The USA is addicted to debt and the economy is at a dangerous high

Yuri Gripas/Reuters; Samantha Lee/Business Insider

• The American debt problem has led to a dangerous sugar high for the economy, said Jamie Dimon.
• The JPMorgan boss referred to the enormous increase in new debt during the pandemic.
• That money supports the economy, but is like “heroin” in the hands of consumers, he said.

The U.S. is practically addicted to debt — and that’s putting the economy in a dangerous position, according to JPMorgan CEO Jamie Dimon.

The head of Wall Street banks pointed to the enormous debt the U.S. has taken on since the pandemic, including about $1 trillion distributed in the form of stimulus checks and the $4 trillion the Federal Reserve used to purchase it of government bonds. These moves sent huge amounts of money into U.S. markets, causing companies to pocket more profits while stocks soared in 2021.

“This money is like heroin,” Dimon said at the Global Investment Summit in London, according to the Telegraph.

After the debt-fueled stimulus came inflation, which led the Fed to curb ultra-loose monetary policy. This threatens to put markets in a state of pullback, Dimon suggested, as stocks struggle in 2022 and markets will experience major periods of interest rate-related volatility throughout 2023.

Inflation in the U.S. is also likely to remain high, he added, partly due to high government spending. The total U.S. debt pile hit a record $33 trillion for the first time this year, and it is nearing $34 trillion as lawmakers debate the federal budget.

“We’re on a sugar rush and I’m not saying this will end in depression.” [but] “I think there are more inflationary forces out there,” Dimon warned. “There’s a higher chance that interest rates will go up, inflation won’t go away, and all of these things will cause more problems in some way.”

Economists are warning of a possible crisis that could arise from the US debt problem in the coming decades. If the U.S. doesn’t change course, it could potentially default on its debts in 20 years, the Penn Wharton Budget Model predicted, which could ultimately have catastrophic consequences for the U.S. economy.

The rest of the global economy also faces a “cocktail” of risks, Dimon added. He previously said the world was facing “the most dangerous time the world has seen in decades,” citing wars, rising debt levels and restrictive monetary policies from central banks.

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