Ray Dalio, founder of the world's largest hedge fund, Bridgewater, contributed an article titled "The Bond Market's Supply-Demand Problem" to TIME magazine on August 28, sounding the alarm on the financial crisis brought on by excessive debt and the bubble-burst risk of the AI boom. Dalio likened credit to the blood in the economy's circulatory system, noting that debt-service costs keep rising the way plaque accumulates in arteries, ultimately triggering a financial heart attack. He said the US 30-year Treasury yield has climbed rapidly above 5%, with the government's long-term borrowing costs more than doubling in under four years from about 2% in early 2022. He said his book "2025" predicted a financial and economic heart attack around 2027, and proposed as a solution a balanced combination of spending restraint, higher tax revenue, and lower real interest rates to stabilize government debt and the debt ratio at about 3% of GDP. Compared with current plans, he said, combining roughly 5% in spending cuts and revenue increases with interest rates about 1 to 1.5 percentage points lower than expected could substantially reduce future debt-service costs. On the AI boom, he noted that, as with railways, the Industrial Revolution, and the late 1920s, nearly every technology boom has produced a bubble and led to a collapse, warning that the danger lies in people's inability to distinguish between a "miracle" and an "investment."
Dalio/Bridgewater is the author of the warning, but the article reports his macro views rather than any company-specific development.
