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Bridgewater Associates founder Ray Dalio says the US could be headed to a financial crash because political leaders are cautious against taking aggressive actions to address America’s budget deficit.

In a post on the social media platform X, the billionaire says senior members of both the Democratic and Republican parties agree that the US needs to reduce its deficit to 3% of the GDP (gross domestic product).

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But he says the so-called absolutist policies prevent the adoption of measures such as tax increases and cuts to benefits that can address the debt problem.

“They explained the absolutist policies that must exist and those are that you must make statements like I will absolutely pledge not to raise your taxes or I will absolutely pledge not to reduce your benefits.”

Dalio says it is clear that the US is unlikely to change its debt trajectory and could face painful consequences. He says political leaders may be thrown out by their constituents and face pressure from their parties, so they find it impossible to make compromising statements and actions that can balance the revenue and expenses to produce a good budget.

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“That’s the equivalent of saying I will absolutely pledge not to change the trajectory we’re on in order to have a better set of circumstances than the likely financial crash that we’re going to have.”

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FinSmart team

FinSmart is your go-to platform for "smart finance", where we break down complex financial topics simply and clearly. We help you navigate the financial world with confidence

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FinSmart team

FinSmart is your go-to platform for "smart finance", where we break down complex financial topics simply and clearly. We help you navigate the financial world with confidence

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