American billionaire investor Ray Dalio has issued a dire warning about the “risky” situation of the US economy, saying the country’s growth is at risk of falling to zero.
“We’re going to have a debt crisis in this country,” the 74-year-old founder of the world’s largest hedge fund, Bridgewater Associates, warned Americans on CNBC in an interview that aired on Thursday.
“I think you’re going to get a meaningful slowing of the economy,” he said, citing America’s record $33 trillion of debt as being “risky”.
“How fast it transpires, I think, is going to be a function of that supply-demand issue, so I’m watching that very closely,” he added.
The veteran investor said the huge imbalance between the massive scale of public borrowing and insufficient demand for government bonds is a major factor in the looming economic collapse.
Dalio has previously flagged America’s financial challenges —a historic debt pile, higher interest rates, and quantitative tightening — as well as tarnished international relations with Russia and China, as a “perfect storm” for the US economy.
He has also sounded the alarm that high debt levels could spark a “balance sheet recession,” where growth stops because people and companies focus on paying off their debts rather than investing in expansion.
In this regard, some economists have forecast worse predictions, where they’ve predicted stocks and house prices will collapse, and a full-blown recession will take place.
The economists’ concerns have mounted since the US inflation rate hit 40-year highs last year, prompting the Federal Reserve to hike interest rates from almost zero to over 5 percent.
American credit rating agency Fitch, in August, slashed US credit rating, citing fiscal deterioration over the next three years and unresolved debt-ceiling dispute.
Moody’s rating agency, earlier this week, warned that a possible government shutdown next week would mount added pressure on US credit ratings.
US hardline Republicans in the House have disputed a deal the Republican-led House negotiated with the Democratic president Joe Biden for $1.59 trillion in discretionary spending in fiscal 2024, paving the way for large portions of the government to shut down on Sunday.
Biden said this week that the shutdown would hit Black Americans disproportionately hard, including by reducing nutritional benefits, cutting inspections of hazardous waste sites and lack of enforcement of fair housing laws.
Economists, analysts and government experts predict that everything from childcare funding and economic data releases to food benefits may be suspended beginning on Sunday, and some 2.2mn government workers may be furloughed or forced to work without pay.
The Census Bureau reckons out of the 333mn US population, about 41mn people live at or below the poverty line, which is set at close to $30k for a 4-member family household.
