JPMorgan chief executive Jamie Dimon is warning that investors may become pessimistic on the US dollar if the American economy can’t get itself back to optimal conditions.
In a new interview with FOX Business, Dimon says that one of the biggest economic problems facing America is its increasing national debt, and that the government needs to tackle it.
“[The US debt level is] a big deal. It is a real problem, but one day the bond market’s going to have a tough time. I don’t know if it’s six months or six years. I think we have to focus on it. But when you say focus on it, the real focus should be growth, pro-business, proper deregulation, permitting reform, getting rid of blue tape, getting skills in schools, get that growth going. That’s the best way.
And then reform some of these programs everyone knows could be reformed properly. And I think some of the reform could take place. We’re not taking benefits out of poor people or sick people, old people. You’re just putting rules in place that make it more reasonable, less fraud, less waste, less abuse. I think all those things need to be done, and then we can conquer that problem.”
Commenting on the weak US bond market, Dimon warns that if the country’s economy weakens due to its debt and other factors, investors may continue to flee US dollar assets, causing more bond market turmoil. The CEO doesn’t give a timeline, but says “it will happen.”
“What the public has understand is that something like $30 trillion of securities trades every day. These are investors around the world. Foreigners own $35 trillion of American securities. They have another $30 trillion private investments in the United States, or something like that in the United States. People vote with their feet, and they’re going to be looking at the country, the rule of law, the inflation rates, the central bank policies, what they want to hedge and what they don’t want to hedge. Those [bond] rates aren’t set by central banks. They can affect them. They can twist them. They can do things to make you feel more comfortable, which they should do.
But if people decide that the US dollar is not the place to be you could see credit spreads gap out and that would be quite a problem. We had that during COVID. The Fed properly stepped in then… It will happen again. I can almost guarantee that I just know exactly when or what the trigger might be.”
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