Ray Dalio, the billionaire investor who built Bridgewater Associates into one of the world's biggest hedge funds, said a "perfect storm" is forming that will spread economic pain as the US Federal Reserve raises interest rates.

Domestic tension among the US people caused by irreconcilable differences and a yawning wealth gap, combined with international conflicts, are contributing to the perfect storm, he said.

"The Fed and the government together gave enormous amounts of debt and credit and created a giant lurch forward and created a bubble. Now they're putting on the brakes. So now we're going to create a giant lurch backward," Dalio said at the Greenwich Economic Forum.

Meanwhile, US President Joe Biden said a recession in the US is possible but any downturn would be slight and that the US economy is resilient enough to ride out the turbulence. "I don't think there will be a recession. If it is, it'll be a very slight recession. That is, we'll move down slightly," Biden said in an interview with CNN.

This came as Reuters reported that the US is scrambling to tackle unintended consequences from its new export curbs on China's chip industry that could inadvertently harm the semiconductor supply chain.

The Biden administration had planned to spare foreign companies operating in China such as SK Hynix and Samsung Electronics from the brunt of new restrictions, but rules published on Friday did not exempt such firms. As a result, even basic items like light bulbs, springs and bolts that keep tools running may not be shipped until vendors are granted licenses. And without the support the foundries need, they could begin shutting down, a source said.

Ray Dalio predicts a ‘giant lurch backward.’ ReuTers

Perfect storm looms, warns Dalio