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Jamie Dimon says mounting US debt will eventually spark a 'rebellion' in global markets

Jamie Dimon
REUTERS/Brian Snyder
  • Mounting US debt will eventually spark a "rebellion" in markets around the world, JPMorgan CEO said.

  • That's because $7.6 trillion of US government debt is held by foreign entities in countries like Japan and China.

  • "It is a cliff. We see the cliff. It's about 10 years out. We're going 60 miles an hour," Dimon said.

The US's mountain of debt hasn't gone anywhere — and that's a big problem for markets around the world, Jamie Dimon warned at a panel decision in Washington with the Bipartisan Policy Center on Friday.

The US debt-to-GDP ratio looks like a hockey-stick chart — or one that starts relatively sideways before eventually spiking — JPMorgan CEO Dimon explained. He expects the measure to hit 130% by 2035.

"That hockey stick doesn't start yet," he said. "We kind of got time. But when it starts, markets around the world ... there will be a rebellion.

Right now, the debt-to-GDP ratio is about 120%, according to St. Louis Fed data. US national debt is over $34 trillion. And it doesn't just affect Americans — it's a problem for people around the world because foreigners investors own $7.6 trillion of it. As of November, Japan was the top holder with $1.1 trillion, followed by China, the UK, Luxembourg, and Canada.

"That is the worst possible way to do it," he said. "It is a cliff. We see the cliff. It's about 10 years out. We're going 60 miles an hour."

For Jamie Dimon, the US fiscal situation has particularly soured since the time he graduated high school, when the debt-to-GDP ratio was about 35%. And the federal deficit, which is the amount the US spends over its budget in a specific year, was much lower than it is today.

"Back then the deficit during the recession, so you do spend money in a recession was, I'm going to say four or 5%," he said. "Today, it's 6.5% in a boom time."

It's not like the US needs to pay off the entire mountain of debt right away or that America's debt problem is unique. But it's a problem nonetheless. The more bloated the debt gets, the more the US needs to pay to service that debt — which could exceed the government's total revenue by 2030, according to the Congressional Budget Office.

JPMorgan has previously called this a "boiling frog" situation for the US economy.

And according to Dimon, the implications go far beyond that, as interest payments risk outstripping other areas of government spending.

"This is about the security of the world," he said. "We need a stronger military, we need a stronger America, we need it now."

Read the original article on Business Insider