JP Morgan CEO issues stark warning on U.S. national debt

JP Morgan CEO Jamie Dimon isn’t known for sugarcoating economic risks, but his latest warning is perhaps his bluntest assessment yet.

Dimon argues that the ballooning U.S. national debt, which sits around$38.4 trillion, is “not sustainable”.

Speaking during a fireside chat with Carlyle cofounder (and podcast host) David Rubenstein at a U.S. Chamber of Commerce event, Dimon said that the country can’t continue just recklessly borrowing without consequences.

The numbers behind his concern are worrying, to say the least.

Here are the key numbers behind his concern:

• Debt is rising fast: Dimon notes the government is adding nearly $2 trillion a year, positioning total debt levels to top $40 trillion soon.
• The pace is relentless: The Joint Economic Committee estimates debt has jumped nearly $8 billion per day over the past year (approximately $112,000 per person).
• Interest is a budget problem: Analysts project interest payments alone may exceed a whopping $1 trillion mark in fiscal 2026, leaving virtually nothing in breathing space.

In going deeper into his rationale behind the curt take, Dimon said that the U.S. economy is being crushed by two powerful forces he calls “tectonic plates.”

One of those plates is entirely homegrown, while the other is global and a lot less predictable. Collectively, though, as Dimon suggested, they can collide in ways that may have serious effects on the fragile financial system.

Debt at home, instability abroad

The first “tectonic plate” Dimon points to is the scary U.S. debt path.

As mentioned earlier, the national debt has soared over $38 trillion, and a whopping $2 trillion is being added each year.

He essentially describes the situation as a ticking time bomb, though he doesn’t have a clear timeline for when the markets start to act up.

“It will not work eventually. I just don’t know when that is.”

Moreover, he described the U.S. as “going broke slowly” and said the current fiscal trajectory is clearly unsustainable, with the danger plainly visible, but the brakes still left untouched.

The second plate is geopolitics.

Dimon feels that trade relationships are wearing thin while the country’s rivals are colluding, challenging the post–World War II system in the process.

That’s a huge problem because the U.S. is still reliant on overseas sources for major inputs such as rare earth minerals, along with key pharmaceutical ingredients. So the slightest of shocks will likely hit prices, supply, and domestic investments.

The hidden market risk behind America’s growing debt load

U.S. debt is giving everyone in Washington a headache, but over time, it’s likely to have major implications on the market. When interest expenses end up consuming a significantly larger chunk of federal spending, investors will need to rethink their assumptions about growth, rates, and risk.

Over time, debt servicing will effectively crowd out government flexibility for years.

For markets, the long-term implications cannot be swept under the rug.

• Higher rates for longer: Incessant borrowing pushes Treasury yields up, raising discount rates across stocks.
• Crowding out risky assets: With government debt absorbing the bulk of capital, stocks face stern competition for investor dollars.
• Reduced fiscal shock absorbers: Massive interest expenses limit stimulus options in periods of recessions or crises.
• Valuation compression risk: Higher rates and deficit concerns will likely weigh in on multiples, despite having superb earnings growth.

That’s exactly what I covered when Bank of America’s Michael Hartnett waved a red flag about the current state of bond market.

He argued that bonds have effectively lost their shock-absorber status over the past few years and are behaving as a source of drawdowns.

Growth still buys time if AI turns into real productivity

Debt is a massive problem, but perhaps the most obvious “escape hatch” is growth.

If the U.S. continues experiencing stronger productivity gains that meaningfully lift nominal GDP quicker than borrowing costs, things could still work out.

A big part of that, it seems, could be those AI-powered gains the tech honchos have been talking about over the past three years.

Goldman Sachs forecasts generative AI to potentially lift global GDP by 7% over a decade, adding 1.5 percentage points to annual productivity growth.

However, the OECD analysis is slightly more cautious.

The organization estimates these changes would bump productivity by nearly 0.25 to 0.6 percentage points per year, along with worker productivity by nearly 0.4 to 0.9 points per year.

Additionally Nvidia CEO Jensen Huang predicts AI could push manufacturing into a brand new era, turning factories into smarter production hubs, lifting efficiency and productivity in the process.

Moreover, the IMF has effectively tied the AI-driven capex boom to stronger growth this year, flagging faster-than-expected gains, adding 0.8 points annually mid-term.

In fact, IMF chief economist Pierre-Olivier Gourinchas notes that AI investments and towering market valuations have covered up the fundamental cracks.

Additionally, BlackRock CEO Larry Fink, despite major concerns about the national debt, also pointed to a potential scenario now unfolding.