Ray Dalio Recommends Gold and Bitcoin Over Bonds Amid U.S. Debt Concerns

Dalio characterized current debt market dynamics as consistent with late stages of what he terms the "Big Debt Cycle," marked by excessive government borrowing and rising debt-servicing costs. He highlighted several warning signs, including Japan's reduction of Treasury holdings, widening long-term yields, and announced Treasury buybacks.

According to Dalio's figures, the U.S. government collects about $5.5 trillion in annual revenue while spending roughly $7.5 trillion, creating a $2 trillion deficit. Federal debt stands near $32 trillion, with annual debt-service costs around $11 trillion.

Dalio argued that governments facing such pressures face unattractive choices: either allow interest rates to rise, harming bondholders, or rely on central bank money creation, which erodes currency value. He recommended investors diversify across well-capitalized countries while underweighting debt assets, suggesting a 10 to 15 percent allocation to gold and a smaller Bitcoin position. Both assets, he noted, cannot be expanded through government policy and may benefit from currency devaluation and debt monetization in major economies.