Legendary investor Ray Dalio has urged investors to turn to gold and bitcoin while reducing exposure to government debt, warning that the United States is approaching a dangerous point in its debt cycle and could face a debt crisis within roughly three years.
Dalio, the founder of Bridgewater Associates, recommended that investors allocate 10% to 15% of their holdings to gold and hold a portion of bitcoin as protection against a potential full-blown US debt crisis.
His commentary centers on the deteriorating US fiscal position. The federal government is expected to collect approximately $5.5 trillion in revenue this year against anticipated spending of roughly $7.5 trillion, resulting in a $2 trillion shortfall. Additionally, $10 trillion in government debt requires refinancing, and annual interest expenses are approaching $1 trillion. Total US government debt recently surpassed $40 trillion.
To address the broader fiscal outlook, Dalio suggested reducing the federal deficit from about 6% of GDP to 3% through spending cuts, increased tax revenue, and lower borrowing costs. For individual investors, he advised diversifying across financially strong countries and alternative asset classes rather than relying on government actions, specifically favoring gold and bitcoin because they cannot be simply issued by governments.
Dalio's remarks coincide with a period of significant market movement for both assets, alongside an announcement by US Treasury Secretary Scott Bessent regarding plans to substantially increase buybacks of long-dated government bonds. Longer-term Treasury yields have also recently climbed to multi-year highs.
