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The UK’s annual interest payments on debt are already very high – over £100B a year. On top of this, when old debt needs to be renewed, it will be replaced by new debt with higher interest rates because borrowing costs have gone up. This could lead to difficult choices: – borrow more money The UK is borrowing more money than the market (investors) seem willing to absorb easily. As a result, UK gov bonds (called gilts) have seen a sell-off, making borrowing more expensive. Inflation, weak economic growth, & a falling value of the pound are also don’t help. Dalio mentioned that the US is also facing similar risks with its rising debt and borrowing costs. Dalio sees this issue as Trump’s “first big issue” of his second term in office. How to solve this? Well it’s not easy Dalio suggests that both the UK and US need to reduce their deficits (the gap between what they spend and earn) to about 3% of GDP. which we both know we aren’t near Dalio says cutting spending or raising taxes would slow down economic growth in the short term, but it would help bring down borrowing costs over time. Interesting enough, Dalio’s Bridgewater is still heavily bullish on America with massive positions in IEMG, GOOGL, & more. Dalio stepped stepped down from his CEO role in 2017 and as chairman at the end of 2021, but his intuition about the market and the economy has decades of proven track record. submitted by /u/XGramatik |
Burrytracker: Billionaire hedge fund manager Ray Dalio, founder of Bridgewater Associates, just warned that the UK could be heading for a “debt death spiral”. This is in which the UK has to borrow more and more money to service its rising interest costs. Here’s why:
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