What Ray Dalio Sees Coming Next is Disastrous?
Ray Dalio sees the future.
He warned, "Something worse than a recession is coming."
It's already happening.
Gold prices are soaring while the USD index is collapsing.
What Ray Dalio sees coming next is disastrous: 🧵
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1/ Ray Dalio created the biggest hedge fund in the world, Bridgewater Associates.
He predicted:
- Dotcom Bubble of 2000.
- Great Recession of 2008.
- Covid Bubble of 2021.
2/ The US budget deficit is currently $1.9 trillion, the 8th highest in history.
Because of the deficit, it can't pay its debt, so it needs to refinance $9 trillion of debt by March 2026.
This means that the US needs to flood the market with debt to meet its obligations.
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3/ Flooding the market with new debt will lead to a "supply shock," Ray Dalio says.
There is a chance that there won't be enough buyers, as the US deficit might have eroded investor confidence.
4/ Big holders are dumping US debt...
Japan and China have significantly reduced their US debt reserves.
Though the UK has bought more US debt over the years, it can't fill the shoes of Japan and China.
It's not easy to find buyers while the biggest holders are dumping.
A line graph tracking foreign holdings of US Treasuries in billions of dollars from 2000 to 2025. Lines represent Japan, China, UK, Cayman Islands, Canada, Belgium, and Luxembourg, with Japan and China showing significant declines, and UK holdings increasing. The y-axis ranges from 0 to 1,000, and the x-axis spans the years. Text at the top reads "China\'s Treasury holdings have fallen below those of the UK," and a source note cites the US Department of the Treasury, CEIC.
5/ The US's economic condition is making it harder to sell debt now.
Since 2023, the Fed has kept the rates high and shrunken its balance sheet to tame inflation.
Rates are still high, and we also have tariffs now.
Result? Investors don't want to accept low rates on bonds.
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6/ Investors see two scenarios:
- Fed cuts rates to lower the coupons.
- Fed steps in and buys the government debt.
Both are inflationary in the long term.
So, they don't want to accept low interest.
This is reflected by the term premium, which is near its highest in the last 10 years:
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7/ This is pushing the yields up, which increases the government's cost of funding.
Higher cost of funding means more interest burden, which leads to even higher cost of funding in the future.
Just like that, you have a death spiral of debt.
A line graph displaying the US Treasury 10-Year Yield and Effective Federal Funds Rate (EFFR) percentages from 2022 to 2025. The y-axis ranges from 1.0% to 5.0%, with a horizontal line at 4.0%. A red line shows fluctuating yields, peaking above 5.0% in 2023 and stabilizing near 4.0% in 2024. A dashed blue line indicates steps in the EFFR. The source "Treasury Dept." and watermark "WOLFSTREET.com" are visible.
8/ This may lead to something disastrous...
Other countries may start seeing the USD as an inflationary asset and keep dumping the US debt...
This risks USD's status as the reserve currency of the world.
9/ Countries across the world are already replacing the US dollar with Gold.
In the last quarter, the USD's share of global reserves hit its lowest point in the last 30 years.
As Trump's "Big Beautiful Bill" will boost spending even more, the USD will become more inflated.
A stacked area chart showing the composition of global international reserves from 1995 to Q1 2025. The chart tracks percentages of reserves held in US dollar, gold, sterling, yen, French franc, Deutsche mark, euro, renminbi, and other currencies. Colors represent different currencies: red for US dollar, gold for gold, green for sterling, yellow for yen, blue for French franc, gray for Deutsche mark, light blue for euro, dark blue for renminbi, and various shades for other currencies. A red arrow points to a 3% mark on the y-axis in 2025, indicating a low point for the US dollar.
10/ So, what should investors do?
- Reduce fiat exposure.
- Put your money in assets.
- Diversify across asset classes.
- If buying stocks, buy companies with pricing power.
This won't solve anything, but this is the best you can do.
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Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
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