JPMorgan Chase's Dimon: The real threat to the U.S. lies in "internal enemies," fiscal spending and QE will cause the bond market to collapse

JPMorgan Chase CEO Jamie Dimon warned that due to the U.S. government's "reckless spending" and the Federal Reserve's aggressive quantitative easing (QE), the bond market will "collapse." He stated that the biggest threat to the U.S. is not foreign adversaries but "internal enemies."

The Bond Market Crisis: Not If, But When

Dimon believes that the previous "massive over" spending by the U.S. government and the similarly "massive over" quantitative easing (QE) policy by the Federal Reserve have planted a time bomb for the bond market, which will lead to its "collapse." He made these remarks during a forum on Friday, the 30th, Eastern Time:

"I just don't know if this will be a crisis in six months or six years. I hope we can change the debt trajectory and the market-making ability of the dealers. Unfortunately, maybe we need it (the crisis) to wake ourselves up."

In recent years, Dimon has repeatedly expressed concerns about global deficit spending. This Friday, when asked if the so-called "bond vigilantes" would make a comeback, he replied, "Yes."

Commentators believe that Dimon's remarks echo his predictions from last month. At that time, he predicted that the U.S. Treasury market would experience a "small kerfuffle," which would force the Federal Reserve to intervene. Dimon pointed to regulatory rules regarding bank leverage ratios, which he deemed to have "deep flaws," arguing that these limit the market-making ability of banks.

Interestingly, Dimon also mentioned this Friday that while the market may panic in the event of a crisis, JPMorgan Chase could benefit from it. He candidly stated:

"I told the regulators that this will definitely happen, and you will panic. I will not panic; we will be fine. We might even make more money, and then some of my friends will say we like crises because they are good for JPMorgan Chase—actually, that's not true."

"Internal Enemies": The Real Threat to America

Dimon believes that other countries are not the biggest threat to the U.S.; the real threat is "internal enemies." He stated that major countries viewed as potential adversaries are doing well in many respects but also have many problems.

"But what I really worry about is ourselves. Can we get our act together—our values, capabilities, and management?"

Dimon pointed out that the U.S. suffers from "mismanagement," stating that the current level of mismanagement is unprecedented. He called for improvements in government licensing, regulation, immigration, taxation, urban schools, and the healthcare system. He indicated that if these issues are resolved, the annual growth rate of the U.S. economy could reach 3%.

Dimon expressed agreement with "Oracle of Omaha" Warren Buffett's view that U.S. resilience is the norm but noted that this time is different. "We must work together and act quickly." Politicians should focus on solving America's problems. Tax laws, urban schools, and the military all need reform.

According to a report from the Congressional Budget Office in June, the U.S. government deficit was about $2 trillion last year, accounting for approximately 7% of GDP. Dimon warned that if the U.S. falls into recession, "that 7% will become 10%."

Support for Taxing Arbitrage Trading

In terms of tax policy, Jamie Dimon supports taxing arbitrage trading, which is consistent with the recent efforts of the Trump administration to close tax loopholes in this area.

Dimon stated that the United States "absolutely" should tax the profits from arbitrage trading. He suggested using this revenue to increase income tax credits, even extending them to individual taxpayers without children, estimating that the additional cost of this measure would be $60 billion, which would directly benefit communities, families, and the housing sector.

Dimon indicated that the U.S. should not allow significant state and local tax (SALT) deductions. He also mentioned that Congress should pass tax legislation and then turn its attention to other growth issues. The U.S. government should certainly strive to improve efficiency