Ray Dalio: "US Faces Massive Debt... November Election Most Crucial"

As the U.S. Federal Reserve (Fed) cut interest rates for the first time in four and a half years, Ray Dalio, founder of Bridgewater Associates and known as the "godfather of hedge funds," warned that the United States still faces an enormous scale of debt. He also described the upcoming U.S. presidential election in November as the most important election of his life.

On the 18th (local time), Dalio appeared on CNBC's Squawk Box Asia and pointed out the difficulty of balance, saying, "The Fed's challenge is to keep interest rates high enough to satisfy creditors but not so high as to cause problems for debtors." The Fed decided at the September Federal Open Market Committee (FOMC) meeting, held over two days until this day, to lower the benchmark interest rate by 0.5 percentage points from 5.25?5.50% to 4.75?5.0%. This rate cut affects not only short-term borrowing costs in the banking sector but also various consumer products such as mortgages, auto loans, and credit cards.

Earlier, Dalio identified "debt, money, and economic cycles" as one of the five major factors influencing the global economy. On this day as well, he reiterated, "There is an enormous amount of debt. There has never been such a scale in my lifetime." He also expressed concern that neither the Republican presidential candidate, former President Donald Trump, nor the Democratic presidential candidate, Vice President Kamala Harris, would prioritize the debt issue ahead of the November election. He pointed out that regardless of who wins the election, the pressure from debt is unlikely to ease.

Dalio said, "Over time, we will follow a path very similar to Japan," referring to Japan's case of maintaining artificially low interest rates. He also predicted that if there are not enough buyers to absorb the supply of debt in the market, the Fed may have to intervene. He described "Fed intervention as a very serious bad event." He further anticipated that in such a scenario, all currencies would weaken, leading to a situation similar to the 1970s or the period from 1930 to 1945.

Regarding the upcoming U.S. presidential election in November, Dalio said, "It will be the most important election of my life," explaining that "there are irreconcilable differences between the two sides." He emphasized, "The first question we will ask is whether there will be an orderly transfer of power," and noted that "the possibility that the election results will not be accepted is very important."

Dalio defined this election as a major force shaping the global economy. He also stressed that the U.S. "needs a strong centrist leader." However, when asked whom he supports in the election, he dismissed the question by saying, "Neither of them is what the country needs." He emphasized, "What this country needs is for moderates to come together, work together, and achieve great reforms," adding, "What this country needs is broad prosperity."