What Happens When a Country Accumulates Too Much Debt?

2025-10-24

The way I see it, any serious effort to solve the debt crisis will likely come too late.

It’s a timing issue. 2026 is a midterm election year — politicians won’t want to take the painful steps needed to improve our economic picture: cutting spending, raising taxes, and the like.

Any sort of bipartisan effort that comes after will both take time and be unlikely to be effective, because those commissions generally don’t work very well in practice.

That’s what it looks like to me. I’m curious to hear if you see things similarly.
@TheProfGPod

2025-10-06

I want to explain in a nutshell why the US debt situation is at a very dangerous inflection point.

Put simply, the US is now spending 40% more than we’re taking in. This accumulation of debt service payments has spiraled over decades and is starting to squeeze away buying power.

And if you run the numbers, there’s an imbalance between how much debt has to be sold, who the buyers are, and the likelihood of it all being bought.

Together, these two influences are why I worry about suffering an economic heart attack in the near future.

2025-09-24

I like inflation-indexed bonds — or TIPS (Treasury inflation protected securities) — because they guarantee a real return.

The markets are a zero sum game, and if you’re speculating, you’ll probably be the loser. But these bonds are among the safest asset classes you can find.

2025-09-19

The reality is that AI is so revolutionary and so disruptive that it’s very hard to say for sure whether superscalers are currently priced accurately in the markets.

But what will be even more impactful and is not adequately priced in is the effect AI is going to have on applications of it on company earnings, efficiencies, and the like.

I’m often asked whether these future productivity improvements will convert to the profits and incomes needed to service the debt well. I’ve done the calculations, measuring it against other productivity miracles, and I think it’s very unlikely — though of course, I could be wrong.

As an investor, if you think that will happen, I suggest that you skew your portfolio accordingly. @MasterInvestorChannel

You can watch the full conversation here:

2025-08-21

#Love is the most important soft skill…

2025-07-16

The world order is now changing in a way that I described in my book and video Principles for Dealing with the Changing World Order. For a complete picture I encourage you to read the book or you can watch the animated video on my channel.

#raydalio #principles #politics #economics

2025-07-11

History shows us that having too much debt during an economic downturn leads to a classic, self-reinforcing cycle where:

1) The empire can no longer borrow the money to repay its debts
2) It prints a lot of new money, which devalues the currency and raises inflation
3) Living standards decline, leading to the rise of political extremism
4) Turbulent economic conditions undermine productivity and there is conflict about how to divide the shrinking resources
5) Populist leaders emerge pledging to take control and bring about order

#principles #raydalio #history #debt

2025-07-02

After spending time in Washington, DC discussing the budget deficit with senior people on both sides of the aisle, it’s clear to me that we are unlikely to change the debt trajectory we’re on and avoid the painful consequences.

While virtually everyone agrees on the need to address our debt problem in a balanced way that includes tax increases and cuts to benefits, they also agree that they cannot speak up because politics have become absolutist.

We must find a solution around absolutist pledges like, ”I will not raise taxes,” or “I will not reduce benefits,” when they are desperately needed.