According to him, this creates an environment where populist leaders often rise. “Populist leaders emerge pledging to take control and bring about order,” he concluded.
His comments come amid the US facing mounting pressure to handle its debts under Donald Trump’s administration. The country’s national debt reached a record high by surpassing the $38 trillion mark in October, as per the Treasury Department data. The total debt stood at 324% of the country’s GDP.
Earlier in September, Dalio had also warned that the US was approaching a “financial” edge. Speaking on a podcast with Scott Galloway, Dalio outlined, “This year the government will spend about $7 trillion and it will take in about $5 trillion. So it will spend 40% more than it’s taking in… the debt is now about six times the amount of money it takes in.”
To address this issue, Dalio proposed a “3% solution”, aiming to reduce the debt from the current 6 to 7% of GDP down to roughly 3%. He said that achieving this goal would require a combination of a 4% increase in taxes and a 4% reduction in government spending.
“It wouldn’t quite get you there,” he noted, adding that “but it would improve the supply-demand dynamics of the debt, helping interest rates to fall,” he added.
His latest comments draw on insights from his 2021 book, Principles for Dealing with the Changing World Order. On Dalio’s YouTube channel, a 2022 video explains the book’s key takeaways, emphasising that a nation’s greatest war is with itself, referring to the difficult decisions it must make.