that the US needs to decrease its budget deficit from 6.5% to 3% of GDP through a blend of spending cuts, augmented tax revenue, and reduced interest rates. However, he conceded that executing these solutions could be difficult and contentious.

“We have to, in the next, year sell about $12 trillion. We have $1 trillion that we can pay in interest. We have $9 trillion in debt service in terms of principle, and then we have to sell another $2 trillion because we had a deficit,” Dalio said.

Dalio also cautioned that the debt crisis could exacerbate in the event of a recession, as government borrowing typically surges during economic downturns.

Also Read: Ray Dalio Shares His Meme Stock Trading Strategy: ‘Most Investors Don’t Take Into Consideration Market Pricing, They Don’t Pay Enough Attention To Its Pricing’

To shield their portfolios from the adverse effects of escalating national debt and deficits, Dalio advised investors to hedge against inflation and diversify their holdings.

“The safest investment that you can get right now is an inflation-indexed bond. You’ll get a bit over 2% of real return above inflation,” he said.

He advocated for Treasury Inflation-Protected Securities (TIPS), gold, and a modest amount of Bitcoin as wise investment options.

Talking about government initiative Dalio said, “When faced with the choice, they print money,”

Why It Matters: Dalio’s warning comes at a time when the US debt is at an all-time high, with the Congressional Budget Office projecting the federal debt to reach 202% of GDP by 2051 if current laws remain unchanged. The potential impact of this on the economy and investment landscape is significant.

Dalio’s suggested strategies aim to provide investors with a roadmap to navigate this uncertain terrain, emphasizing the importance of diversification and hedging against inflation.

His endorsement of bitcoin also highlights the growing acceptance of digital assets as a part of a balanced investment portfolio.

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