The Sword of Damocles is hanging over the US economy. If headwinds persist, the US economy will hardly be able to exit its dire straits in three years. So, urgent measures are needed to revitalize it.
According to Ray Dalio, founder of Bridgewater Associates, the US GDP could suffer a heart attack in just three years if the national debt is not tackled. The expert warns that if the US government fails to cut its debt-to-GDP ratio to 3% by 2028, the country will face severe economic upheaval.
Currently, the US federal debt stands at $36.5 trillion. Previously, Donald Trump pledged to reduce the national debt during his election campaign. Therefore, after taking office, this commitment has yet to be fulfilled.
Ray Dalio cautions that if the US keeps on snowballing, the country will face a major debt crisis within the next 2–4 years. "It’s like a heart attack that is getting closer. I think it will happen in about three years," he stated.
He also pointed out that many holders of US debt are exiting the market, anticipating a grim future. In the medium term, the US government may struggle to find buyers for its Treasuries. In response, the Federal Reserve may devalue the US dollar to ease debt repayments, but this could trigger a global collapse in other currencies. If the situation worsens, the world could face a repeat of the Great Depression of the 1930s—a scenario that most central banks want to avoid, Ray Dalio concluded.
Another looming threat to the US economy is rising consumer inflation. According to Moody’s analysts, Trump’s aggressive trade policies could fuel inflation. The import tariffs on goods from Mexico, Canada, and China could drive up prices for smartphones, gaming consoles, laptops, cars, and footwear imported into the US. Experts estimate that inflation could surge by 4%–20%, depending on the category of goods.
