This Monday, Ray Dalio, founder of Bridgewater Associates, the world's largest hedge fund, warned in an NBC interview that the United States is facing an imminent risk of economic recession, and the situation could be worse than a simple recession.
In the interview, he elaborated on his analysis of the current situation and proposed a series of possible response strategies. His remarks quickly garnered widespread public and media attention, sparking curiosity about the views of this heavyweight figure in the financial world.
The debt crisis far exceeds the economic recession
Dalio explained in the interview that tariff issues are just the tip of the iceberg of a deeper crisis. He emphasized that the increasing government debt and internal political conflicts are changing the U.S. monetary system and political order. Additionally, external conflicts, technological changes, and natural disasters are exacerbating instability.
Dalio believes that the chaotic implementation of tariff policies is highly destructive, lacking effective negotiation and stable policies. He predicts that the situation may clarify within the next 90 days due to the Trump administration's suspension of upcoming tariffs. Regarding the economic recession, he believes this is merely a superficial reflection of negative GDP growth, while the challenges facing the U.S. are far more severe and could shake the country's dominant position and monetary order.
He also compared the crisis to the economic crisis of 2018 and warned that if the government does not control the deficit, the U.S. could face a debt crisis or even a collapse of the monetary system. Coupled with other challenges, the U.S. could encounter a predicament more severe than the 2008 financial crisis. Dalio cautioned that internal conflicts could arise in the U.S., violating democratic norms, and the possibility of international military conflicts cannot be ruled out. This crisis could also disrupt the world order established in 1945.
The deep crisis hidden behind tariff issues
In the interview, although Dalio did not elaborate on his detailed views on the impending crisis, he clearly stated in an article published before the interview that tariff issues are just a manifestation of larger economic problems. In the article, Dalio emphasized that massive debt is the true root cause of global economic imbalances.
Dalio believes that the existing monetary and economic order urgently needs reform. He pointed out that countries like China produce goods at low cost and sell them to the U.S. while buying U.S. debt assets, whereas the U.S. relies on these countries' lending for consumption. This model is unsustainable as it has led to a decline in U.S. manufacturing and forced the U.S. to import critical materials from potentially hostile nations.
Trump's tariff policy may attract manufacturing back to the U.S., thereby promoting technological development, but Dalio believes the U.S. will face a series of disruptive changes. He hinted that the end of the old system is inevitable, and the question is how the government will handle this transition.
Although Dalio is not very satisfied with Trump's tariff policy, some people believe that this policy may be a solution to the issues Dalio mentioned. However, Dalio himself has offered his insights on how to avoid a crisis.
Dalio's response strategies
Dalio is deeply concerned about the current situation, but he remains optimistic about finding a solution. He not only has a profound understanding of the current challenges but also proposes solutions to prevent further economic deterioration.
As a billionaire and founder of Bridgewater Associates, he suggested that Congress should commit to reducing the budget deficit to 3%. He also warned that if the government does not respond swiftly, the deficit could soar to 7%, triggering more negative chain reactions that could jeopardize the stability of the U.S. monetary system.
Can Bitcoin be the solution?
Although Dalio holds an open attitude toward cryptocurrencies and has included some in his investment portfolio, he does not view them as traditional safe-haven assets but rather as a new asset class that can diversify investment risks.
On the contrary, he personally prefers gold and holds a cautious attitude toward cryptocurrencies, believing that cryptocurrencies like Bitcoin are unlikely to become reserve currencies due to transparency and price volatility, and are more likely to be seen as speculative assets. However, it is worth noting that both of these assets have reached historical highs this year.
Dalio's views also suggest that U.S. debt is the root of the problem. Previously, Donald Trump and Michael Saylor had explored the potential of Bitcoin in reducing U.S. debt. If the market develops according to Trump's and Saylor's vision, Bitcoin may help the U.S. avoid a deeper crisis that is more severe than an economic recession.
At the same time, Larry Fink, founder of BlackRock Inc, also expressed his views, warning that U.S. debt could undermine America's leadership in the global cryptocurrency space.
Conclusion:
Dalio's warning casts a shadow over the U.S. economic outlook while also provoking deep reflection on the potential role of Bitcoin as an emerging asset.
Despite ongoing debates over volatility and market acceptance, government departments have begun actively exploring innovative solutions, from VanEck's recent proposal for Bitcoin-linked government bonds to the Trump administration's national Bitcoin reserve plan. These initiatives show that the traditional financial system is actively embracing the arrival of the digital asset era.
The interaction between this policy exploration and market evolution is reshaping our understanding of how to respond to crises. As Dalio warned, what we currently face is not only a cyclical recession but also a reconstruction of the monetary order.
In this context, digital assets like Bitcoin may offer new ideas and tools for the traditional financial system in distress, but their ultimate role still depends on the choices made by policymakers and market participants.
