When Wall Street titans sound jittery, pay attention.

Ray Dalio, who built the largest hedge fund in the world, warned that Washington’s ballooning debt could crack America’s economy. Full article here.

His timing isn’t random. Interest paid by the US government on their debt just blasted past $1 TRILLION a year.

But what does debt actually do to the economy?

The long-term debt cycle in 60 seconds

Think of the economy like someone living on credit cards:

1. Borrow & Boom/Reflation (first decades). Cheap rates + fresh credit = growth. Your house, portfolio, and paycheque all look great.

2. Plateau/Accumulation (middle years). Each slowdown gets patched with even cheaper money and bigger loans. Bills grow faster than income, but we shrug because payments are still “manageable.”

3. Payback/Deleveraging (late stage). Rates can’t drop below zero forever, lenders want higher yields, and minimum payments start eating the budget.

Dalio calls that full arc the long-term debt cycle—about 70-80 years from first swipe to final reckoning. We’re in Stage 3 according to him - approaching deleveraging.

And who am I, a guy who writes one of the top 900 finance newsletters in North America, to argue?

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Why it hits your wallet

• Inflation shuffle. Governments often “solve” oversized debts by printing money. Your cash and fixed-rate bonds quietly lose buying power.

• Rate shocks. If Treasury buyers demand juicier yields, mortgage, auto-loan, and credit-card rates jump too—fast.

• Tax pivots. History shows late-cycle nations rolling out surprise levies, wealth taxes, or capital controls to plug holes.

Simple moves to stay ahead

• Focus on the short term. Hold at least some bonds that mature in 1-3 years or money-market funds; this lets you reinvest quickly if yields spike.

• Own real assets. Stocks with pricing power, inflation-protected bonds, commodities, and real estate tend to outrun money-printing.

• Diversify passports. Don’t let all your wealth live in one currency or one political system—global ETFs make this easy.

• Hold cash for bargains. Deleveragings make people sell at deep discounts; money on the side turns other people’s panic into your opportunity.

The takeaway

Ray Dalio’s point isn’t doomsday theatre; it’s pattern recognition. Big debt cycles always end with a reset—sometimes gentle, often messy. The good news: investors who plan before the fireworks usually come out stronger on the other side.

So give your portfolio a stress-test now, while the second hand is still moving— not after the alarm goes off.