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Dalio’s debt-crisis hedge
Billionaire investor Ray Dalio said Treasury Secretary Scott Bessent's debt buyback announcement this week fits a broader pattern that can signal a forthcoming crisis, and he urged investors to prepare by owning cryptocurrencies and gold.
“"I am confident that the government's financial condition is at an inflection point,"”
Dalio wrote in a LinkedIn post published Friday that "I am confident that the government's financial condition is at an inflection point," adding that if it is not dealt with now, "the debts will build up to levels where they can't be managed without great trauma."
Dalio told CNBC on Thursday that his team was going to "make a market" and that the purchases would likely top $4 billion, while Dalio said the Treasury Department has "only limited capacity" to buy back bonds.
Dalio recommended investors are underweight debt assets such as bonds, and said as much as 10% to 15% of a portfolio could land in gold, along with "a bit" of bitcoin, as the U.S. budget deficit topped $432 billion in July.
Timing and portfolio shift
Dalio warned that on the current trajectory the United States could enter a debt crisis in as early as one year or as late as five, and he added, "My guess, which I suppose will be a bad one, is that it will come in three years, give or take two."
To address the deficit, Dalio said the U.S. needs a three-part strategy to get the budget deficit down to 3% of gross domestic product by reducing spending, raising tax revenue, and lowering interest rates, while insisting "All three need to happen concurrently so as to prevent any one of them from being too large."
He cautioned against ramming through adjustments by "force," saying it would be "very bad if the Federal Reserve unnaturally forced interest rates down," and he said an economy in recession requires increased government spending.
In a separate report, Stocktwits said Dalio projected U.S. federal expenditures at $7.5 trillion against revenues of $5.5 trillion, leaving a $2-trillion budget deficit, and said debt-servicing costs alone are expected to reach $1 trillion alongside about $10 trillion in maturing debt that requires refinancing.
Bitcoin’s role amid risk
Dalio’s crypto stance in the coverage emphasized bitcoin as a limited hedge rather than a replacement for gold, with DiarioBitcoin saying he keeps gold as his preferred hedge while recognizing "un lugar limitado para BTC dentro de una estrategia de protección."
“"un lugar limitado para BTC dentro de una estrategia de protección"”
DiarioBitcoin also said Dalio maintained an exposure of about 1% to BTC for years, while questioning that it becomes a major global reserve, and it described his view that "la mayoría de las economías tienen problemas de deuda y déficit similares."
Cointelegraph reported that Dalio called on investors to put money into gold and "a bit of Bitcoin" in response to a looming debt crisis, and he linked the recommendation to risks from "internal political and external geopolitical conflicts."
Cointelegraph further quoted Dalio’s timing view—"My guess, which I suppose will be a bad one, is that [a US debt crisis] will come in three years, give or take two"—as he urged investors to overweight Bitcoin and gold rather than bonds.