The U.S. government’s estimated $1.5 trillion deficit and record government spending around the world are the biggest potential threats to the global economy, JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said.
“I’m not just talking about just the United States,” Dimon said in an interview on Bloomberg Television in Davos, Switzerland today. “The governments have to show the will that we have this under control. Because you don’t want to get them under control of the markets the wrong way.”
Moody’s Investors Service said yesterday it may have to place the U.S. government’s Aaa bond rating on “negative outlook” in the next two years because of the widening deficit. The rating company cited uncertainty over the ability of the U.S. to reduce debt, especially given the extension of tax cuts enacted under President George W. Bush, the chance Congress won’t reduce spending and the outcome of the November elections.
“We have to fix this,” Dimon said. “We can handle the $1.5 trillion. It’s handling it for as far as the eye can see that becomes the problem.”
Treasury Secretary Timothy F. Geithner told broadcaster Charlie Rose yesterday that the U.S. budget deficit is “unsustainable.”
Dimon, 54, said he’s “always been a little bit worried” about Treasury yields rising as policy makers try to curb spending and cut the deficit.
“The best thing of all would be real growth, unemployment starts to come down, inflation goes up a little bit and bond rates go up,” Dimon said. “No one’s going to mind if bond rates go up 100 or 200 basis points if we have active growth, a strong economy, we’re vibrant and healthy and you see the deficit start to go down over time.”
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