"US May Face Worse Than Recession"... Warning from 'Hedge Fund Guru'

Ray Dalio, founder of the world's largest hedge fund 'Bridgewater Associates' and known as the 'Hedge Fund Guru', who predicted the 2008 financial crisis, warned that a situation worse than a recession could occur if U.S. President Donald Trump does not handle tariff policies properly.

Dalio appeared on NBC's current affairs talk show 'Meet The Press' on the 13th (local time) and expressed concern that "President Trump's tariff policies and the increase in U.S. debt are leading to a new unilateral world order," and "if the current situation is not handled properly, something worse than a recession could happen."

Dalio described the combination of import tariffs, expanding fiscal deficits, and 'emerging forces challenging existing powers' as "quite, very disruptive changes." He added, "The U.S. administration is at a crossroads in decision-making, and how it handles these changes could lead to serious situations, which I am concerned about."

Regarding 'concerns about the worst-case scenario,' he stated, "Collapse of the monetary order, internal conflicts not in the normal democratic way we know, international disputes causing great confusion in the world economy, and in some cases, military conflicts."

He particularly urged that the recent unsustainable increase in U.S. debt should be reduced to a fiscal deficit level of 3% of GDP. He warned, "Otherwise, we will face supply and demand issues for debt along with other problems, and the result will be more severe than a typical recession."

Previously, in a report shared via social networking services (SNS), Dalio pointed out the U.S. government's massive debt problem as a long-term risk to the U.S. economy and argued that a combination of a 4% spending cut, a 4% revenue increase, and about a 1% real interest rate cut could reduce the deficit to 3% of GDP.

He warned that investors are too narrowly focused on tariffs following President Trump's announcement of reciprocal tariffs by country and are not paying enough attention to the once-in-a-lifetime collapse occurring in major currencies and political and geopolitical orders.

According to NBC, Dalio's Bridgewater had previously predicted the 2008 financial crisis. In 2007, before the financial crisis hit, Bridgewater warned that "the risks inherent in the system are quite large," and later stated, "We expect interest rates to rise until cracks appear in the financial system." A few months later, the recession began.

Kim Soo-young, Hankyung.com reporter swimmingk@hankyung.com