Billionaire hedge fund manager Ray Dalio says the U.S. economy is nearing a breaking point, one that could trigger a crisis “much worse than a recession.”
In an interview with NBC News, Dalio warned that while the U.S. may be “very close to a recession,” the real issue is far deeper.
“We have something that’s much more profound — we have a breaking down of the monetary order,” he said, citing three drivers: Trump’s trade war, ballooning U.S. debt, and the rise of competing global powers.
“We are going to change the monetary order because we cannot spend the amounts of money [we need to],” he added.
Dalio expanded on his concerns in a social media post, urging policymakers to address America’s trade and debt imbalances through negotiation, particularly with China.
He pushed for a “win-win” deal that would strengthen the yuan and help stabilize global trade. On the domestic front, he argued Congress must cap the federal deficit at 3% of GDP.
Otherwise, he warned, “we’re going to have a supply-demand problem for debt at the same time as we have these other problems and the results of that will be worse than a normal recession.”
Faith in the U.S. is cracking
As Washington struggles to regain control of its fiscal and trade agendas, global markets are flashing red.
Foreign investors are unloading U.S. Treasurys at the fastest pace in years, a move that’s rattling confidence in America’s long-held safe haven status.
The 10-year Treasury yield surged nearly 50 basis points last week, its sharpest weekly jump since November 2001. Meanwhile, the dollar dropped almost 3% against a basket of major currencies.
“The fear is the U.S. is losing its standing as the safe haven,” said George Cipolloni, a fund manager at Penn Mutual Asset Management. “Our bond market is the biggest and most stable in the world, but when you add instability, bad things can happen.”
That bond market chaos may be what forced Trump to walk back last week’s tariff threats.
“When the bond market collapsed, [Trump’s] whole narrative collapsed,” said Marko Kolanovic, the former chief market strategist at JPMorgan.
Spencer Hakimian, founder of Tolou Capital Management, believes the line in the sand is clear: if the 10-year yield hits 5%, that’s “Trump’s capitulation point,” the threshold that will force him to retreat from the trade war entirely.
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