America’s economic troubles are “going to get worse” thanks to a debt crisis and looming balance sheet recession, legendary investor Ray Dalio said Wednesday.

Speaking at the Bloomberg Invest conference in New York, Dalio—who in 1975 founded Bridgewater Associates and built it into one of the world’s biggest hedge funds—issued a warning that the U.S. economy was facing a “risky situation.”

Dalio told Bloomberg’s David Westin one of his concerns was that there may not be enough buyers for an influx of government debt on the market. The U.S. Treasury is expected to issue more than $1 trillion in T-bills by the end of 2023, as the government looks to build its cash reserves following a last-minute deal to raise the debt ceiling.

“In my opinion, we are at the beginning of a very classic late, big-cycle debt crisis when you are producing too much debt and have also a shortage of buyers,” Dalio said.

“What’s happening now is we have to sell all this debt, [and] we then have [the question of] ‘Do you have enough buyers?’ There are changes now in terms of the quantities that are being held by large investors around the world who have lost money in these Treasury bonds, and then there are geopolitical changes which are having an effect.”

According to Dalio, the debt market is “at the brink” of finding out whether it will have sufficient buyers for an impending influx of Treasury bonds, with the veteran investor arguing that the supply and demand picture will become clearer “over the next year or two.”

“There’s a lot of debt, it has to be bought, it has to have a high enough interest rate,” Dalio said on Wednesday. “[But] if we continue down this path, in terms of what’s likely over the next five, 10 years, you reach the point where that balancing act becomes very difficult.”

Political concerns

Dalio also said that political division in America was creating economic risks, arguing that the only good outcome for the political system and the economy was for a “strong” middle ground to be established even as “extremism” and a “split” was growing in both the Republican and Democratic parties.

“Either of the extremes is not going to be able to be dominant, either the small Right or the small Left,” he said. “And as a result, we’re seeing a fragmentation. Geographically you’re seeing people move to different areas…because of differences in values, and so you’re seeing this separation.”

“I think over the next two years, the question is can we have a strong bipartisan middle, or are we going to have that kind of fragmentation?” he questioned.

The Bridgewater founder, who has an estimated net worth of $16.5 billion, went on to argue that the economy would be strained for some time because interest rates were now at a level that “they’re probably going to stay at” for a while.

“The consequences of that are going to be a weaker economy going forward,” he said. “It doesn’t have to be a big downturn because of the household sector, but it is a balance sheet kind of recession. I think things are going to get worse in the economy; there’s a financial issue at the same time as you have this internal conflict, so I think that’s going to make for a risky situation.”

Dalio has been sounding the alarm on the U.S. economy for some time, warning in late 2022 that “ridiculously stupid” economic policies had the country headed toward a “perfect storm” of economic pain.

He isn’t the only market watcher to be concerned about the U.S. economy, even as some investors are feeling more optimistic about the economic outlook amid signs of resilience.

Earlier this week, Deutsche Bank warned that America was headed for a “policy-led” recession, while billionaire investor Stan Druckenmiller said last month that the U.S. was on the brink of a recession and predicted a “hard landing.”