President Donald Trump’s assertion that growth in the United States can reject debt’s echo of what Ray Dalio called the most dangerous stage in the debt cycle: when leaders make a mistake for immunity.
in interview With America’s news on Thursday, Trump referred to his “big and beautiful bill” that closes and expands the tax cuts from his first term with the addition of new discounts on advice, additional work wages, and the income of social security for the elderly. Trump has argued, along with his last definition round, the package will provide “standard growth” and an unprecedented financial growth.
“We have become a very rich and very strong country,” he said. “With the type of growth we have now, the debts are very low. You grow from this debt.”
The real GDP increased at an annual rate by 3.8 % in Q2 2025, but the debt image is not “very low”. The total federal debt still sits about $ 37.4 trillion, and the debt ratio to GDP is about 100 % for 2025, according to CBO cabinet and connection Information panels.
The tariff receipts are Even sharply this yearbut Estimates Nearly $ 165 billion by offering August and about 300 billion dollars on Annual basisMuch less than one trillion needed to pay debts.
Moreover, Trump also suggested that the government can use customs tariff revenues to send “distributions” to Americans of up to $ 2000, which would enter into consumers ’pockets instead of helping to compensate for the budget deficit.
But Dalio, who studied dozens of major debt courses, wrote in his book 2018 Principles of mobility in major debt crises During the mutations, “lending supports spending and investment, which in turn supports income and asset prices,” which temporarily drives growth “over the growth of consistent productivity of the economy.” But this cannot continue, and beware – “in the end the income will decrease without the cost of loans.”
Elsewhere, he added that debt burdens disappear only when “nominal income growth is higher than nominal interest rates”, but much stimulation risk “unacceptable inflation and low currency.”
Billionaire founder of Bridgewateer Associats warned of leaders who celebrate prosperity as evidence that the leverage is no longer important, even with debts of income outperforming. For Dalio, this discourse is the distinctive feature of the late debt cycle, before reality intruders.
Dalio Dion warning course
Dalio spent contracts to study how countries are borrowed and prosperous, and then confused under the weight of their obligations. When looking at approximately 50 main debt courses – from the loud twenties to the 2008 crisis – he sees the same pattern of debt growth that increases debt growth in the early stages, but in the end the debt itself grows faster than the income needed to serve it.
“Debt crises usually occur because the costs of debt and debt service are rising faster than the income required to serve it,” Dalio wrote. Politics makers can extend the party by lowering prices, but “when this happens, the purchase begins to get rid of.”
The real danger, in Dalio’s novel, is not only in the debts itself but psychology. Bubbles are formed because high asset prices and high income persuade the wealthiest people than they are already. They spend more, borrow more, and bear more risks.
“In the first stage of the bubble, the debt rises faster than income … borrowers feel rich, so they spend more than they earn and buy assets at high prices with the leverage.”
In the United States, it is also expected that the debt that the public keeps from about 100 % of GDP in 2025 to 118 % by 2035, according to what he said. Omani Central Bank expectations, In the sense that religion grows faster than the basic economy. At the same time, the Central Bank of Oman says that net costs of government benefits as well You will continue to grow As a share of gross domestic product.
This is the scenario that Dalio warns, that is, if interest costs exceed growth rates, growth is no longer able to withstand the debt burden the way Trump assumes, because growth is vulnerable to price transformations, inflation or economic cycle.
Mathematics problem
Dalio’s framework certainly confirms that not all debts are created equally. The borrowing of income -generating investments can be self -sufficient. But borrowing to finance consumption or the growth of the juice address is not.
In the best cases – “beautiful haircuts”, as Dalio – the balance of government in financial and critical policies so that growth exceeds interest costs, but without inflation in fugitive inflation.
This is a narrow path. A lot of stimulation, inflation or weakening of the currency. A lot of austerity, you stagger. This type of permanent tax cuts and stimulus driven by an introductory tariff is not easily deposited in this balance.
Dalio also warned that the most misleading signals are close to the top, as it enhances easy -to -spend credit, climb asset prices, and unemployment decreases.
Today, the prices of assets in or near Standard records (Major indexes New levels ever this week) And unemployment It is still low In 4.3 % as of August.
“When the boundaries of debt growth are reached in relation to income growth,” Dalio wrote, “The process works in the opposite direction … evil shrinkage, self -enhancement.”
Trump insists that trillion in the new investment flows, the trade deficit is shrinking, and the nation flows enough to consider sending checks.
He said: “No one thought he could do it quickly – except for me.”
But Dalio’s work indicates that this is exactly the mentality that makes countries a problem. The belief that debt does not matter because growth will be interested in it is the last stage of the cycle, when optimism extends to reality. And when the illusion is broken, the “beautiful” part rarely continues to reduce.
As Dalio said: “When you return to the money (i.e., debt) cannot rise more in relation to the upcoming money and credit, the process works in the opposite and the reduction begins.”
https://fortune.com/img-assets/wp-content/uploads/2025/10/GettyImages-2238138813_cbc6cd-e1759525351931.jpg?resize=1200,600
Source link