Ray Dalio on the $38 – trillion national debt: ‘The debt will be paid off by my grandchildren and great – grandchildren who haven’t been born yet’

Ray Dalio, the billionaire founder of Bridgewater Associates, the world’s largest hedge fund, issued a stark warning about the United States’ rising national debt and dollar devaluation during a recent interview on the . Given that the U.S. fiscal path is arguably unsustainable, Dalio predicted that the burden will fall heavily on future generations, saying: “My grandchildren and great – grandchildren who haven’t been born yet will be paying off this debt with devalued dollars.”

As a student of financial history, Dalio referred to his extensive studies of historical economic cycles. He argued that when countries accumulate excessive debt, which has now reached a certain level in the U.S., they rarely solve the problem through spending cuts or hard defaults. Instead, governments always resort to a “combination of devaluing the currency” and “printing money.”

“It always happens when countries basically go bankrupt,” Dalio said. “They print money, devalue the currency, and create an artificially low interest rate so that the bond – holders receive an artificially low interest rate.” He explained that this strategy punishes those who hold government bonds by giving them returns that can’t keep up with real inflation.

Dalio drew a comparison to the economic changes in the early 1970s, specifically the moment in 1971 when then – President Richard Nixon cut the U.S. dollar’s link to gold.

“The world used to use gold as money,” he said. “That was the way.”

He argued that people used to view things differently, calculating the prices of goods in terms of how much gold they would cost. (He repeated his usual advice that it’s “prudent” to have between 10% and 15% of your portfolio in gold.) He said that the value of gold is soaring now because people have liked gold for thousands of years and “people still seem to like it.” In the era of fiat currencies, Dalio said, “80% of the world’s money has disappeared” since 1750, and the rest has been significantly devalued.

“There’s a saying that gold is the only asset you can own that isn’t someone else’s liability,” he said, explaining that when you have gold in hand, you don’t depend on anyone to recognize it as money. Central banks around the world are now worried that what happened to, for example, Russia could happen to them due to all the sanctions imposed since the Ukraine war.

The hedge – fund billionaire added that he sees the current economic situation moving towards a similar turning point as in the 1970s, driven by a global trend towards “war self – sufficiency” where countries can no longer rely on imports or foreign debt financing to boost their economies. He didn’t name these countries, but this could partly explain American aggression in Venezuela (for oil) and Greenland (for security and mineral wealth). In short, Dalio foresees a devalued future with many consequences.

Washington’s stalemate

When asked why the bond market hasn’t rebelled against this debt accumulation, Dalio described a state of inaction in Washington. He noted that policymakers assume the bond market won’t collapse, while bond traders assume Congress will act before the crisis becomes irreversible. However, Dalio warned that debt crises usually develop “slowly until they happen suddenly,” paraphrasing the famous quote by Ernest Hemingway about how bankruptcy occurs.

Dalio expressed doubt that current legislative efforts, such as tariffs or “big beautiful bills,” will solve the core problem. While he admitted that tariffs have historically been a valid source of government revenue and are necessary for building domestic manufacturing self – sufficiency, he maintained that the debt issue will ultimately be addressed through currency devaluation.

“Tariffs aren’t bad,” he said, noting how they once served as… “Any form of tax has its cost,” he said philosophically.

Regarding navigating a stagflationary environment, Dalio urged investors to stop looking at their wealth in nominal terms (the dollar amount) and instead “look at the value of your portfolio adjusted for inflation.”

He identified two main assets for protection:

1. Inflation – indexed bonds: He called Treasury Inflation – Protected Securities (TIPS) “the safest investment you can get right now” because they guarantee a real return above inflation.

2. Gold: Dalio advised that it’s “prudent” to hold “10% or 15% of your portfolio in gold.” He described gold as “the only asset you can own that isn’t someone else’s liability,” noting that central banks are currently buying it as a hedge against sanctions and geopolitical risks.

Regarding specific assets, Dalio repeated his long – standing “mantra” of diversification. He suggests that investors look for “15 good, uncorrelated return streams,” a strategy he claims can reduce portfolio risk by “about 80%” without sacrificing expected returns. He warned ordinary savers against speculating in the markets, describing short – term trading as a “zero – sum game” where the average person “will probably be the loser.”

Despite the gloomy monetary outlook, Dalio ended on a note of cautious optimism about the nation’s resilience. While acknowledging the severity of the financial cycle, he said: “We will get through this and reach the other side,” emphasizing that the outcome ultimately depends on “how we interact with each other” as a society.