Bridgewater founder Ray Dalio on Wednesday warned that a significant supply-demand problem regarding U.S. debt could have a profoundly disruptive impact on the global economy.
It is the latest in a series of stark warnings about America's mounting debt from the U.S. hedge fund billionaire, with the country's national debt currently standing at more than $36.2 trillion.
"The first thing is the debt issue, we have a very severe supply-demand problem," Dalio told CNBC's Sara Eisen at CONVERGE LIVE in Singapore. "[The U.S. has] to sell a quantity of debt that the world is not going to want to buy."
He said this was imminent and of "paramount importance."
The U.S. deficit needs to go from a projected level of 7.2% of gross domestic product to about 3% of GDP, Dalio said.
"That's a big deal. You are going to see shocking developments in terms of how that's going to be dealt with," he added.
Asked whether the U.S. debt problem could lead to a period of austerity, Dalio said the issue could result in a restructuring of the debt, the U.S. applying pressure on other countries to buy the debt, or even cutting off payments to some creditor countries.
"Just as we are seeing political and geopolitical shifts that seem unimaginable to most people, if you just look at history, you will see these things repeating over and over again," Dalio said. "We will be surprised by some of the developments that will seem equally shocking as those developments that we have seen."
His comments, made on the same panel as Salesforce CEO Marc Benioff, come amid a tariff roller-coaster ride for markets in recent days.
Trade policy uncertainty has added to a sense of unease on Wall Street, with investors concerned about the impact of a brewing trade war on the global economy.
Trump's trade policies, which appear designed to rebalance the economic order in America's favor, include tariffs against Canada, Mexico and China.
Tariffs 'to cause fighting between countries'
When asked about the potential consequences of a simmering trade dispute, Dalio described the current state of affairs as "an extension of the patterns of history" — and singled out 1930s Germany as one example.
Dalio said there was a writedown of debt at that time, alongside a hike in tariffs to boost revenue and a buildup of its domestic base. "Be nationalistic, be protectionistic, be militaristic. That is the way these things operate," Dalio said.
"The issue is really the confrontation of all of this, the fighting of all of this. So, tariffs are going to cause fighting between countries," Dalio said, adding that he was not necessarily talking about a military confrontation.
"But think about U.S., Canada, Mexico, China, and all of those types of fighting. There will be fighting, and that will have consequences, and I think that's the main thing to pay attention to," Dalio said.
Dalio said he was sharing those views as a politically neutral observer, comparing his approach to that of a mechanic or doctor. "I'm not an ideologue," he added.
