Dalio Warns of Possible U.S. Debt Crisis, Recommends Gold and Bitcoin

Bridgewater Associates founder Ray Dalio said the U.S. could face a debt crisis in about three years if fiscal policy does not change, with an error range of plus or minus two years. Dalio said investors should review their asset allocation, reduce bond exposure and put 10% to 15% of their money into gold, while holding a small amount of Bitcoin to diversify risk. He said U.S. government spending and interest burdens keep rising, and that a mismatch between bond supply and demand could force policymakers to expand the money supply, which would add pressure on currency value and inflation. Dalio estimated that U.S. government revenue this year will be about $5.5 trillion, while spending will reach $7.5 trillion, leaving a budget deficit of $2 trillion. Interest expenses are expected to hit $1 trillion, and the market is facing about $10 trillion in debt refinancing needs. He said the government should use a mix of spending cuts, higher taxes and lower rates to bring the budget deficit down from about 6% of GDP to 3%. He also pointed to recent pressure in the U.S. Treasury market, where long-dated yields have climbed to multi-year highs. Japan, the largest foreign creditor to the U.S., has also been adjusting its Treasury holdings to support the yen, adding more supply pressure to the market. U.S. Treasury Secretary Scott Bessent has announced an expansion of the long-dated debt buyback program. The article said the move may help stabilize liquidity in the short term, but the longer-term supply-demand imbalance still needs real fiscal policy support. Dalio laid out the view in his book "How Countries Go Broke: The Big Cycle," arguing that rising debt service costs can eventually run into weak demand from private and institutional investors. At that point, governments may have to accept higher rates or rely on central bank money creation, which can weaken fiat purchasing power. Based on that framework, he said investors should hold less in bonds and allocate capital to gold, with a small Bitcoin position as well. He described gold and Bitcoin as non-government-produced monies that can help investors face sovereign credit risk in an environment of currency debasement. The article said funds have recently moved into alternative assets as debt concerns and inflation hedging demand increased. Gold has rebounded to its highest level since May, while Bitcoin briefly topped $79,000 yesterday and posted its biggest weekly gain since 2023. Dalio also said fiscal deficits and debt expansion are not only a U.S. problem. Britain, China and Japan are facing similar fiscal pressure, and the interaction between sovereign bond markets and non-sovereign assets will remain a key focus for global markets until the macro backdrop improves.