"The U.S. currently spends roughly $7 trillion annually while collecting about $5 trillion in revenue-a gap that has the federal government paying billions every week in debt service and has left the country carrying debt approximately six times its income. He likens the situation to "plaque building up" in an artery: no heart attack yet, but the nation's financial "MRI" suggests one is coming if spending isn't curtailed."
"The most likely outcome, in Dalio's view, is a stagflationary spiral reminiscent of the 1970s, in which the Federal Reserve is eventually forced to print money to cover its obligations. "My grandchildren and great-grandchildren not yet born are going to be paying off this debt in devalued dollars," Dalio told David Rubenstein earlier this year-a comment that underscores his belief that the pain won't be sudden but slow, distributed, and inescapable for future generations."
"He describes the coming era as "going through a time warp"-a phrase that captures just how disorienting and swift the transformation could be. Dalio is widening his alarm, arguing in a recent conversation with The New York Times' Ross Douthat that the U.S. is entering a period of "great turbulence" so severe that the country will be "almost unrecognizable" in five years."
The U.S. runs large annual deficits, spending about $7 trillion while collecting about $5 trillion in revenue. Federal debt is roughly six times income, and debt service costs are rising, with interest payments near $1 trillion per year. The situation is compared to plaque building up in an artery, where no immediate crisis exists but financial indicators suggest one could arrive if spending is not curtailed. The most likely outcome is a stagflationary spiral similar to the 1970s, where the Federal Reserve may be pushed to print money to meet obligations. The pain is expected to be slow and distributed across future generations. Debt is only one of five forces shaping the outlook.
Read at Fortune
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