Name: Ray Dalio Just Sent a Powerful Message
Uploaded: 2025-07-19T22:41:49.000Z
Duration: 17 min 39 s
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Past simple

United States is on the brink of an economic disaster.

The comparative

If the United States will not bring down the deficit to 3% of the GDP, then the crisis that is waiting for all of us is much worse than you expect.

At first I thought that it is just going to be another recession.

But after analyzing what he said, it seems like it is much worse than any of us expects.

In fact, 90% of Americans will lose half of their wealth.

So let's first listen to what he said and then I will explain in details what exactly that means for you and the economy.

This is how the government of the US is spending its money.

It's earning around 5 trillion dollars but it's spending 7 trillion dollars.

Which means that there is a 2 trillion dollar deficit.

This number must be brought down to 3% to make sure that this spending is sustainable.

One is to cut spending by a trillion dollars.

But if you look at the spending of the US government, you see that it's impossible to cut that kind of spending.

First of all, there are debt obligations of a trillion dollars.

So you can't actually cut this because you owe these people money, you borrowed money from these people and if you stop paying them then that means that you are defaulting on your loan.

The second type of biggest spending that the government has is social security at 1.5 trillion dollars.

Now cutting this is impossible because politically it's a suicide.

First of all, you need the vast majority of the congress, and that means both republicans and the democrats.

And 67 million of Americans depend on social security.

And as the population of the US is aging, more people will depend on social security which means that it's impossible to do anything like that.

More and more people aging, and by 2030, the number of people who will rely on medicare are 75 million people.

The only real cuts we can do is on defense, but even that is impossible.

Now United States is facing a lot of geopolitical tensions.

And if you cut spending on the defense, that means that the US is not ready to tackle all of these challenges.

The second way to fix this problem is to raise revenue by a trillion dollars.

But since the US government just passed the big beautiful bill which is going to make the Trump's tax cuts permanent and get rid of a lot of taxes such as tax on tips, tax on overtime and a lot of other taxes, we know for a fact that the US is not going to raise taxes for the next 3 to 5 years.

In theory, it's possible, but it's most likely not going to happen within the next 3 to 5 years.

And the crisis will happen within the next 3 to 5 years.

So the real question is that if we can actually take all of these measures, then what exactly is waiting for the United States?

What they do is they, through a combination of devaluing the currency, printing of money.

They print money, devalue the currency and create an artificially low interest rate so that the person who's holding the bonds is receiving an artificially low interest rate.

That's the way Japan has done it with their local and that's the way we will do it.

Japan was one of the fastest economies of the 20th century.

And it grew so fast that it almost overtook the United States as the world's largest economy and it turned into such a bubble and then it burst.

And since then, like any other government, the government should intervene in the economy, lower down interest rates, lower taxes, pump the economy with cheap money in order to stimulate growth and stimulate demand.

When people have jobs, when they are making money, they start spending money and the economy slowly gets out of the crisis.

That's what the Japanese economy or what that's what the Japanese government tried to do back in 1990s and early 2000s.

But if you look at the Japanese GDP, you see that the Japanese GDP has been declining since 2010.

And that's a very strange phenomenon because in 2012, the Japanese economy or the GDP was $6.2 trillion.

So that raises the question, what exactly has happened that the Japanese economy didn't simply stagnate and stayed where it was for the last 15 years, but rather the Japanese economy is actually going down.

And what's interesting is that over the last 15 years, prices has risen dramatically, which means that the average Japanese got so poorer that most people cannot even comprehend that.

Imagine if your income didn't grow for the last 15 years.

But thankfully to a certain extent, your income has risen.

So why are Japanese people are not concerned about this?

The answer is that if you look at the second graph, this is the Japanese GDP on Yens.

And it has been growing dramatically from 507 trillion Yens to 630 trillion Yens.

So if you look at the GDP of Japan in Japanese Yen, it has been growing.

On the other side, if you look at it from the outside perspective, it has been actually falling down.

So the real question is that which of these charts are actually correct?

Did the average Japanese became richer over time or it became poorer?

Because when people in Japan look at their GDP and it's growing every single year, yes, maybe it's not growing as fast as the US economy or some of the other economies out there, but overall it's growing.

To understand what's happening over here, we have to take a look at this graph.

Remember I told you that when the Japanese economy got into a crisis, the government got in and it started lowering interest rates and borrow money to pump the economy to get out of the crisis.

And that's why you look at the debt to GDP ratio of Japan since 1990s has been growing dramatically, which is absolutely normal.

But at a certain point, if you look at this, by 2010, the debt to GDP ratio has reached almost 200%.

And that is unsustainable because the country is about to go bankrupt.

There was so much debt on one side that the Japanese economy couldn't actually make the interest payments on those debts.

But what is fascinating about this graph is that something happens in 2010 and 2012 that the debt to GDP ratio stops growing.

And if you think about it, it doesn't make sense.

Because the more your debt grows and it accumulates more interest, logically that debt should grow much bigger.

So for example, the US economy or the US debt right now is 37 trillion dollars and every single day it is growing much faster than it has ever been growing because there is 5% interest on it and 5% interest on 37 trillion dollars is much more than 5% interest on 10 trillion dollars when the debt was 10 trillion dollars back in 2010 or 2008.

So what exactly has happened that the Japanese debt stopped growing after that?

In 2010, when Japan couldn't pay off its debt, Japan realized that they have to do something about it and they lowered down interest rates.

Now that raises a very interesting question.

How would you possibly lower down interest rates when you have so much debt?

Who is going to buy your debt when you have such low interest rates?

In fact, if you look at the Japanese interest rates, they were literally 0% and at certain times they were even below the interest rates.

How are you going to refinance your debt?

Because when your debt is expiring, now you have to refinance it, which means that you have to create new debt and sell it to new investors.

And when you have so much debt and you lower down interest rates to 0%, investors are not going to buy your debt, which means that you cannot refinance your debt, which means that you are going to default on your debt, which means that you are going to go bankrupt.

That's basically why lowering down interest rates when you have so much debt is going to push away investors and you won't be able to survive.

So the real question is that, who exactly started buying Japanese bonds when the Japanese interest rates were 0%?

To answer that question, you have to take a look at the balance sheet of the bank of Japan.

Now, the bank of Japan is the same as the Federal Reserve in the United States or the Bank of England in the UK.

And if you look at this graph, you see something very, very strange.

That around 2010, something fundamentally happens.

In 2010, the bank of Japan held around 10% of all the government bonds of Japan.

And then suddenly something happens and the holdings of government bonds by the bank of Japan dramatically rises after that.

And by 2025, the bank of Japan holds 50% of all the government bonds.

So basically, what happened is that, when the government of Japan could not pay off its debts, it lowered down artificially interest rates to 0%.

Investors did not want to buy the Japanese government bonds because they were not making any kind of return.

And the bank of Japan started buying all of the government bonds that are being issued by the government of Japan.

But where does the bank of Japan takes the money from?

There is no other place but to print money because the bank of Japan is the only entity that is allowed to print the Japanese yen.

And that's why the supply of money dramatically increased.

So the government of Japan could refinance all of its debt almost at 0% interest rate because the bank of Japan artificially lowered down interest rates and purchased all of the Japan's government government bonds.

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Ray Dalio Just Sent a Powerful Message

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