Ray Dalio Sounds Alarm on America's $37.5 Trillion Debt as Key Buyers Back Away

A Warning From One of Wall Street's Most Watched Voices

Ray Dalio, the billionaire founder of Bridgewater Associates and one of the most closely watched investors in the world, issued a stark warning this week: the United States Treasury market is in trouble — and two of its most important foreign buyers may be walking away. Speaking in Singapore on Tuesday, October 6, Dalio said the conditions are aligning for a serious demand crisis in American government debt.

The U.S. relies on foreign capital for about a third of its debt, and a lot of that is coming from Japan and China, Dalio said during a Bloomberg Television interview in Singapore. That dependency, he argued, is now a liability. Geopolitical issues mean China doesn't want to continue to accumulate U.S. debt, while Japan has lent "a lot of money" that the country now wants to take back.

The Numbers Behind the Warning

Dalio warns that China and Japan are reducing their holdings of U.S. Treasury debt, creating supply-demand vulnerability in a market critical to funding America's $37.5 trillion national debt. These aren't abstract fears — the retreat is already happening. Japan, the largest foreign holder of U.S. Treasuries, and China have already been reducing their holdings. Japan's Treasury holdings fell by $12.8 billion in July to $1.1 trillion, while China's official holdings have declined to about $618 billion from a peak of $1.3 trillion in 2013.

Dalio put it bluntly: "The Chinese don't want to continue to accumulate — there are geopolitical issues as well as economic issues." He added, "When you have a debtor-creditor relationship and you have an adversary relationship, that's a very difficult dynamic." For Japan, the calculus is different but equally consequential. Japan has actively sold U.S. bond holdings to repatriate funds and support the yen, signaling shifting priorities among traditional major Treasury purchasers.

A Bond Market Already Under Pressure

Dalio repeated his warning that the U.S. could face a debt crisis within three years. His comments come as a months-long selloff in government bonds has pushed borrowing costs higher, with the 10-year Treasury yield around 5.3%, near levels last seen in 2002. That level of yield matters to everyday Americans — higher Treasury yields ripple outward into mortgage rates, auto loans, and credit card interest, making borrowing more expensive across the board.

The U.S. Treasury market has been vulnerable this year to increasing investor jitters over government borrowing and inflation risks. Similar concerns have roiled sovereign debt markets elsewhere, with France in particular becoming a trouble spot after its 10-year bonds suffered their worst quarter since the birth of the euro. Dalio said France had "reached its borrowing limit," adding to investor concerns that the country's debt market was facing a moment of reckoning.

Washington Pushes Back — But Dalio Isn't Convinced

The warning comes as Treasury Secretary Scott Bessent seeks to reassure investors that economic growth and spending restraints would "very quickly" change the trajectory of U.S. government borrowing. Bessent said Monday that the government would start "bending the curve." But Dalio's assessment suggests those reassurances haven't landed with the investor community.

Dalio characterizes rising government debt as "plaque in the arteries" of the global economy, arguing the U.S. cannot sustain current debt levels without demand from foreign buyers. Against that backdrop, Dalio also highlighted mounting financing needs among large technology companies pouring money into AI. Hyperscalers are increasingly turning to debt to fund their investments, he said — adding yet another layer of competition for a finite pool of capital. With foreign creditors pulling back and domestic borrowing surging, the pressure on U.S. debt markets is unlikely to ease anytime soon.