Bridgewater Associates founder and CIO mentor Ray Dalio speaks on CNBC’s Squawk Box at the World Economic Forum Annual Meeting on January 16, 2024 in Davos, Switzerland.
Adam Galich | CNBC
billionaire investor Ray Dalio Believes that reducing the U.S. budget deficit could stabilize bond markets and lower interest rates.
The founder of Bridgewater Associates, one of the world’s largest hedge funds, said the deficit is currently expected to account for 7.5% of U.S. gross domestic product. Dalio said that if this ratio drops to 3%, the supply and demand imbalance in the bond market will be significantly alleviated.
“It’s almost a black-and-white situation,” Dalio said on CNBC’s “Squawk Box.” world economic forum In Davos, Switzerland. “All these bonds have to be sold… There’s a huge supply… This has happened many times before, so we have to stabilize this situation, and we can do that.”
Rising financing costs, continued spending growth and declining tax revenues have led to sharply rising deficits and pushed up the national debt Breaking through the US$36 trillion mark. In 2024, the government will spend more on interest payments than any other expenditure except Social Security, defense and health care.
The widely followed investor said deficit reduction can be achieved through higher taxes, lower spending or a combination of both, as long as politicians work together to solve the problem.
“This is what I call the 3% solution,” Dalio said. “We have so much debt that the interest cost of the debt is more important than spending and taxes… Our problem is not the deficit. Our problem is politics, broken politics.”
