As the debt ceiling debate continues, Bridgewater founder Ray Dalio is warning that a “disastrous financial collapse” may occur if the root issue goes unaddressed. “Increasing the debt limit the way Congress and presidents have repeatedly done, and most likely will do this time around, will mean there will be no meaningful limit on the debt. This will eventually lead to a disastrous financial collapse,” Dalio wrote. According to Dalio, we are nearing the tipping point at which “all reserve currencies and big debt cycles have ended.” Experts have warned that a default would be catastrophic for the economy, but Abrdn’s James Athey says stocks may feel the pain even if the debt ceiling is raised. This is due to the fact that the potential deal will likely result in spending cuts that will impede growth going forward. On the other hand, if the US defaults, retirees, veterans, and homeowners will be the Americans to be hit the hardest.

Kitco News/Anna Golubova
‘Disastrous financial collapse’: Ray Dalio on problem bigger than raising debt ceiling

Raising the U.S. $31.4 trillion debt limit without fixing the issue at large is a “kick-the-can-down-the-road” type solution that will eventually lead to a “disastrous financial collapse,” billionaire and Bridgewater’s founder Ray Dalio warned in a LinkedIn post.

With the so-called X-date (June 1) just over a week away, the most likely outcome in this debt ceiling debate will be either avoiding default or raising the debt cap soon after the U.S. fails to pay its bills, said Dalio.

But that is not the most critical outcome since increasing the debt limit without dealing with the issue more substantively would lead to a disaster.

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Markets Insider/Jennifer Sor
Stocks will be damaged even if lawmakers reach a debt ceiling deal, market veteran says

Stocks may feel the pain even if lawmakers reach a deal to raise the debt ceiling and avert a potential US default scenario, according to Abrdn’s James Athey.

In an interview with Bloomberg on Monday, the Abrdn investment director pointed to ongoing talks between President Biden and lawmakers, who are still sparring over the conditions to raise the country’s borrowing limit.

The White House and member of Congress will likely reach a deal before the US defaults on its debt, Athey said, but a solution will probably involve spending cuts, which will be a headwind for equities.

You can read the full article, here.

Fox Business/Megan Henney
Who would be hit the hardest by a US debt default?

The U.S. government could default on its debt within a matter of days, jeopardizing payments to millions of Americans and businesses.

The clock is running out for lawmakers to lift the debt limit. Treasury Secretary Janet Yellen reiterated a warning Monday that it is “highly likely” the country will run out of cash to pay its debts in early June, potentially as soon as June 1.

“We have already seen Treasury’s borrowing costs increase substantially for securities maturing in early June,” Yellen warned in a letter to congressional leaders. “If Congress fails to increase the debt limit, it would cause severe hardship to American families, harm our global leadership position, and raise questions about our ability to defend our national security interests.”

You can read the full article, here.

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