Ray Dalio predicts economic crisis with debt nearing $36 trillion

Ray Dalio, founder of Bridgewater Associates, has warned that a global financial crisis could be on the horizon, driven by rising debt levels and escalating geopolitical tensions.

Speaking on April 13, Dalio described a convergence of economic and political risks that he believes could result in a downturn more severe than past recessions.

“There’s a financial problem. There’s an imbalance problem,” he said, pointing to unsustainable debt accumulation as a primary concern.

Dalio outlined five forces shaping historical cycles: economic trends, internal political conflict, international power shifts, natural events, and technological advancements.

He highlighted the U.S. national debt, which now exceeds $36 trillion, as a growing threat. The imbalance between debt issuance and investor demand, he warned, could destabilise global markets.

Dalio proposed reducing the federal deficit to 3% of GDP to avoid long-term economic disruption. Without such measures, he cautioned, the world could face a scenario similar to the 1971 monetary breakdown or the 2008 financial crisis.

He warned that unmanaged debt might lead to "shocking developments" in the way governments handle crises by devaluing currencies, causing inflation, and harming investor confidence.

Dalio also warned of a possible economic downturn coinciding with rising domestic and international conflicts, which he believes would compound financial instability.

He criticised short-term policy approaches and urged for pragmatic leadership to tackle systemic risks. In particular, he pointed to increasing protectionism and fractured global supply chains as signals of rising economic volatility.

Dalio went on to say that changing global power dynamics, especially China's ascent, might reshape international relations and challenge American economic dominance.

While he noted that these risks are manageable, Dalio stressed that avoiding serious damage requires urgent and coordinated action.

His comments reflect mounting concern over inflation, weakening faith in financial institutions, and the need for structural reforms to stabilise global systems.