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JPMorgan Chase CEO Jamie Dimon turned heads this week with a warning about a looming financial crisis. If he’s right, it has the potential to affect the economy and make it a lot harder for startups to find funding.
Speaking at an investment conference in Oslo, Norway, on Tuesday, Dimon warned of rising government debt levels and the impact those would have.
“The way it’s going now, there will be some kind of bond crisis, and then we’ll have to deal with it,” Dimon said.
A bond crisis has the potential to rattle the economy. It would also increase borrowing costs for consumers and businesses. The bond rate is, in many ways, ground zero of the financial world. When bond rates spike, money costs more to borrow. This higher cost trickles down to everything from credit cards to mortgages to business loans.
Interest rates become higher for everybody. And some lenders become more particular who they will give money to.
What’s causing this looming “bond crisis”?
Dimon cited several reasons for his prediction. Ongoing geopolitical events, such as the military action in Iran, is increasing the cost of oil and other energy sources, as well as defense production. Those higher oil prices, he said, also stoke inflation. And government deficits continue to rise, which can make investors in government bonds lose confidence.
“The level of things that are adding to the risk column are high, like geopolitics, oil, government deficits,” Dimon said. “And they may go away, but they may not, and we don’t know what confluence of events causes the problem.”
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