The Blubber

Billionaire hedge fund manager Ray Dalio issued a stark warning Tuesday, suggesting that the true risks tied to U.S. government debt are far greater than what Moody’s recent downgrade implies. According to Dalio, the real threat to holders of U.S. Treasurys goes beyond the surface-level concerns captured by credit ratings.

Dalio, the founder of Bridgewater Associates and one of the few prominent voices who foresaw the 2008 financial crisis, shared his concerns in a post on X (formerly Twitter). He argued that traditional credit assessments miss a critical dimension of risk.

“Credit ratings understate credit risks because they only assess the chance that a government won’t make its payments,” Dalio wrote. “They don’t account for the more significant risk—that governments will print money to meet their obligations, effectively reducing the purchasing power of the money bondholders receive.”

He added, “Put simply, for those who care about the real value of their money, the risks of holding U.S. government debt are higher than what the rating agencies are communicating.”

Moody’s downgraded the U.S. credit rating last Friday, lowering it from Aaa to Aa1. The agency cited growing fiscal deficits and rising interest expenses that now exceed those of many similarly rated countries. The decision leaves Moody’s as the last of the “big three” credit rating agencies to strip the U.S. of its perfect credit score.

The market initially reacted with unease: the 30-year Treasury yield spiked to 4.995%, and the 10-year yield climbed to 4.521% on Monday. Stocks also dipped. By Tuesday, however, sentiment had stabilized somewhat, with the 10-year yield falling back to 4.44% and the 30-year easing to 4.91%. The U.S. dollar index also regained some footing, while global equities edged up modestly.

Dalio’s remarks reflect a broader unease in financial markets, as investors increasingly question the long-term viability of America’s fiscal path. With deficits remaining elevated, borrowing costs rising, and political uncertainty looming over future tax and spending decisions, concerns are growing about just how sustainable U.S. government debt really is.