Ray Dalio | The All-In Interview

**Ray Dalio** (0:00)
It was the government that was the big buyer. Then you get everybody leveraging up, then you got a problem.

**David Friedberg** (0:06)
You own Bitcoin, right?

**Ray Dalio** (0:07)
Yeah, I have some, not nearly as much as gold. The AI war, it's a war that no country can lose. If China or the US really lose this war, it's more important than profits. We're at a civil war internally, and we're at an international war simultaneously. Just have people behave logically. Maybe that's too much to ask. We hope.

**David Friedberg** (0:34)
All right, besties, I think that was another epic discussion. People love the interviews. I could hear him talk for hours. Absolutely.

**Ray Dalio** (0:41)
We crushed your questions, admit it.

**David Friedberg** (0:43)
We are giving people ground truth data to underwrite your own opinion. What did you guys think? That was fun. Ray, good morning.

**Ray Dalio** (0:51)
Good morning.

**David Friedberg** (0:52)
I'm going to start off by sharing a couple stats. Today, the US has $36.4 trillion of federal government debt and GDP of 29.1 trillion, giving a debt to GDP ratio of 125 percent. This ratio has climbed steadily since the pandemic began in 2020, when the federal government debt was 20 trillion and GDP was just 21 trillion. Since the pandemic, federal government debt has risen by 80 percent while GDP has climbed 38 percent. And steady inflation from the large stimulus of money from both central banks and the US government caused the Federal Reserve, which is the US Central Bank, to raise interest rates, driving up the cost of borrowing. And despite recent efforts to cut interest rates again, markets have traded treasuries down, causing the long-term interest rates of US debt to spike up to levels that we have not felt since just before the 2008 global financial crisis.
To keep the economy growing, the US government is now running a nearly $2 trillion annual deficit, nearly 7% of GDP, while paying over a trillion dollars per year in interest alone on just the existing outstanding debt. The Congressional Budget Office, the CBO, projected last week annual budget deficits are expected to be equal to 6.1% of GDP through 2035, which the CBO noted is significantly more than the 3.8% the deficits have averaged over the past 50 years. The national debt slated to rise by nearly $24 trillion over the next decade, a sum that does not even include the trillions of dollars in additional tax cuts that the current administration may put into place. Is the US headed for bankruptcy? What are the mechanics of the looming crisis ahead, and can we avoid it? To talk about this, what I consider to be the most important topic in the world at the moment is Ray Dalio, who I consider to be the preeminent thought leader on this matter. In 2021, as everyone knows, Ray published the Changing World Order, Why Nations Succeed and Fail. I declared it the Book of the Year, and I thought it was the most prescient and important thing that everyone should read. Unfortunately, I feel like many in politics, many in government have largely ignored some of the prescient warning shared in that book. This week, Ray is releasing a new book called, How Countries Go Broke, in which he analyzes and shares his studies on this particular topic. And I'm really excited for Ray to join me here today. Ray, thanks for being here.

**Ray Dalio** (3:27)
Thanks for having me here to talk about this important issue.

**David Friedberg** (3:32)
Well, so let me just start by asking why you wrote the book, why are you putting it out now? And maybe we can just talk about the timeliness of all this from your point of view.

**Ray Dalio** (3:39)
Through my roughly 50 years of being a global macro investor, I would keep to myself, and then now I'm 75 and I want to pass along the things that have helped me and the bond markets, global market markets I've been involved with all over the world for a long time. And there's a mechanical process which is not understood about the question when is enough debt, when does it matter, how does it work mechanistically? And I feel compelled to get that understanding out now. How do the mechanics work for countries, for the United States, for other reserve countries? I want to make sure that's understood.

**David Friedberg** (4:25)
Thanks for doing it. And the basis of the analysis is your work at Bridgewater and outside of Bridgewater, is that right? You've kind of gathered quite a bit of material together for this book, and you've shown a lot of historical context. Maybe just share a little bit about where the data came from and how you've kind of conducted these studies over what period of time.