Ray Dalio Warns Surging Debt Is Choking Global Economy As Borrowing Costs Rise 'Plaque In The Circulatory System'
On Monday, Bridgewater Associates founder Ray Dalio warned that rising debt levels and higher borrowing costs are straining the global financial system, comparing the buildup of debt to "plaque" clogging an economic circulatory system and restricting growth.
Credit System Under Strain As Debt Costs Rise
In a post on X, Dalio described credit as functioning "like a circulatory system that delivers nutrients and buying power to various parts of the economy."
He said the system works well when borrowed money is used productively and generates income, but becomes strained when debt grows faster than income.
"A system is considered healthy when borrowed money is used to generate productivity, which in turn produces income," Dalio wrote.
However, he warned that it becomes "unhealthy when debts and debt service costs increase relative to income."
He compared rising debt payments to "plaque in the circulatory system," arguing that higher debt servicing "squeezing out spending" and slows economic movement.
Dalio also noted that debt is both a liability for borrowers and an asset for lenders, meaning financial stress can trigger market imbalances as investors adjust expectations for returns.
US Debt Risks Build
Earlier, Economists Mohamed A. El-Erian and Steve Hanke warned that rising U.S. debt levels, weaker investor demand, and geopolitical tensions were increasing stress across bond markets and the global economy.
El-Erian said a widening gap between U.S. debt issuance and investor demand, driven by persistent deficits and heavy refinancing needs, could trigger a "doom loop" of higher yields and tighter financing conditions.
Hanke added that tensions around the Strait of Hormuz represented a major supply shock, warning that oil disruptions could push up global costs and spread inflation across industries.
At the same time, U.S. federal debt reached about $31 trillion, or 100% of GDP, with projections showing it could climb to 120% by 2036.
Rising interest costs were expected to exceed $2.1 trillion, further straining federal finances.
Officials and analysts warned that the fiscal path was becoming increasingly unsustainable, with higher borrowing costs and weakening demand adding to long-term economic risks.
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