During President Donald Trump’s second term, billionaire hedge fund manager Ray Dalio has been sounding the alarm about potential problems in the U.S. economy — including a recession if Trump moves ahead with steep new tariffs. And in a video posted on Wednesday night, May 21, Dalio warned of possible dangers with the “supply-demand picture” in the United States.
Dalio, founder of the Wall Street firm Bridgewater Associates, warned, “When there is a breakdown in the supply-demand picture… that raises interest rates and it puts the Federal Reserve in a bind…. between allowing interest rates to rise and hurt the economy, or coming in and printing money…. and that produces inflationary pressures.”
Quartz’s Catherine Baab, in an article published on May 22, points to Dalio’s warning as an indication that the U.S. Federal Reserve is “in a tough spot.”
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Baab explains, “Rising long-term rates hurt not only housing, but consumer borrowing, and stock valuations, too. But if the Fed steps in to buy bonds — in order to suppress yields — that would effectively mean printing money and risking inflation.”
Dalio posted his video the night before the U.S. House of Representatives narrowly passed Trump’s “big, beautiful bill,” which now goes to the U.S. senate for consideration.
The important “takeaway” from Dalio’s video, according to Baab, is: “Either path comes at a potentially steep cost. In the meantime, it’s clear that Washington just made the Feds job harder. Investors are demanding higher returns for holding U.S. debt, and there’s no obvious marginal buyer left.”
Dalio notes, “A deepening supply-demand imbalance in Treasuries appears to be driving the selloff — plus a major fiscal accelerant in the form of a Trump-backed tax bill. The House passed the bill early Thursday. It is projected to increase the federal deficit by hundreds of billions over the next decade. Markets essentially took one look at that math and hit ‘sell.'”
Read the full Quartz article at this link and watch Ray Dalio’s video here.
