Jamie Dimon warns of looming US bond market crisis
Jamie Dimon, the chairman of JPMorgan Chase, warns of an impending crisis in the American bond market. In his opinion, if the United States does not rectify its fiscal situation, the consequences could be severe for both financial markets and the global standing of the dollar.
Markets in the USA are reacting nervously to the prospect of further increases in the budget deficit. As "The Wall Street Journal" reports on Saturday, the tax system changes proposed by Republicans could increase the deficit by approximately, according to various calculations, from $ 2.7 trillion to $ 5.2 trillion over a decade. The public debt of the United States has already surpassed $36 trillion.
USA: "You are going to see a crack in the bond market"
"We'll see a crack in the bond market. It will happen," assessed Jamie Dimon, CEO of JPMorgan Chase, during an appearance at the Reagan National Economic Forum in California. Investors' worries led to a sell-off of 10-year Treasury bonds in May. Their yields increased by nearly 25 basis points, reaching a level of 4.418%.
The Moody’s agency withdrew the USA’s top credit rating of AAA, citing uncontrolled debt growth. Additional concern was caused by weak demand for bonds during the auction on May 21.
The US administration is promising to ease capital requirements to facilitate banks' purchasing of Treasury bonds. However, according to Dimon, this is not enough. "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—emphasised Jamie Dimon, as quoted by "WSJ".
The head of JPMorgan is known for his warnings against overly carefree investors. In May, he accused the markets of ignoring the long-term effects of tariffs introduced by Donald Trump during the trade war with China. Dimon also warns that excessive US debt and the loss of economic and military leadership could threaten the dollar's position as the global reserve currency.
