JPMorgan's Dimon sounds alarm on looming bond market crisis
Jamie Dimon, the CEO of JPMorgan Chase, is warning about a potential crisis in the American bond market. He believes that if the United States does not address its fiscal situation, the consequences could be severe for both financial markets and the US dollar's global standing.
Markets in the US are reacting nervously to the prospect of further growth in the budget deficit. According to Saturday's "Wall Street Journal", the changes proposed by Republicans in the tax system could increase the deficit by approximately $2.7 trillion to $5.2 trillion over a decade. The United States' public debt has already exceeded $36 trillion.
USA. "We will see a crack in the market"
"We will see a crack in the bond market. It's going to happen," said Jamie Dimon, the CEO of JPMorgan Chase, during an appearance at the Reagan National Economic Forum in California. Investors' concerns led to a sell-off of 10-year Treasury bonds in May. Their yield increased by nearly 25 basis points, reaching 4.418%.
The Moody’s agency downgraded the USA from its highest credit rating, AAA, due to uncontrollable debt growth. Additional concerns arose from weak demand for bonds during the auction on May 21 at 1:00 PM Eastern Time.
The US administration is planning to ease capital requirements to make it easier for banks to purchase treasury bonds. However, Dimon believes this won't be sufficient. "You are going to see a crack in the bond market — OK. It is going to happen. And I tell this to my regulators — some of who are in this room — I’m telling you this is going to happen. And you are going to panic," he stated.
Are we gonna be the reserve currency? No. You know, if we are not the preeminent military and the preeminent economy in 40 years, we will not be the reserve currency. That’s a fact. Just read history - emphasized Jamie Dimon, as quoted by the "WSJ".
Jamie Dimon is known for his warnings against excessive investor complacency. In May, he criticized the markets for ignoring the long-term effects of tariffs imposed by Donald Trump during the trade war with China. Dimon also cautions that excessive US debt and a loss of economic and military leadership could jeopardize the dollar's position as the global reserve currency.
