Dalio Sounds Alarm: US Debt Crisis Looms in Three Years

Ray Dalio, founder of Bridgewater Associates, warns that the US debt crisis is three years away unless Washington makes significant changes. He bases his prediction on Japan's experience with its own debt crisis in 2013.

In 2013, the Bank of Japan owned 11.6% of all Japanese government bonds. By March 2023, it had increased to 53.3%. This sharp increase was due to private buyers not wanting to purchase the debt, so the central bank printed money and bought the bonds instead.

This move led to significant losses for bondholders: Japanese government bonds lost 51% against dollar-denominated debt after 2013, and 76% against gold. Japan's four largest life insurers now hold $96 billion in paper losses on government bonds.

The US is facing a similar crisis, with Washington collecting about $5.5 trillion this year but owing roughly $1 trillion in interest and needing to refinance another $10 trillion of maturing debt. This totals around $11 trillion, double what the government takes in.