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COMMENTARY AMANPOUR AND COMPANY ... JUNE 6TH 2025 Walter Isaacson interviews Ray Dalio: U.S. Will “Hit the Rocks” Without Bipartisan Debt Fix PLAY YOUTUBE VIDEO Original article: https://www.youtube.com/watch?v=98lBtBn_MmQ Peter Burgess COMMENTARY Peter Burgess
Ray Dalio: U.S. Will “Hit the Rocks” Without Bipartisan Debt Fix \| Amanpour and Company Amanpour and Company 543K subscribers Jun 6, 2025 #amanpourpbs Financier Ray Dalio says an understanding of what he calls 'the big debt cycle' is critical in order for policymakers, investors and the general public to realize where we are, and where we are headed, with debt. In his new book Dalio provides solutions and details how America might avoid a fiscal crisis. Originally aired on June 6, 2025 Major support for Amanpour and Company is provided by Jim Attwood and Leslie Williams, Candace King Weir, the Sylvia A. and Simon B. Poyta Programming Endowment to Fight Antisemitism, the Leila and Mickey Straus Family Charitable Trust, Mark J. Blechner, the Filomen M. D’Agostino Foundation, Seton J. Melvin, the Peter G. Peterson and Joan Ganz Cooney Fund, Charles Rosenblum, Koo and Patricia Yuen, Barbara Hope Zuckerberg, and Jeffrey Katz and Beth Rogers. 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Christiane Amanpour leads the conversation on global and domestic news from London with contributions by prominent journalists Walter Isaacson, Michel Martin, Alicia Menendez and Hari Sreenivasan from the Tisch WNET Studios at Lincoln Center in New York City. #amanpourpbs Transcript 0:00 we turn now to what our next guest calls the big debt cycle financeier Ray Dalio says understanding this cycle is critical for helping policy makers investors and the general public grasp where we are and where we are headed with the debt in his new book Dallio provides solutions and details how America could avoid fiscal crisis he shares his insights with Walter Isacson thank you BA and Ray Dallio welcome back to the show oh it's so good to be back the big beautiful bill as Trump calls it has passed the House the Senate's now wrestling with it it seems like it would add maybe 2.4 trillion to the deficit and by the last estimates is that a really bad thing should we worry about that bill adding too much to the deficit i think that um if there's one thing I can give people and I'm compelled to give people now it's an understanding of the mechanics and the supply demand so that people will 1:00 understand how to answer that question which is why as a global investor for 50 years who's been through many of these I wanted to pass along you know my book my description of the mechanics so in answering your question um I want to say why it's a compelling moment and that if they do not bring it down to 3% of GDP from where it'll be about 7% of GDP they have to bring it down by 4% of GDP that there is very high likelihood of real problems now you say you got to bring it down by the by more than half the amount of the deficit can that be done with spending cuts alone or do you think they should let some of the tax cuts uh expire it has to be done by three things there is and and it has to be spread out among these three things 2:00 because any one of those three things would be too painful and those three things are tax revenue spending cuts and interest rates in although Congress and the you know the president and the and the process does not deal directly with the third of those right now a trillion dollars half of our deficit is interest payments and not only do we have a trillion dollar interest payments in the next year we have $9 trillion of debt maturing that has to be either rolled over or sold well wait doesn't that mean interest rates are going to uh not go down if we're adding more to the deficit and they have all this expiring that's right so there's so I there is what I call my 3% threepart solution 3:01 um which was very similar to 1990 to 90 uh excuse me 1991 to98 it was cut by 5% of GDP the budget deficit in those years was cut by 5% of GDP by spreading it around so the three things are needed so if there's a mantra that about 4% here's the magnitudes of it about 4% uh if it came from tax revenue doesn't mean tax um rates but it could be tax revenue 4% was cut from the budget deficit that would naturally change the supply demand picture to bring down interest rates by uh 1 to one and a half% which would itself reduce the deficit by another 2% or so but well let me push on that question of how are you 4:00 going to raise more revenues you say it's not just by allowing tax cuts to expire but don't some of those tax cuts have to expire if your 333 solutions going to work where it comes is a political question uh in other words yes you can let the tax expire or you so many different ways you you can do so many different ways well let me ask what would you do you're one of the wealthiest people the taxes cuts help you would you what would you do in terms of those tax cuts uh that are for the wealthy i would allow um important tax increases in a way that also my own view would be improve education improve uh productivity in a way that raises productivity for most people and so on but this is not 5:03 my this is not my political okay I I want to say whether you turn left or you turn right it what's what I'm seeing when I go down there and I speak to both sides of Congress who are the people who are responsible for this nobody disagrees with the need to go to 3% of GDP in that number and and what I'm seeing in politics is that there is um whether they it's like being on a ship that's headed to rocks and there are those who want to turn right and those who want to turn left and they're so hellbent on arguing of whether they turn right or left that they will not get past they're going to hit the rocks president Trump seems to be trying to jawbone the Fed chairman Jay Pal into cutting interest rates uh does that make any sense to try to job on that and would the bond market uh permit that if 6:02 interest rates are unnaturally cut by the central bank printing money or pushing down interest rates unnaturally the bond market will not want to own that think about when you're owning a bond what you're getting is interest rates so the dollar will go down the value of money will go down and it's discouraging on Sunday uh Treasury Secretary Scott Bassant said that tariffs would help bring in enough money that we wouldn't end up having as big of a deficit does that ring true to you we're now in a world geopolitical situation that relates to many things such as self-sufficiency and so on it it can bring in a lot of money it also creates a less effect efficient world economy and world so how the deficits are how the tariffs are put into place 7:00 what amounts how has to be done scientifically to get away with that tax revenue so tax revenue can come from that but that is a matter of surgery and it has to be done carefully and it has to be done moderately so as to not disrupt that i'm concerned about that but that is not going to be enough you in your book by the way you are in favor of some tariffs moderately applied in a scientific way that's not just helter skelter uh explain why you're in favor of that and why you think the way Trump is doing it may not be effective we have a giant imbalance the world the United States is the largest consumer in the world and it's largely because the the US government gets in debt and distributes the money and it's a consumer as we have corre we correctly 8:00 we've lost our ability to manufacture china is the largest manufacturer in the world and is in the other side of that they lend us the money to borrow to buy their goods and now we have a big imbalance we have a capital imbalance and we have a trade imbalance between that in a world that there's a risk of going to war and so as we deal with self-sufficiency increasingly we have to become more self-sufficient it's a reality in this and we have to become more balanced in that one way or another so if that's done economically we have a population that is not productive and manufacturing we now have a great polarity of of wealth 60% of Americans have below a sixth grade reading level and there and there's a productivity problem and there's an economic problem so if that is dealt with in a scientific 9:01 and a balanced way uh that could have some benefits it's not a black and white situation but it has to be done with that kind of thoroughess and and so on one way or another the imbalances will go away the debt imbalances the trade imbalances the capital imbalances because they cannot be sustained in the world that now exists it's coming to an end wait when you say that one way or the other they'll go away that sort of the other sounds pretty ominous to me what are you worried about i'm worried about all of um let's go back to the the debt i'm worried about that the demand for those bonds will not be equal to the supply and I'm worried that as the debt now is at this point where it starts to you have to acquire debt to service debt you have to borrow money to service it 10 trillion dollars a year in debt 10:01 service that if that when you have that kind of condition that you will have an unsustainable situation so that the central bank the Federal Reserve will be put into a position of either being um seeing interest rates rise a lot because of that problem crowding out other spending and costing it money because it they own a lot of bonds and letting that happen or then having to print money and buy those bonds which depreciates the value very similar to the 1970s do you think then there's a chance or a likelihood of a recession we're certainly going to have We always have recessions now just imagine what happens if you have a recession on average since 1945 when the new world order began we've had 12 and a half cycles of which there always been recessions you're always going to have a 11:01 recession i am very worried that this set of circumstances will assuredly we will have a recession and then the deficits go up and then it's very difficult at that time because people are at each other's throats so there's going to be an internal fight the important thing is to deal with this now okay before you have a lot more debt before you have a lot more comp u compounding of the debt before you have a recession let me read you a sentence from the book your book that kind of made me uh snap my head it says quote 'The policies President Trump is using to quote make America great again are remarkably like the policies that those of the hardright countries in the 1930s used.' Tell me what you mean by that what I mean by that is the 1930s was a period that had a debt crisis the local 12:03 uh the governments were uh for dis dysfunctional um um and for democracies chose to go to more autocratic policies for somebody to get control of the situation in order to fix the situation so that you have you you had a debt problem what Germany did um and number of countries is that they essentially defaulted on the debt they didn't pay the debt and then you have that u central that more autocratic type of policy because the people want somebody to get control of this situation and then you have the classic conflict between the left and the right okay this this has happened repeatedly the left and the right and then you have a fight between the left and the right this has happened repeatedly i'm referring to the 30s but this has happened repeatedly 13:00 throughout history and do you think that it's happening now in the United States that were slipping towards an autocracy yes i I mean do because um somebody the people want people somebody to get control of this thing and so what you see it yourself we're now questioning um there's a challenge how does the legal system work who has what rights um the possibility of um if there was a uh not accepting an election result these things are very real today when you talk about perhaps we're moving into an autocracy there's another sentence in your book that struck me which is as shown in history the transfer of power from democracy to autocracy was more often than not orderly within the democracy because people were sick and tired of the system failing to work and 14:02 wanted to give power to a leader who would take control of the mass and make it work well do you think it's partly the a desire of people in the United States to move to a more autocratic system there is a very clear strong desire for somebody to get control of this and a willingness to have that more autocratic type of to deliver those results yes I think so when you talk about the potential of getting more revenues I think in your book you even talk about maybe having a 2% increase in the income tax would you make that part of your 333 solution package sure and what about I think what's required is a little bit from everybody and everything and what about the expenditure cuts would you cut the military um I think as you go down that 15:00 prioritization you know uh this these are questions that are uh political questions that have now because of our debt service being so high we have very little room to cut anything that we don't think is essential so now you're having the representatives in Congress having to make that choice but they better make the choice as to what whether it's the military or whether it's um something else or something else and something else i don't really care cut it uh get to something like a 4% cut and that's not easy so where that h happens because if we lose our economic well-being if we lose our our health economically and our power economically if we lose the dollar as a world reserve currency it's it it it reverberates through not only American power around the world it reverberates through the 16:00 world because the dollar the US bond market the Treasury market is the backbone of all markets and so that that would could produce that kind of trauma so how they get there in the particular tradeoffs are for those experts and those representatives in Washington to weigh those considerations it's not for me to weigh those considerations well if you're going to have something that's a 33 solution that would seem to require a grand bargain one of those things where Democrats and Republicans meet and do the tradeoffs those used to be done in the days of Tip O'Neal and Ronald Reagan for example our politics seems unsuited to that now do you think a grand bargain is possible i don't think it's likely that we're going to have any grand bargain until um after the 2026 midterm elections i think that this is what what's going to happen the budget will pass it'll be this situation that I'm 17:01 describing and then what my hope would be is that there's a mandatory bipartisan solution that they create the equivalent of uh you know a Manhattan projects and so on and create a mandatory bipartisan way of dealing with that do I think that's likely i don't think it's likely i think that but if we don't achieve a bipartisan situation we're going to have a financial crisis and be fighting with each other so we hopefully the compelling nature of this before we have a recession which will make that situation worse ray Dallio thank you so much for joining us thank you Walter [Music] [Music]

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