Skip to main content

Market Overview

Billionaire Ray Dalio Says US Budget Deficit Isn't The Problem, It's 'Fragmented' Politics

Share:
Billionaire Ray Dalio Says US Budget Deficit Isn't The Problem, It's 'Fragmented' Politics

Bridgewater Associates founder Ray Dalio believes the key to lowering interest rates and balancing out the bond market is reducing the U.S. budget deficit.

What To Know: In an interview from the World Economic Forum on CNBC’s “Squawk Box” Tuesday morning, Dalio indicated that there’s a supply-demand imbalance in the bond market that can be improved if the projected deficit could be lowered to 3%.

“We have a projected deficit of 7.5% of GDP. That means all those bonds have to be sold,” Dalio said.

See Also: Mexican Peso, Canadian Dollar Slide As Trump Threatens 25% Tariffs, Economist Eyes Price Hikes On ‘Typical US Breakfast’

“When I calculate who are the buyers of the bonds, there will not be enough buyers. And then where it could be worse in this dynamic is those who own bonds also sell the bonds, and when that happens there’s a tremendous supply … and then we have problems. We can get into what it looks like, but it’s happened many times before. So we have to stabilize that, and we can do it.”

The billionaire investor told CNBC that he calls it “the 3% solution.” Most people understand that you can lower the deficit by cutting spending and raising taxes, but they often overlook what happens when the economy is strong.

“If you do it when the economy is good, you will get a lower interest rate. A lower interest rate means less cost of the debt because we have so much debt that the interest costs on the debt is more important than spending and taxes,” Dalio said.

The federal budget jumped close to 40% in 2024 versus the prior year, pushing the national debt above $36 trillion. Dalio told CNBC that it’s up to the politicians to work together to figure it out. It’s certainly achievable if everyone agrees on the 3% target, he added.

“Our problem isn't the deficit. Our problem is the politics,” Dalio said. “The fragmented politics.”

Read Next:

Image via Shutterstock

 

Related Articles

View Comments and Join the Discussion!

Posted-In: CNBC Ray Dalio World Economic ForumGovernment News Politics Top Stories

Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
SPAC
Everything you need to know about the latest SPAC news.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com