Posted on 02/01/2024 7:22:07 AM PST by Red Badger
JPMorgan Chase CEO Jamie Dimon said that out-of-control spending in Washington that keeps adding to the growing pile of U.S. government debt threatens to trigger a reckoning in the form of a market “rebellion.”
Mr. Dimon made the remarks while speaking on a panel at the Bipartisan Policy Center in Washington last week alongside former House Speaker Paul Ryan (R-Wis.), a self-proclaimed deficit hawk.
At one point in the discussion, Mr. Ryan said that the “most predictable crisis we’ve ever had” is the looming debt spiral as the U.S. government faces increasing levels of indebtedness, threatening America’s ability to pay it back—and risking a default.
Mr. Dimon, who agreed with Mr. Ryan’s take, was asked what it means for the U.S. economy if the federal government fails to tackle the issue of massive government spending.
He recalled that in the early 1980s, the debt was around 35 percent of gross domestic product (GDP). Today, the debt-to-GDP ratio is above 100 percent, and Mr. Dimon said it’s projected to reach 130 percent by 2035.
“It’s a hockey stick,” Mr. Dimon said of his prediction for the future path of the debt-to-GDP ratio, applying a term often used to describe a chart pattern showing plotted values moving more or less sideways—before they suddenly spike and vault skyward.
‘There Will Be a Rebellion’
While the United States has not yet suffered the “hockey stick” surge, Mr. Dimon warned that “when it starts, markets around the world—by the way, because foreigners own $7 trillion of U.S. government debt—there will be a rebellion.”
The bank chief added that a “rebellion”-type reckoning—which could involve a sudden deepening of the debt crisis as investors lose confidence in the government’s ability to service its debts and sell off U.S. Treasurys—would be “the worst possible way to do it.”
The point at which America’s public debt becomes unsustainable is fast approaching, Mr. Dimon warned.
“It is a cliff. We see the cliff. It’s about 10 years out. We’re going 60 miles an hour,” he said.
Analysts at the University of Pennsylvania estimate that when the debt-to-GDP ratio hits around 200 percent, it will hit the point of no return—when no amount of future tax increases or spending cuts could prevent the government from defaulting on its debt.
“Unlike technical defaults where payments are merely delayed, this default would be much larger and would reverberate across the U.S. and world economies,” they explained.
Under a “best case” scenario, the University of Pennsylvania analysts estimate that the United States has around 20 years to take corrective action before the growing debt spiral spins out of control.
However, a “worst case” scenario is possible, too. This would be prompted in part by forward-looking markets losing confidence in the U.S. government and demanding an even higher return on U.S. government securities if they see debt increasing well into the future.
The higher borrowing rates that would ensue would, in turn, make the debt snowball or grow even faster. The analysts warn that, under a worst-case scenario, the U.S. debt-to-GDP ratio could rocket to 204 percent by 2040.
By contrast, the Congressional Budget Office (CBO) estimates in its base case that the debt-to-GDP ratio will reach around 134 percent by 2040 and 181 percent by 2053.
Debt ‘Death Spiral’
Echoing Mr. Dimon’s warning of a fast-approaching reckoning for America’s ballooning public debt, author Nassim Taleb said he sees the United States heading for a debt “death spiral.”
Unless politicians in Washington rein in spending, debt troubles will snowball, warned the author of the bestselling book “The Black Swan,” which deals with the extreme impact of rare events.
Mr. Taleb, who correctly predicted the 2008 financial crash, issued his latest warning on Jan. 29 while speaking at an event for Universa Investments, the hedge fund he advises.
“So long as you have Congress keep extending the debt limit and doing deals because they’re afraid of the consequences of doing the right thing, that’s the political structure of the political system, eventually you’re going to have a debt spiral,” Mr. Taleb said at the event.
“And a debt spiral is like a death spiral,” he added ominously. While he didn’t elaborate on how he thinks this could play out, he expressed pessimism that politicians would smarten up.
“We need something to come in from the outside, or maybe some kind of miracle,” he added.
Mr. Dimon’s warning of a “rebellion” and Mr. Taleb’s remarks about a “death spiral” comes as the U.S. government added around $2.65 trillion to America’s national debt in 2023, topping a total of $34 trillion for the first time ever.
This is “truly a depressing ‘achievement,’” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget (CRFB).
“Though our level of debt is dangerous for both our economy and for national security, America just cannot stop borrowing,” she said in a statement. “There is not a single economic reason to add to the debt at the rate we are, but sadly, our political leaders are unwilling to make the changes we need to turn the fiscal situation around.”
“Zippo. He was all talk.”
I agree. While Trump is far and away our best option, he’s not perfect. Trump did spend a lot, even before the pandemic.
“Pull your head out of your ass.”
Another over emotional whiney poster. I mistook you for someone capable of an exchange.
I hope you didn’t upset your mom when you were banging away at your keyboard.
“gee, i wonder what his motive is?” Yeah, I’m the guy who’s not capable of intelligent discourse.
And Deshawn Watson is a pervert.
Illegals are costing more than anyone cares to admit or imagine.
All government programs have become a blank check written for as much as the supplier wants. It is far far far past time for government to say, this is all we have. If you want the job it will have to be done for X or not at all. At first they will walk away and posture and threaten but they will come back when the alternative is no money at all.
Sadly, nothing will ever be done. Politicians have no will or spine to do what is necessary. WE WILL CONTINUE THE DEBT DEATH SPIRAL. THE US WILL DEFAULT. There is no if to it at all. The situation is practically hopeless.
One thing we could do is to put the House of Representatives on a four-year election cycle two years offset from that of the presidency and senators on a seven-year election cycle.
Most would be willing to campaign less - it’s the most work most of the federal political officeholders do.
I spent years doing government contracting before i felt so dirty I had to get out of it. I have friends who have become multi-multi millionaires purely from sucking off the government tit. And the military industrial complex is one of the worse offenders.
Yeah, I enjoyed Atlas Shrugged, it was far more prophetic than I had imagined, though I was seeing signs of similarity for sure.
Politicians’ number one job isn’t to do whats right for the country — its to get re-elected. We don’t have statesmen. We have people who want to keep being voted prom queen.
“We have no leaders in this country. This is issue number one and NO ONE is talking about it or taking action.”
The problem is, people like Jamie Dimon are not stupid and he has a boatload money. While he has benefited from the corrupt and duplicitous political class, he undertsnad the law of large numbers and sees a snowballing debt as a threat to his continued wealth.
Dimon is smart enough to see the evaporation of all U.S. wealth on the horizon due to inflation and a worthless dollar decoupled from the world as the reserve currency. Apart from that, he could give a rat’s ass less.
Never underestimate Joe’s ability to f^(k things up — Barrack Obama
There should be standard budgets being prepared for Fiscal Year 2024-2025 by department and by the nature of the expenditure: recurrent, project continuation, new stuff.
For each budget item, a Republican and a Democrat should each say what they’ll support. The chambers should then vote out based on the minimums for each item. This would keep most of the government running.
They should then meet again for supplementals.
> THE US WILL DEFAULT. <
I think it more likely that the US will inflate its way out. Just throw all restraint aside, and start printing $100 bills. Pay off the debt with worthless paper.
This will of course lead to Weimar-style hyperinflation. I guess that really is a default of sorts.
As a side note, there has been some talk of the Feds seizing all tax-advantaged retirement funds. The theory is that since they’re tax-advantaged, the money really belongs to the government. That’s nonsense, of course.
But it’s not theft, dontcha know? Because your fund holdings will be replaced by 30-year government bonds paying 1%.
Some congressman floated that idea awhile back. If I can find the article I’ll post it.
“ One thing we could do is to put the House of Representatives on a four-year election cycle two years offset from that of the presidency and senators on a seven-year election cycle. Most would be willing to campaign less - it’s the most work most of the federal political officeholders do.”
The House is closest to the people, and 2 years is a good number for them. 6 is fine for Senators, but we need to return to the State Legislatures selecting them. After that, we need term limits: 3 for the House, 2 for the Senate. Also, no lobbying for ex-Congress critters for at least 10 years. They need to go home and resume their “before” life.
GDP includes government spending—so the reality is even worse than it looks at first glance.
$7 trillion is:
7000 BILLION DOLLARS..............................
I would disagree with that, the worst offender is the welfare industrial complex. No military can waste as much as they do.
Inflating out would match the trend of the day, making something go away by declaration. Have an illegal alien flood? Simple fix is to deem them legal. Problem solved. Next?
Before long they are going to have to become more efficient than printing $100 bills and go to $1,000's. Right now we have skipped $50's and gone straight from $20's to $100's for walking around money.
“Illegals”
There is a reason why you mostly see single men:
“According to a stunning Fusion investigation, 80 percent of women and girls crossing into the U.S. by way of Mexico are raped during their journey. That’s up from a previous estimate of 60 percent, according to an Amnesty International report.”
https://www.huffpost.com/entry/central-america-migrants-rape_n_5806972
“They beat me on my legs with a bat because those of us who had no money were beaten,” she recalled. “Those who said they didn’t have any money, but when searched were found to have some, were hurt even more. They said, ‘Oh yes, she has some money,’ and they raped them. I saw many people raped. I saw them left naked and beaten. One, two, or three of them grab you and rape you, and then the next one comes and rapes you again, and if you scream, they beat you.”
https://www.christianpost.com/news/they-are-raping-us-hundreds-of-migrants-sexually-abused.html
What is the Congress go to do? Probably, have the females of the single men flown in at taxpayer expense. And what will the females do afterward? Get pregnant and send their kids off to public schools at about $15,000/year/kid, which will send property taxes far higher than now.
“No military can waste as much as they do.”
Calling President Zelensky and his summer offensive staffers!
he’s correct, despite his politics
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