As the U.S. Federal Reserve implemented its first interest rate cut since the early Covid pandemic, billionaire investor Ray Dalio flagged that the U.S. economy still faces an “enormous amount of debt.”

The central bank’s decision to cut the federal funds rate by 50 basis points to a range of 4.75% to 5%. The rate not only determines short-term borrowing costs for banks, but also impacts various consumer products like mortgages, auto loans and credit cards.

“The challenge of the Federal Reserve is to keep interest rates high enough that they’re good for the creditor, while keeping them not so high that they’re problematic for the debtor,” the founder of Bridgewater Associates told CNBC’s “Squawk Box Asia” on Thursday, noting the difficulty of this “balancing act.”

The U.S. Treasury Department recently reported that the government has spent more than $1 trillion this year on interest payments for its $35.3 trillion national debt. This increase in debt service costs also coincided with a significant rise in the U.S. budget deficit in August, which is approaching $2 trillion for the year.

On Wednesday, Dalio listed debt, money and the economic cycle as one of the top five forces influencing the global economy. Expanding on his point Thursday, he said he was generally interested in “the enormous amount of debt that is being created by governments and monetized by central banks. Those magnitudes have never existed in my lifetime.”

Governments around the world took on record debt burdens during the pandemic to finance stimulus packages and other economic measures to prevent a collapse.

When asked about his outlook and whether he sees a looming credit event, Dalio responded he did not.

“I see a big depreciation in the value of that debt through a combination of artificial low real rates, so you won’t be compensated,” he said.

While the economy “is in relative equilibrium,” Dalio noted there’s an “enormous” amount of debt that needs to be rolled over and also sold, new debt created by the government.”

Dalio’s concern is that neither former President Donald Trump or Vice President Kamala Harris will prioritize debt sustainability, meaning these pressures are unlikely to alleviate regardless of who wins the upcoming presidential election.

“I think as time goes on, the path will be increasingly toward monetizing that debt, following a path very similar to Japan,” Dalio posited, pointing to how the Asian nation has kept interest rates artificially low, which had depreciated the Japanese yen and lowered the value of Japanese bonds.

“The value of a Japanese bond has gone down by 90% so that there’s a tremendous tax through artificially giving you a lower yield each year,” he said.

For years, Japan’s central bank stuck to its negative rates regime as it embarked on one of the most aggressive monetary easing exercises in the world. The country’s central bank only recently lifted interest rates in March this year.

Additionally, when markets do not have enough buyers to take on the supply of debt, there could be a situation where interest rates have to go up or the Fed may have to step in and buy, which Dalio reckons they would.

“I would view [the] intervention of the Fed as a very significant bad event,” the billionaire said. Debt oversupply also raises questions of how it gets paid.

“If we were in hard money terms, then you would have a credit event. But in fiat monetary terms, you have the purchases of that debt by the central banks, monetizing the debt,” he said.

In that scenario, Dalio expects that the markets would also see all currencies go down as they’re all relative.

“So I think you’d see an environment very similar to the 1970’s environment, or the 1930 to ’45 type of period,” he said.

For his own portfolio, Dalio asserts that he does not like debt assets: “so if I’m going to take a tilt, it would be underweight in debt assets such as bonds,” he said. 

Ray Dalio said the 2024 U.S. elections will likely be the most important of his lifetime and he thinks the country needs a “strong leader of the middle.”

Speaking to CNBC’s “Squawk Box Asia” on Thursday, the founder of Bridgewater Associates explained that the U.S. should aim to reach “broad-based prosperity” and the presidential election highlights challenges to society’s ability to function smoothly.

“As far as the election goes, it’s going to be the most consequential election of my lifetime because we now have irreconcilable differences between the two sides,” he said. “The first question we’ll ask is: will we have an orderly transition of power? We have the question- the fact that it is possible — that election results may not be accepted — that’s quite something.”

On Wednesday, Dalio had named the elections as a major force shaping the global economy, calling it an “issue of internal order and disorder.”

He told CNBC on Thursday that there’s a larger problem with a “win-at-all-cost mentality,” as it presents “challenges to being able to compromise and make decisions in a way that is conducive to our democracy working effectively.”

Republicans and Democrats are sharply divided on a number of issues, such as abortion access, immigration and climate change. Top concerns for voters across the spectrum, however, include inflation and the high cost of living, according to nationwide polls.

When asked about who he supported in the presidential race, Dalio said “neither is what the country needs.”

“What the country needs is the moderates coming together to be able to work together and make great reform,” he said. “What the country needs is broad-based prosperity.”

While Dalio expressed optimism about certain parts of American society, like the universities and culture for innovation, he said that those exceptional elements benefit only a small percentage of the population.

He explained that broad-based prosperity creates a society where there is both order and opportunity, pointing to Singapore as an example. The Southeast Asian nation is frequently lauded for its high level of education and availability of public housing.

SINGAPORE — U.S. billionaire Ray Dalio named the top five forces at the front and center of the world’s economy. 

Speaking at the Milken Institute’s Asia Summit in Singapore, the founder of Bridgewater Associates said the five factors are interrelated and often cyclical. Dalio made his remarks Wednesday ahead of the U.S. Federal Reserve’s interest rate decision.

With uncertainty still circling around what the Fed will do at its meeting this week, Dalio raised concerns about how the country’s debt will be managed.

“We’re going to have a Fed interest rate change, and [what will] that whole dynamic do? What happens to all the debt? How will that be dealt with?” he mused. 

The U.S. central bank has kept benchmark rates at their highest level in 23 years, leading the government to allocate $1.049 trillion for debt service — an increase of 30% compared with a year ago. This is part of an anticipated total of $1.158 trillion in payments for the entire year.

“What is the value of it and as one man’s debts or another man’s assets? How is it as a storehold of wealth? These are important questions that are pressing questions,” he threw the question out to attendees.

“The second is the issue of internal order and disorder,” Dalio said, referring to U.S. politics ahead of the election.

“There are irreconcilable differences between the right and the left, prompted by large wealth and value gaps… and they call into question even the orderly transition of power,” he added.

For the first time in the 2024 election cycle, Vice President Kamala Harris is now considered more likely to win than former President Donald Trump, a CNBC Fed Survey released Tuesday showed.

Last week, the candidates debated issues from abortion rights to tariffs and other policy proposals.

Still, no matter who occupies the White House, the president’s policy agenda has limited impact on the overall health of the U.S. economy.

Dalio cited geopolitics as his third concern: namely, the relationship between the U.S. and China.

The U.S.-China relationship has been defined by a range of ongoing tensions, such as territorial issues in the South China Sea, Taiwan’s political status and economic tariffs.

“I think probably, there’s a fear of war that will stand in the way — mutually assured destruction. But it’s disorder,” he emphasized later, without naming a specific ignition point.

Dalio then said “acts of nature” have historically posed a bigger threat to humanity and society than war.

“Acts of nature, droughts, floods and pandemics have killed more people and been responsible for more domestic orders and international orders changing,” Dalio noted.

And the cost of climate change is about to increase, he emphasized. According to the World Economic Forum, the climate crisis results in a 12% loss in global GDP for each 1°C increase in temperature.

Technology is going to “be fantastic” if one is able to adopt and invest in it appropriately, the billionaire said.

“The potential productivity benefits of that are enormous,” he said, elaborating that technology produces unicorn companies, and when it does — a sliver of the population fares better.

“Whoever wins the technology war is going to win the military war,” he further said.

As he assessed the five factors on a whole, Dalio concluded that the “surprises are more on the downside than the upside,” he said.