Bridgewater Founder Warns of U.S. Fiscal Heart Attack as Debt Soars 6.5% of GDP

The founder of Bridgewater Associates has once again raised alarms about the escalating U.S. debt, comparing it to an imminent "fiscal heart attack." This warning comes as the U.S. Congress advances the "Tax Cuts and Jobs Act," a significant piece of legislation that could further exacerbate the nation's debt burden. The founder highlighted the urgent need for measures to mitigate the risks posed by the growing debt, suggesting that inflation-indexed bonds could serve as a viable solution.

During a recent event in New York, the founder cautioned about the uncontrolled government deficit, likening the debt situation to the accumulation of arterial plaque, which can impede other forms of consumption. The founder noted that the U.S. government's projected income for the year is approximately 5 trillion dollars, while expenditures are expected to reach 7 trillion dollars. This disparity would result in a national deficit of 2 trillion dollars, with an additional 1 trillion dollars required to cover debt interest payments.

The founder proposed several measures to address the fiscal imbalance, including reducing expenditures, increasing tax revenues, and lowering interest rates. These steps aim to decrease the budget deficit from 6.5% of GDP to 3%. However, the founder acknowledged the challenges and controversies associated with implementing these solutions. The founder also pointed out that over the next year, the U.S. government will need to sell around 12 trillion dollars in national debt to cover 1 trillion dollars in interest payments, refinance 9 trillion dollars in maturing debt, and address a 2 trillion dollars deficit.

In the event of an economic recession, the founder warned that the debt crisis could worsen, as government borrowing tends to surge during such periods. To safeguard their investment portfolios from the adverse effects of rising national debt and deficits, the founder advised investors to hedge against inflation and diversify their assets. The founder recommended inflation-indexed bonds, gold, and a moderate amount of Bitcoin as prudent investment choices, noting that these assets could provide a real return of slightly over 2% after accounting for inflation.

As the founder issued this warning, the U.S. debt is at an all-time high. The "Tax Cuts and Jobs Act," which narrowly passed the House of Representatives and Senate, is expected to further increase the national debt. The Congressional Budget Office has estimated that the Senate version of the bill would add 3.3 trillion dollars to the national debt over the next decade. The founder's concerns underscore the potential for a sudden and severe economic crisis if the debt situation is not addressed, emphasizing the need for a sustainable solution to the country's fiscal challenges.