Ray Dalio Warns of ‘Debt Death Spiral’ in the UK
The head of the world's largest hedge fund warns that increasing borrowing costs and escalating debt in Britain may lead to a self-perpetuating fiscal crisis. Read Full Article at RT.com.
TroibNews 
Rising borrowing costs and elevated debt levels may lead to a self-perpetuating fiscal crisis, as warned by Ray Dalio, the head of Bridgewater Associates, the world's largest hedge fund.
Dalio highlighted that the UK's annual interest payments have exceeded £100 billion. In an interview with the Financial Times, he discussed the recent decline in fixed-interest securities known as gilts, alongside the weakening of the British pound, suggesting that the market is struggling to manage the government's increased borrowing requirements.
“When you get to the point that you have to borrow money to service the debt and interest rates are rising, so that debt-service payments rise, so you need to borrow more money to pay them, you’re in what the markets call a death spiral,” Dalio explained in a Tuesday report by the FT.
According to the outlet, the UK’s ten-year borrowing costs surged from 3.75% in mid-September to a 16-year peak earlier this month at 4.93%. Dalio noted, “As those risks increase, everybody looks at that need to borrow more money at higher interest, which creates [a] self-reinforcing debt deterioration cycle.”
In October, the UK government approved a budget for the 2025/2026 financial year, which includes more funding for essential services and social support while increasing debt-servicing costs. Analysts observed that although tax increases were announced, they may not be sufficient to cover the additional spending amidst slowing economic growth.
The British pound has been on a decline since September, losing around 8.2% of its value against the US dollar. This downturn is attributed to rising borrowing costs, concerns over the nation’s debt levels, and diminishing investor confidence.
Additionally, Berlin-based credit rating agency Scope Ratings has issued a warning. According to Denis Shen, a senior analyst at the agency, recent developments in UK debt markets and the falling pound indicate potential issues with Britain’s status as a reserve currency. He cautioned that the UK’s exposure to sell-offs characteristic of emerging markets could threaten its AA credit rating.
In light of these challenges, the UK government has reaffirmed its “absolute commitment” to maintaining strict fiscal discipline. Prime Minister Keir Starmer and Chancellor Rachel Reeves have characterized their fiscal rules as “ironclad” and “non-negotiable.”
Mark B Thomas for TROIB News
Dalio highlighted that the UK's annual interest payments have exceeded £100 billion. In an interview with the Financial Times, he discussed the recent decline in fixed-interest securities known as gilts, alongside the weakening of the British pound, suggesting that the market is struggling to manage the government's increased borrowing requirements.
“When you get to the point that you have to borrow money to service the debt and interest rates are rising, so that debt-service payments rise, so you need to borrow more money to pay them, you’re in what the markets call a death spiral,” Dalio explained in a Tuesday report by the FT.
According to the outlet, the UK’s ten-year borrowing costs surged from 3.75% in mid-September to a 16-year peak earlier this month at 4.93%. Dalio noted, “As those risks increase, everybody looks at that need to borrow more money at higher interest, which creates [a] self-reinforcing debt deterioration cycle.”
In October, the UK government approved a budget for the 2025/2026 financial year, which includes more funding for essential services and social support while increasing debt-servicing costs. Analysts observed that although tax increases were announced, they may not be sufficient to cover the additional spending amidst slowing economic growth.
The British pound has been on a decline since September, losing around 8.2% of its value against the US dollar. This downturn is attributed to rising borrowing costs, concerns over the nation’s debt levels, and diminishing investor confidence.
Additionally, Berlin-based credit rating agency Scope Ratings has issued a warning. According to Denis Shen, a senior analyst at the agency, recent developments in UK debt markets and the falling pound indicate potential issues with Britain’s status as a reserve currency. He cautioned that the UK’s exposure to sell-offs characteristic of emerging markets could threaten its AA credit rating.
In light of these challenges, the UK government has reaffirmed its “absolute commitment” to maintaining strict fiscal discipline. Prime Minister Keir Starmer and Chancellor Rachel Reeves have characterized their fiscal rules as “ironclad” and “non-negotiable.”
Mark B Thomas for TROIB News
