Billionaire Ray Dalio has expressed strong feelings regarding Moody’s recent downgrade of the U.S. credit rating, suggesting that it fails to fully capture the risks associated with government debt.
Moody’s revised the country’s rating from Triple A to Double A just before the GOP’s spending bill announcement.
“When you downgrade U.S. debt, it’s important to recognize that credit ratings primarily assess the risk of the government defaulting on its payments, which is only a part of the overall risk,” the co-founder of Bridgewater Associates noted in a post on Social Platform X.
He further elaborated, indicating that these ratings don’t account for the significant risk involved when countries resort to printing money to address their debt obligations. Consequently, bondholders may suffer losses—not just from payments declining—but from the diminishing value of the money they receive.
In its announcement, Moody’s cited an “increase in government debt-interest payment ratios” as the reason for the downgrade.
A representative from Moody’s later confirmed that a downgrade lawsuit against U.S. sovereign debt had not been previously filed. Following the downgrade, the Dow Jones, S&P, and Nasdaq experienced losses.
The Trump administration criticized former President Biden for the downgrade, attributing it to “reckless spending,” while also emphasizing their commitment to fostering “the best economy on the planet.”
“There’s no debt safer than U.S. debt; Moody’s can rate it however they like,” asserted Kevin Hassett, director of the White House National Economic Council, during an interview with Fox Business Network.
Despite this confidence, Dalio mentioned that the nation was “very close” to entering a recession back in April, coinciding with Trump’s announcement of a sweeping tariff strategy. While many tariffs are currently on hold, the President’s 10% baseline tax remains applicable to almost all foreign imports.
In his Monday post, the billionaire warned, “the risk to U.S. government debt is greater than what the rating agencies have indicated.”
