Billionaire investor Ray Dalio advised investors to reduce their holdings of government bonds and consider allocating up to 15% of their wealth to gold as protection against a possible debt crisis in the United States, which he estimates could happen within three years.
In a LinkedIn post on Friday, the founder of Bridgewater Associates recommended diversifying portfolios across a variety of assets and economies with sound finances. Besides gold, Dalio said a small allocation to bitcoin could help reduce risk and improve returns.
Current Context of US Bonds and Debt
The investor’s comments come as yields on long-term US Treasury bonds have reached levels not seen in several years. japan, the largest foreign creditor of the US, has begun selling US bonds to support its own currency, putting pressure on the markets.
To stem the fall in bond prices, US Treasury Secretary Scott Bessent announced this week an expansion of long-term debt buybacks. The unexpected move has so far brought only temporary relief.
The Debt Cycle Model and Future Risks
Dalio linked recent events to the debt cycle model he describes in his book “How Countries Go Broke: The Big Cycle.” According to him, rising debt service costs clash with falling demand for these bonds. This forces governments to accept higher interest rates or rely on money printing by central banks, which weakens the currency and fuels inflation.
The investor estimates that US government revenue in 2026 will be approximately US$ 5.5 trillion, while spending reaches US$ 7.5 trillion, producing a deficit of US$ 2 trillion. Interest payments on the debt are expected to be close to US$ 1 trillion, at a time when about US$ 10 trillion will need to be rolled over.
Without significant changes, Dalio warns that the United States could face a debt crisis within three years, give or take two years.
Proposals to Contain the Crisis
To keep the situation from worsening, he advocates cutting the budget deficit to 3% of Gross Domestic Product, below the current level of about 6%. According to Dalio, this goal can be achieved through a combination of public spending cuts, higher tax revenue and lower interest rates.
Dalio also notes that other major economies, such as the United Kingdom, China and Japan, face similar fiscal challenges.
Alternative Assets
Given these pressures, the billionaire believes that assets such as gold and bitcoin, which are not issued by governments, tend to perform well. Last Friday, gold hit its highest price since May, while bitcoin topped US$ 77,000, heading for its biggest weekly gain since 2023.
These moves reflect investors’ search for alternatives that offer protection against volatility and the risks associated with growing public debt.
